ANNUAL REPORT
June 30, 1996
INVESCO
INDUSTRIAL
INCOME
FUND,
INC.
A Smart Choice For
The Foundation
of Your Portfolio
INVESCO FUNDS
<PAGE>
Economic Overview July 1996
The U.S. economy is growing stronger. There had been a sharp drop-off in
the Gross Domestic Product growth rate during the last quarter of 1995. The
Federal Reserve Board helped kick-start the expansion by cutting short-term
interest rates twice in the winter of 1995-1996. Since then, statistics for
factory orders, inventories, housing sales, and U.S. exports all point to
renewed vigor.
Graph: Economic Growth
Quarterly Changes in Gross Domestic
Product (Annualized)
This bar graph illustrates the annualized quarterly growth rate for the
Gross Domestic Product, for the period from the first quarter of 1992
through the second quarter of 1996.
First quarter 1996 growth in GDP was estimated at an annualized rate of
2.2%. During the second quarter, the economy picked up speed; GDP expanded by
4.2%. According to the Bureau of Labor Statistics, about 230,000 new jobs were
created in June 1996. With unemployment running at a relatively modest 5.3%,
inflation is considered a threat by some economists. Hence, there is the
possibility that the central bank will tighten credit by raising short-term
interest rates, in the event the economy does appear to be overheating.
Given this potential for higher rates, securities investors have pulled
back slightly, leading to intensified volatility in the securities markets. The
S&P 500 had advanced by 9.60% for the five months ended 5/31/96, only to turn in
a flat performance in June. Bond prices dropped throughout the first six months
of 1996 in response to the overall uncertainty. For the six months ended
6/30/96, the Lehman Government/Corporate Bond Index had a total return of
- -1.88%.(1,2)
Complicating matters, the past year has seen cyclic market shifts. In
1995, equity investors generally favored large- capitalization companies;
small-cap stocks underperformed the broad market indexes. In early 1996,
however, expectations of a continued moderate economic expansion made the
earnings growth rates of smaller-cap firms more attractive on a relative basis.
More recently, concerns about consumer debt and confidence buffeted the
small-caps, particularly in the technology sector.
Graph:
This line graph represents a comparison of the value of a $10,000
investment in the INVESCO Industrial Income Fund to the value of a $10,000
investment in the S&P 500 and Lehman Government/Corporate Bond Indexes,
assuming in each case reinvestment of all dividends and capital gain
distributions, for the ten year period ended 6/30/96.
<PAGE>
Individual performance by equity sectors varied widely over the first half
of 1996. Among the stronger industries were heavy equipment, chemicals,
securities brokers, airlines, and consumer cyclicals such as apparel retailers.
Underperformers included utilities, broadcasting, factory equipment, and
insurance.
Industrial Income Fund
Average Annualized Total Return
as of 6/30/96(1)
1 year 16.54%
-----------------------------------
5 years 13.33%
-----------------------------------
10 years 13.09%
-----------------------------------
The market environment has been even more challenging for bond investors.
Over the past 18 months, the fixed-income markets experienced two distinct
phases. The first began in 1995 with a bond rally that ran through January 1996.
Price advances were fueled by moderate economic growth and low inflation. For
all of 1995, the broad fixed-income market had a total return of 19.24%, as
measured by the Lehman Government/Corporate Bond Index.(1,2)
The second fixed-income market phase was initiated in February of this
year. The environment shifted to one of stronger economic growth, with the
concomitant potential for upward spirals in wages and prices; mild indications
have already appeared. Fixed-income investors responded to the positive economic
news by sending prices tumbling.
Since 1994 the Federal Reserve Board has actively manipulated short-term
rates, seeking to maintain economic expansion without sparking inflation.
Recently, there has been some indication that the Fed may allow a slightly
higher level of inflation before tightening credit availability; however, their
overall strategy is unlikely to alter in the near-term, given an impending
presidential election and the recent reappointment of Alan Greenspan as Fed
chairman.
In 1995, the fixed-income market advanced, though not as strongly as
equities. Since then, with interest rates rising, bond prices have shown a
corresponding weakness. These factors have had a negative impact on Industrial
Income Fund's overall performance during the past year. However, it is important
to note that, separately, the fund's stock and bond portfolios both performed
well compared to those markets.
For the one-year period ended 6/30/96, INVESCO Industrial Income Fund
achieved a total return of 16.54%. During the same period, the S&P 500 had a
total return of 25.88%, and the Lehman Government/Corporate Bond index had a
total return of 4.66%. (Of course, past performance is not a guarantee of future
results.)(1,2)
As the line graph on page one illustrates, for the 10-year period ended
6/30/96, the value of a $10,000 investment in INVESCO Industrial Income Fund,
plus reinvested dividends and capital gain distributions, would have risen to
$34,226. 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. (Past performance is not a guarantee of
future results.)(1,2)
<PAGE>
Strategic Summary
Industrial Income Fund employs a two-pronged strategy in seeking its
objective of current income with potential capital appreciation over the
longer-term.
The stock and bond markets don't always move in parallel. As a result, the
fund's fixed-income allocation can provide an element of stability, along with
additional income opportunities. Over the past two years, however -- with the
bond market trailing stocks by an unusually wide margin -- the fund's bond
component has compromised overall returns.
In April 1996, the fund's board of directors approved that management of
Industrial Income Fund place a greater emphasis on equities. While future
performance cannot be guaranteed, we believe that this refinement of our broad
strategy will provide additional opportunities for more competitive returns,
while maintaining investment flexibility. And of course, as you can see from the
bar chart below, bonds remain an important part of our strategy.
Graph: Portfolio Diversification by Value
This graph reflects the allocation of the Industrial Income Fund's
portfolio by value of net assets in Fixed-Income, Capital Goods &
Construction, Consumer Cyclical, Consumer Staples, Energy, Finance,
Technology, Other Equity, and Net Cash & Short-Term securities as of 6/95,
12/95, and 6/96.
Equity Investments
Industrial Income Fund's holdings continue to be well- diversified across
the various market sectors, with no significant biases towards any single
industry. Instead, we are emphasizing five investment themes: companies with
strong balance sheets, positive cash flows, excellent management, leadership
positions, and--most important--the ability to grow earnings regardless of the
economic environment.
While our thematic approach results in more of a "bottom-up" investment
process, cyclical market shifts are continuously monitored. For example,
industries such as banking and insurance tend to perform poorly during periods
of rising interest rates. As rates began to move upward earlier this year, we
cut back on the portfolio's financial weighting and avoided much of the
subsequent price depreciation.
On the other hand, opportunities abound in the energy sector. Due to
increasing efficiencies from improved technology, profitability in exploration
and production is up, particularly for natural gas firms. These in turn lead to
improved sales for servicing companies. Over the past six months, we have opened
or increased positions in domestic firms, which stand to benefit from any
political problems in the Middle East. These holdings include Sonat Inc,
USX-Marathon Group, and Apache Corp.
Retail has been another profitable area. We have focused our attention on
department stores such as Nordstrom Inc, Sears Roebuck & Co, Dayton Hudson, and
Penney (JC) Co. These firms have shown increased ability to control inventories
efficiently.
<PAGE>
Despite turmoil among the smaller-capitalization issues, technology
remains a valuable aspect of our overall strategy. Over the past year, we
reestablished positions in companies like Motorola Inc and Intel Corp, seeking
to benefit from new product cycles. And, now that the U.S. defense budget has
stabilized and orders from overseas are on the upswing, aerospace firms --
especially component manufacturers such as Honeywell Inc and AlliedSignal Inc --
show potential for increasing earnings growth.
Health-care, too, has provided opportunities for growth. We have
highlighted pharmaceutical companies, including Glaxo Wellcome PLC, Novo-Nordisk
A/S ADR, Pharmacia & Upjohn Inc, and others.
Other than drug companies, we have underweighted consumer staples for the
past six months. Over the second half of 1996, however, the market is likely to
make a cyclical turn to predictable earnings and dividend reports; our sector
allocations will be shifted as specific opportunities present themselves.
Fixed-Income Holdings
In managing the fund's fixed-income holdings, our strategy has focused on
interest rate risk management. During the 1995 market advance, we restructured
the portfolio to take advantage of the generally positive market environment, by
lengthening bond duration. Duration is an expression of a bond's volatility --
generally speaking, longer duration reflects greater market risk. However, as
interest rates declined last year, bond prices concurrently rose, and the fund's
holdings appreciated in value. (Of course, past performance is not a guarantee
of future results.)
With evidence of a reviving economic expansion in February
1996, the market cycle shifted and interest rates began to rise. In
response to this change, we began to shorten duration.
As this report was written, we had taken a neutral stance on interest
rates. Our goal is to maintain flexibility so that we may react promptly to the
key variables -- data on the leading economic indicators, corporate earnings,
potential action by the Fed, a shift in market sentiment, and other factors.
The present market environment also demands a heightened sensitivity to
credit quality. In our opinion, corporate bonds are now fully valued. Shifts in
the economy's momentum -- up or down -- will have considerable impact on
fixed-income obligations, particularly high yield corporates. Since 1994, we
have pursued special situations: corporations whose debt may enjoy a credit
upgrade due to improving fundamentals or other factors. Already in 1996, for
example, our stake in Continental Cablevision appreciated in value, and we took
profits, as a result of that firm's acquisition by US WEST Communications Group.
(The latter is among the fund's top-ten equity holdings.)
Fund Management
INVESCO Industrial Income Fund is co-managed by industry
veterans. Charles P. Mayer has been responsible for the equity side
of the portfolio since 1993. An industry veteran with 26 years of
professional experience, he earned an MBA from St. John's University
and a BA from St. Peter's College. Previously, Charlie was with
Westinghouse Pension.
<PAGE>
Charlie is assisted by INVESCO Trust Company Vice President
Albert M. Grossi. Al began his career as a securities analyst in
1974. Previously, he served as a portfolio manager/senior analyst
with Westinghouse Pension Investments Corporation. He holds both an
MBA and BA from Rutgers University.
Donovan "Jerry" Paul has served as co-portfolio manager of the fund since
1994, concentrating on fixed-income securities. Jerry began his investment
career in 1976; before joining INVESCO, he worked for Stein, Roe & Farnham Inc.
as well as Quixote Investment Management. He earned an MBA from the University
of Northern Iowa, and a BBA from the University of Iowa. He is a Chartered
Financial Analyst and Certified Public Accountant.
(1) Total return assumes reinvestment of dividends and capital gain
distributions for the periods indicated. Investment return and principal
value will fluctuate so that, when redeemed, an investor's shares may be
worth more or less than when purchased.
(2) The S&P 500 is an unmanaged index considered representative of
the performance of the broad U.S. stock market. The Lehman
Government/Corporate Bond index is an unmanaged index
indicative of the broad fixed-income market.
<PAGE>
INVESCO Industrial Income Fund, Inc.
Ten Largest Common Stock Holdings
June 30, 1996
Description Value
- ------------------------------------------------------------------------
Hilton Hotels $78,750,000
U S WEST Communications Group 70,125,000
General Electric 69,200,000
AT&T Corp 68,200,000
Bank of New York 61,500,000
Exxon Corp 60,812,500
American Home Products 60,125,000
Philip Morris 57,200,000
Allied Signal Inc 57,125,000
Kansas City Southern Industries 53,893,875
Composition of holdings is subject to change.
<PAGE>
INVESCO Industrial Income Fund, Inc.
Statement of Investment Securities
June 30, 1996
<TABLE>
<CAPTION>
Shares or
Principal
Description Amount Value
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Boeing Co 250,000 21,781,250
General Motors Class H 500,000 30,062,500
Lockheed Martin 500,000 42,000,000
McDonnell Douglas 460,000 22,310,000
Northrop Grumman 687,800 46,856,375
------------
163,010,125
------------
AUTOMOBILE RELATED 3.26%
Borg-Warner Automotive 400,600 15,823,700
Chrysler Corp 425,000 26,350,000
Cummins Engine 400,000 16,150,000
Eaton Corp 600,000 35,175,000
Ford Motor 800,000 25,900,000
Goodyear Tire & Rubber 350,000 16,887,500
------------
136,286,200
------------
BANKING 5.15%
Bank of New York 1,200,000 61,500,000
BankAmerica Corp 400,000 30,300,000
Chase Manhattan 600,000 42,375,000
First Chicago NBD 943,000 36,894,875
Fleet Financial Group 500,000 21,750,000
Mellon Bank 400,000 22,800,000
------------
215,619,875
------------
BUILDING & CONSTRUCTION RELATED 0.70%
Fluor Corp 450,000 29,418,750
------------
CHEMICALS 1.76%
Air Products & Chemicals 500,000 28,875,000
Olin Corp 500,000 44,625,000
------------
73,500,000
------------
COMPUTER RELATED 1.18%
International Business Machines 500,000 49,500,000
------------
DIVERSIFIED COMPANIES 6.32%
AlliedSignal Inc 1,000,000 57,125,000
duPont (E I) de Nemours 590,000 46,683,750
General Electric 800,000 69,200,000
Kansas City Southern Industries 1,257,000 53,893,875
Tenneco Inc 500,000 25,562,500
Whitman Corp 500,000 12,062,500
------------
264,527,625
------------
<PAGE>
ELECTRICAL EQUIPMENT 2.12%
Emerson Electric 500,000 45,187,500
Honeywell Inc 800,000 43,600,000
------------
88,787,500
------------
FINANCE RELATED 1.16%
American Express 500,000 22,312,500
Block (H & R) Inc 800,000 26,100,000
------------
48,412,500
------------
FOOD PRODUCTS & BEVERAGES 3.31%
Anheuser-Busch Cos 700,000 52,500,000
General Mills 700,000 38,150,000
Heinz (H J) Co 1,125,000 34,171,875
Quaker Oats 400,000 13,650,000
------------
138,471,875
------------
FUNERAL SERVICES 0.69%
Service Corp International 500,000 28,750,000
------------
HOTELS 1.88%
Hilton Hotels 700,000 78,750,000
------------
INSURANCE 0.32%
Allmerica Property & Casualty 500,000 13,500,000
------------
MACHINERY 1.70%
Foster Wheeler 600,000 26,925,000
Ingersoll-Rand Co 550,000 24,062,500
TRINOVA Corp 600,000 20,025,000
------------
71,012,500
------------
MEDICAL EQUIPMENT & SUPPLIES 0.77%
Becton Dickinson & Co 400,000 32,100,000
------------
MEDICAL RELATED - DRUGS 5.13%
American Home Products 1,000,000 60,125,000
Glaxo Wellcome PLC Sponsored ADR 1,600,000 42,800,000
Novo-Nordisk A/S ADR 859,172 30,715,399
Pfizer Inc 300,000 21,412,500
Pharmacia & Upjohn 600,000 26,625,000
Warner-Lambert Co 600,000 33,000,000
------------
214,677,899
------------
MINING 0.94%
Newmont Mining 799,050 39,453,094
------------
MOTION PICTURES & TELEVISION 0.45%
Disney (Walt) Co 300,000 18,862,500
------------
<PAGE>
OFFICE EQUIPMENT 1.15%
Xerox Corp 900,000 48,150,000
------------
OIL & GAS RELATED 9.59%
Amoco Corp 400,000 28,950,000
Apache Corp 800,000 26,300,000
Atlantic Richfield 400,000 47,400,000
Chevron Corp 400,000 23,600,000
Dresser Industries 1,000,000 29,500,000
Exxon Corp 700,000 60,812,500
Halliburton Co 550,000 30,525,000
Royal Dutch Petroleum
New York Registry 5 Gldr Shrs 300,000 46,125,000
Schlumberger Ltd 400,000 33,700,000
Sonat Inc 600,000 27,000,000
USX-Marathon Group 1,000,000 20,125,000
Unocal Corp 800,000 27,000,000
------------
401,037,500
------------
PAPER & PAPER PRODUCTS 0.94%
Champion International 500,000 20,875,000
International Paper 500,000 18,437,500
------------
39,312,500
------------
PHOTO EQUIPMENT & SUPPLIES 0.44%
Polaroid Corp 400,000 18,250,000
------------
PRINTING & PUBLISHING 1.06%
Donnelley (R R) & Sons 600,000 20,925,000
Time Warner 600,000 23,550,000
------------
44,475,000
------------
REAL ESTATE RELATED 2.06%
Health & Retirement Properties Trust REIT 1,600,000 27,600,000
Health Care Property Investors REIT 550,000 18,562,500
Healthcare Realty Trust 400,000 9,500,000
Meditrust SBI REIT 500,000 16,687,500
Omega Healthcare Investors 500,000 13,812,500
------------
86,162,500
------------
RETAIL 4.29%
Dayton Hudson 400,000 41,250,000
Limited Inc 543,899 11,693,829
May Department Stores 800,000 35,000,000
Nordstrom Inc 500,000 22,250,000
Payless ShoeSource* 128,000 4,064,000
Penney (J C) Co 500,000 26,250,000
Sears Roebuck & Co 800,000 38,900,000
------------
179,407,829
------------
<PAGE>
SAVINGS & LOAN 0.40%
Charter One Financial 480,000 16,740,000
------------
SEMICONDUCTOR EQUIPMENT 0.88%
Intel Corp 500,000 36,718,750
------------
TELECOMMUNICATIONS 4.01%
AT&T Corp 1,100,000 68,200,000
Harris Corp Delaware 500,000 30,500,000
Motorola Inc 400,000 25,150,000
Nokia Corp Sponsored ADR
Representing Ord A Shr~ 500,000 18,500,000
U S WEST Media Group* 1,400,000 25,550,000
------------
167,900,000
------------
TOBACCO 1.37%
Philip Morris 550,000 57,200,000
------------
TRANSPORTATION 2.26%
Conrail Inc 598,600 39,732,075
Norfolk Southern 250,000 21,187,500
Overseas Shipholding Group 300,000 5,437,500
Union Pacific 400,000 27,950,000
------------
94,307,075
------------
UTILITIES 4.85%
Bell Atlantic 600,000 38,250,000
GTE Corp 600,000 26,850,000
KN Energy 303,000 10,150,500
NYNEX Corp 800,000 38,000,000
SBC Communications 400,000 19,700,000
U S WEST Communications Group 2,200,000 70,125,000
------------
203,075,500
------------
TOTAL COMMON STOCKS
(Cost $2,436,209,591) 3,097,377,097
------------
BROADCASTING 0.08%
Chancellor Radio Broadcasting
Sr Exchangeable Pfd**^, 12.250% 35,000 3,535,000
------------
CABLE TELEVISION 0.19%
Cablevision Systems
Redeemable Exchangeable Pfd**^
Series L, 11.125% 82,350 7,699,725
------------
TOTAL PREFERRED STOCKS
(Cost $11,400,000 ) 11,234,725
------------
<PAGE>
US Government Obligations 3.17%
US Treasury Bonds
6.875%, 8/15/2025 25,000,000 24,734,375
US Treasury Notes
6.875%, 5/15/2006 20,000,000 20,218,720
6.750%, 4/30/2000 10,000,000 10,106,250
5.875%, 2/15/2004 50,000,000 47,734,300
5.375%, 11/30/1997 30,000,000 29,746,830
------------
TOTAL US GOVERNMENT OBLIGATIONS
(Cost $133,833,102) 132,540,475
------------
US Government Agency Obligations 6.13%
Federal Home Loan Mortgage
Gold, Participation Certificates
7.500%, 9/1/2024 8,174,370 8,067,278
7.000%, 6/1/2024 8,727,640 8,407,152
6.500%, 7/1/2008 32,789,450 31,930,661
6.500%, 8/1/2008 5,226,184 5,089,305
6.500%, 6/1/2010 44,594,625 43,426,647
6.500%, 8/1/2010 9,534,660 9,237,837
Federal National Mortgage
Association, Gtd Mortgage
Pass-Through Certificates
7.500%, 6/1/2024 13,720,795 13,548,723
6.500%, 7/1/2008 37,447,090 36,391,044
6.000%, 10/1/2009 21,864,192 20,837,209
Government National Mortgage
Association I, Modified
Pass-Through Certificates
7.500%, 10/15/2023 16,612,484 16,473,421
7.000%, 12/15/2023 45,891,825 44,298,874
6.500%, 3/15/2026 20,342,187 18,924,316
------------
TOTAL US GOVERNMENT AGENCY OBLIGATIONS
(Cost $260,688,688) 256,632,467
------------
Corporate Bonds 12.69%
BANKING 0.29%
Dresdner Bank AG, Sub Notes
7.250%, 9/15/2015 6,000,000 5,777,322
Sovereign Bancorp, Medium-Term
Sub Notes, 8.000%, 3/15/2003 6,500,000 6,472,174
------------
12,249,496
------------
BROADCASTING 2.03%
Allbritton Communications Sr Sub Deb
11.500%, 8/15/2004 13,350,000 13,583,625
Series B, 9.750%, 11/30/2007 5,000,000 4,562,500
Benedek Broadcasting, Sr Secured
Notes, 11.875%, 3/1/2005 10,400,000 10,972,000
EZ Communications, Gtd Sr Sub Notes,
9.750%, 12/1/2005 3,250,000 3,087,500
<PAGE>
Granite Broadcasting, Sr Sub
Deb, 12.750%, 9/1/2002 10,600,000 11,580,500
Notes, 10.375%, 5/15/2005 4,000,000 3,870,000
Notes^, 9.375%, 12/1/2005 3,500,000 3,202,500
Grupo Televisa SA de CV, Sr Notes^
Series B, 11.875%, 5/15/2006 5,000,000 5,100,000
Heritage Media, Sr Sub Notes
8.750%, 2/15/2006 4,000,000 3,720,000
SCI Television, Sr Secured Notes
11.000%, 6/30/2005 6,990,000 7,269,600
SFX Broadcasting, Sr Sub Notes^
10.750%, 5/15/2006 8,000,000 7,960,000
Telemundo Group, Sr Discount
Step-Up Notes, 7.000%, 2/15/2006 6,000,000 5,400,000
Young Broadcasting, Sr Sub Notes
Series B, 9.000%, 1/15/2006 5,000,000 4,450,000
------------
84,758,225
------------
BUILDING & CONSTRUCTION RELATED 0.14%
USG Corp, Sr Notes 8.500%, 8/1/2005 6,000,000 5,805,000
------------
CABLE TELEVISION 1.96%
Cablevision Industries, Sr Deb Series B,
9.250%, 4/1/2008 27,050,000 27,252,875
Century Communications, Sr Sub Notes,
11.875%, 10/15/2003 1,300,000 1,381,250
Continental Cablevision Sr Sub Deb,
11.000%, 6/1/2007 21,800,000 24,687,933
Sr Notes, 8.300%, 5/15/2006 4,500,000 4,656,375
Jones Intercable, Sr Sub Deb
10.500%, 3/1/2008 7,403,000 7,810,165
Marcus Cable LP/Marcus Cable Capital III
Sr Discount Step-Up Notes
Zero Coupon^^, 12/15/2005 9,400,000 5,757,500
TeleWest PLC, Sr Discount Step-Up
Deb, Zero Coupon^^, 10/1/2007 4,600,000 2,714,000
UIH Australia/Pacific Sr Discount
Step-Up Notes^ Zero Coupon^^, 5/15/2006 14,650,000 7,654,625
------------
81,914,723
------------
CHEMICALS 0.27%
Freeport-McMoRan Resource Partners LP,
Sr Sub Notes 8.750%, 2/15/2004 4,000,000 4,041,200
Rexene Corp, Sr Notes 11.750%, 12/1/2004 6,800,000 7,072,000
------------
11,113,200
------------
CONTAINERS 0.11%
Packaging Resources, Sr Secured
Notes^, 11.625%, 5/1/2003 4,500,000 4,533,750
------------
<PAGE>
HEALTH CARE RELATED 0.19%
Tenet Healthcare, Sr Sub Notes
10.125%, 3/1/2005 7,500,000 7,912,500
------------
INSURANCE 0.12%
Torchmark Corp, Deb 8.250%, 8/15/2009 5,000,000 5,223,870
------------
INVESTMENT BROKERS 0.13%
Donaldson Lufkin & Jenrette
Medium-Term Notes 5.625%, 2/15/2016 6,000,000 5,647,236
------------
MOTION PICTURES & TELEVISION 0.67%
Paramount Communications, Sub Deb
Series A, 7.000%, 7/1/2003 7,500,000 6,870,510
Series B, 7.000%, 7/1/2003 3,140,000 2,876,454
Viacom Inc, Sub Deb 8.000%, 7/7/2006 19,800,000 18,412,792
------------
28,159,756
------------
OIL & GAS RELATED 0.44%
Gulf Canada Resources Ltd Sr Sub Deb,
9.250%, 1/15/2004 6,550,000 6,353,500
Louis Dreyfus Natural Gas Sr Sub Notes,
9.250%, 6/15/2004 5,000,000 5,087,500
Noble Drilling, Sr Notes 9.125%, 7/1/2006 4,500,000 4,522,500
TransTexas Gas, Gtd Sr Secured Notes,
11.500%, 6/15/2002 2,500,000 2,493,750
------------
18,457,250
------------
PAPER & PAPER PRODUCTS 0.50%
Buckeye Cellulose, Sr Sub Notes
9.250%, 9/15/2008 2,000,000 1,990,000
SD Warren, Sr Sub Notes Series B,
12.000%, 12/15/2004 10,500,000 11,130,000
Tembec Finance, Gtd Sr Notes
9.875%, 9/30/2005 8,500,000 7,905,000
------------
21,025,000
------------
PRINTING & PUBLISHING 0.15%
News America Holdings, Sr Notes
8.500%, 2/15/2005 5,900,000 6,211,585
------------
RECREATION PRODUCTS & SERVICES 0.85%
AMF Group, Sr Sub Discount Step-Up
Notes^, Zero Coupon^^ 3/15/2006 14,000,000 7,525,000
Bally's Park Place Funding
Gtd 1st Mortgage Notes
9.250%, 3/15/2004 7,000,000 7,455,000
Station Casinos, Sr Sub Notes
9.625%, 6/1/2003 3,000,000 2,940,000
<PAGE>
Trump Atlantic City Associates/
Trump Atlantic City Funding
1st Mortgage Notes 11.250%, 5/1/2006 9,900,000 9,949,500
United Artists Theatre Circuit
Sr Secured Notes, Series B
11.500%, 5/1/2002 7,350,000 7,763,437
------------
35,632,937
------------
RETAIL 0.29%
Revco (D S) Inc, Sr Notes
9.125%, 1/15/2000 11,755,000 12,166,425
------------
SAVINGS & LOAN 0.34%
Western Financial Savings Bank
Sub Capital Deb 8.500%, 7/1/2003 14,000,000 14,080,108
------------
TELECOMMUNICATIONS 2.49%
Arch Communications Group Sr Discount
Step-Up Notes Zero Coupon^^, 3/15/2008 5,750,000 2,961,250
Centennial Cellular, Sr Notes
8.875%, 11/1/2001 10,480,000 9,746,400
Comcast Cellular Sr Participating Notes
Series A, Zero Coupon, 3/5/2000 3,000,000 2,055,000
Series B, Zero Coupon, 3/5/2000 6,000,000 4,110,000
CommNet Cellular, Sr Sub Discount
Step-Up Notes Zero Coupon^^, 9/1/2003 9,700,000 7,566,000
IntelCom Group USA Gtd Sr Discount
Step-Up Notes^ Zero Coupon^^, 5/1/2006 12,000,000 6,510,000
International CableTel Conv Sub Deb^,
7.000% 6/15/2008 15,000,000 14,700,000
Sr Deferred Step-Up Notes
Zero Coupon^^, 10/15/2003 2,000,000 1,450,000
Sr Deferred Step-Up Notes, Series B
Zero Coupon^^, 2/1/2006 27,100,000 15,176,000
Lenfest Communications Sr Sub Notes^
10.500%, 6/15/2006 9,000,000 9,045,000
MFS Communications Sr Discount
Step-Up Notes Zero Coupon^^, 1/15/2006 29,300,000 17,653,250
Rogers Cantel, Sr Secured Deb
9.375%, 6/1/2008 2,700,000 2,612,250
9.750%, 6/1/2016 8,000,000 7,710,000
Teleport Communications Group Sr Discount
Step-Up Notes Zero Coupon^^, 7/1/2007 5,000,000 2,912,500
------------
104,207,650
------------
TEXTILES & APPAREL MANUFACTURERS 0.12%
Avondale Mills, Sr Sub Notes^
10.250%, 5/1/2006 5,000,000 4,925,000
------------
<PAGE>
TRANSPORTATION 0.86%
Delta Air Lines Equipment Trust
Certificates Series 1992E,
9.300%, 1/2/2010 4,175,000 4,631,887
Series 1992F, 9.300%, 1/2/2011 4,585,000 5,100,253
Overseas Shipholding Group, Deb
8.750%, 12/1/2013 3,925,000 3,954,096
Stena AB, Sr Notes
10.500%, 12/15/2005 4,000,000 3,970,000
Teekay Shipping Gtd 1st Pfd Ship
Mortgage Notes 8.320%, 2/1/2008 5,350,000 4,988,875
Viking Star Shipping Gtd 1st Pfd Ship
Mortgage Notes 9.625%, 7/15/2003 13,000,000 13,195,000
------------
35,840,111
------------
UTILITIES 0.74%
El Paso Electric, 1st Mortgage
Secured Bonds, Series B
7.750%, 5/1/2001 8,900,000 8,666,375
Long Island Lighting, Deb
9.000%, 11/1/2022 5,850,000 5,375,992
7.500%, 3/1/2007 11,000,000 9,893,829
U S WEST Communications Group
Deb, 6.875%, 9/15/2033 8,000,000 7,000,000
------------
30,936,196
------------
TOTAL CORPORATE BONDS
(Cost $544,788,094) 530,800,018
------------
TOTAL FIXED INCOME SECURITIES
(Cost $939,309,884) 919,972,960
------------
SHORT-TERM INVESTMENTS 3.70%
Corporate Bonds 0.09%
UTILITIES 0.09%
First PV Funding, Lease Oblig Bonds
Series 1986B, 8.950%, 1/15/1997
(Cost $3,914,880) 3,920,000 3,920,000
------------
Commercial Paper 3.61%
FINANCE RELATED 3.36%
American Express Credit 5.370%, 7/1/1996 39,372,000 39,372,000
Chevron Oil Finance 5.250%, 7/1/1996 25,337,000 25,337,000
5.250%, 7/2/1996 32,189,000 32,189,000
Ford Motor Credit 5.400%, 7/8/1996 14,937,000 14,937,000
General Motors Acceptance 5.380%, 7/5/1996 28,652,000 28,652,000
------------
140,487,000
------------
<PAGE>
LEASING COMPANIES 0.25%
Hertz Corp 5.380%, 7/3/1996 10,593,000 10,593,000
------------
TOTAL COMMERCIAL PAPER
(Cost $151,080,000) 151,080,000
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $154,994,880) 155,000,000
------------
TOTAL INVESTMENT SECURITIES AT VALUE 100.00%
(Cost $3,541,914,355)
(Cost for Income Tax Purposes $3,542,501,418) 4,183,584,782
============
<FN>
* Security is non-income producing.
** Security may make interest payments in other types of securities.
~ Security is an affiliated company (see Note 5).
^^ Step up bonds are obligations which increase the interest payment rate at a
specific point in time. Rate shown reflects current rate which may step up
at a future date.
^ The following are restricted securities at June 30, 1996:
Value as
Acquisition Acquisition % of
Description Date(s) Cost Net Assets
- --------------------------------------------------------------------------------
AMF Group, Sr Sub Discount
Step-Up Notes 3/7/96-
Zero Coupon, 3/15/2006 4/22/96 7,850,830 0.18%
Avondale Mills, Sr Sub Notes
10.250%, 5/1/2006 4/23/96 4,923,500 0.12
Cablevision Systems Redeemable
Exchangeable Pfd, Series L,
11.125% 2/8/96 7,900,000 0.18
Chancellor Radio Broadcasting
Sr Exchangeable Pfd 12.250% 2/21/96 3,500,000 0.08
Granite Broadcasting Sr Sub Notes
9.375%, 12/1/2005 2/21/96 5,887,500 0.08
Grupo Televisa SA de CV Sr Notes,
Series B 11.875%, 5/15/2006 5/8/96 5,000,000 0.12
IntelCom Group USA Gtd Sr Discount
Step-Up Notes Zero Coupon,
5/1/2006 4/25/96 6,613,678 0.16
International Cabletel
Conv Sub Deb, 7.000% 6/15/2008 6/7/96 15,000,000 0.35
Lenfest Communications Sr
Sub Notes 10.500%, 6/15/2006 6/20/96 8,929,890 0.22
Packaging Resources Sr
Secured Notes 11.625%, 5/1/2003 5/10/96 4,500,000 0.11
SFX Broadcasting Sr Sub Notes
10.750%, 5/15/2006 5/23/96 8,000,000 0.19
UIH Australia/Pacific Sr Discount
Step-Up Notes Zero Coupon,
5/15/2006 5/8/96 7,495,523 0.18
------------
1.97%
============
See Notes to Financial Statements
</FN>
</TABLE>
<PAGE>
INVESCO Industrial Income Fund, Inc.
Statement of Assets and Liabilities
June 30, 1996
ASSETS
Investment Securities at Value
(Cost $3,541,914,355) 4,183,584,782
Receivables:
Investment Securities Sold 14,331,796
Fund Shares Sold 4,428,889
Dividends and Interest 19,660,167
Prepaid Expenses and Other Assets 178,011
---------------
TOTAL ASSETS 4,222,183,645
---------------
LIABILITIES
Payables:
Custodian 32,580
Distributions to Shareholders 2,280,009
Investment Securities Purchased 29,510,815
Fund Shares Repurchased 14,536,555
Accrued Distribution Expenses 5,017,630
Accrued Expenses and Other Payables 270,253
---------------
TOTAL LIABILITIES 51,647,842
---------------
Net Assets at Value 4,170,535,803
===============
NET ASSETS
Paid-in Capital* 3,299,297,632
Accumulated Undistributed Net Investment Income 91,634
Accumulated Undistributed Net Realized Gain
on Investment Securities and Foreign
Currency Transactions 229,476,110
Net Appreciation of Investment Securities and
Foreign Currency Transactions 641,670,427
---------------
Net Assets at Value $4,170,535,803
===============
Net Asset Value, Offering and Redemption
Price per Share $13.21
=======
* The Fund has one billion authorized shares of common stock, par value of
$1.00 per share, of which 315,632,152 were outstanding at June 30, 1996.
See Notes to Financial Statements
<PAGE>
INVESCO Industrial Income Fund, Inc.
Statement of Operations
Year Ended June 30, 1996
INVESTMENT INCOME
INCOME
Dividends $76,656,261
Interest 95,806,145
Foreign Taxes Withheld (489,569)
TOTAL INCOME 171,972,837
EXPENSES
Investment Advisory Fees 21,541,300
Distribution Expenses 10,507,790
Transfer Agent Fees 5,698,274
Administrative Fees 640,468
Custodian Fees and Expenses 643,975
Directors' Fees and Expenses 219,609
Professional Fees and Expenses 157,535
Registration Fees and Expenses 111,763
Reports to Shareholders 743,351
Other Expenses 205,984
------------------
TOTAL EXPENSES 40,470,049
Fees and Expenses Absorbed
by Investment Adviser (1,198,984)
Fees and Expenses Paid Indirectly (331,771)
------------------
NET EXPENSES 38,939,294
------------------
NET INVESTMENT INCOME 133,033,543
------------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENT SECURITIES
Net Realized Gain on Investment Securities
and Foreign Currency Transactions 291,155,395
Change in Net Appreciation of Investment
Securities and Foreign Currency Transactions 217,662,186
------------------
NET GAIN ON INVESTMENT SECURITIES 508,817,581
------------------
Net Increase in Net Assets from Operations $641,851,124
==================
See Notes to Financial Statements
<PAGE>
INVESCO Industrial Income Fund, Inc.
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended June 30
-------------------------------------
1996 1995
OPERATIONS
<S> <C> <C>
Net Investment Income $133,033,543 $ 140,289,025
Net Realized Gain on
Investment Securities and
Foreign Currency Transactions 291,155,395 52,677,597
Change in Net Appreciation
of Investment Securities and
Foreign Currency Transactions 217,662,186 336,508,408
-------------------------------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS 641,851,124 529,475,030
-------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS
Net Investment Income (133,792,249) (140,427,579)
Net Realized Gain on
Investment Securities (77,502,041) (180,471,498)
-------------------------------------
TOTAL DISTRIBUTIONS (211,294,290) (320,899,077)
-------------------------------------
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 714,175,666 767,808,162
Reinvestment of Distributions 198,324,457 301,417,968
-------------------------------------
912,500,123 1,069,226,130
Amounts Paid for Repurchases
of Shares (1,182,130,063) (1,181,514,849)
-------------------------------------
NET DECREASE IN NET
ASSETS FROM FUND
SHARE TRANSACTIONS (269,629,940) (112,288,719)
-------------------------------------
Total Increase in Net Assets 160,926,894 96,287,234
NET ASSETS
Beginning of Period 4,009,608,909 3,913,321,675
-------------------------------------
End of Period (Including
Accumulated Undistributed
Net Investment Income of
$91,634 and $1,916,689,
respectively) $4,170,535,803 $4,009,608,909
=====================================
FUND SHARE TRANSACTIONS
Shares Sold 55,792,000 67,824,580
Shares Issued from Reinvestment
of Distributions 15,483,292 27,888,096
-------------------------------------
71,275,292 95,712,676
Shares Repurchased (92,077,091) (105,096,248)
-------------------------------------
Net Decrease in Fund Shares (20,801,799) (9,383,572)
=====================================
See Notes to Financial Statements
</TABLE>
<PAGE>
INVESCO Industrial Income Fund, Inc.
Notes to Financial Statements
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. INVESCO Industrial
Income Fund, Inc. (the "Fund"), was incorporated in Maryland. The Fund is an
equity income fund that seeks the best possible current income. 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.
Debt securities are valued at evaluated bid prices as determined by
a pricing service approved by the Fund's board of directors. If evaluated
bid prices are not available, debt securities are valued by averaging the
bid prices obtained from one or more dealers making a market for such
securities.
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. Discounts on debt securities purchased are amortized over the
life of the respective security as adjustments to interest income. 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.
Investments in securities of governmental agencies may only be
guaranteed by the respective agency's limited authority to borrow from the
U.S. Government and may not be guaranteed by the full faith and credit of
the United States.
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 June 30, 1996,
49.33% 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 mortgage-backed securities, market discounts,
foreign currency transactions, nontaxable dividends, net operating losses
and expired capital loss carryforwards. For the year ended June 30, 1996,
the Fund reclassified $396,876 from accumulated undistributed net
investment income and $1,124,326 from accumulated undistributed net
realized gain on investment securities to paid-in capital. Net investment
income and net assets were not affected.
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, and 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.
<PAGE>
For the year ended June 30, 1996, Fees and Expenses Paid Indirectly
consisted of $327,736 included in Custodian Fees and Expenses, $1,150
included in Transfer Agent Fees and $2,885 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. Effective October 15, 1992, IFG voluntarily agreed to
waive a portion of its fee which exceeds 0.45% of average net assets in excess
of $2 billion. In addition, effective October 21, 1993, IFG voluntarily agreed
to waive a portion of its fee which exceeds 0.40% of average net assets in
excess of $4 billion.
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 received a transfer agent fee at an annual rate of $14.00 per
shareholder account, or per participant in an omnibus account through April 30,
1996. 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,
where applicable, 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
June 30, 1996, the Fund paid the Distributor $7,068,200 for reimbursement of
expenses incurred.
NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES. For the year ended June
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 $2,143,649,433 and $2,255,090,081, respectively.
The aggregate cost of purchases and proceeds from sales of U.S. Government
securities were $349,997,614 and $528,793,876, respectively.
NOTE 4 -- APPRECIATION AND DEPRECIATION. At June 30, 1996, the gross
appreciation of securities in which there was an excess of value over tax cost
amounted to $703,534,306 and the gross depreciation of securities in which there
was an excess of tax cost over value amounted to $62,450,942, resulting in net
appreciation of $641,083,364.
NOTE 5 -- TRANSACTIONS WITH AFFILIATES AND AFFILIATED COMPANIES. Certain of the
Fund's officers and directors are also officers and directors of IFG or ITC.
<PAGE>
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 June 30, 1996, included in Directors' Fees and Expenses in the
Statement of Operations were $45,449. Unfunded accrued pension costs of $108,817
and pension liability of $233,926 are included in Prepaid Expenses and Accrued
Expenses, respectively, in the Statement of Assets and Liabilities.
An affiliated company represents ownership by the Fund of at least 5% of
the voting securities of the issuer during the period, as defined in the Act. A
summary of the transactions during the year ended June 30, 1996, in which the
issuer was an affiliate of the Fund, is as follows:
<TABLE>
<CAPTION>
Purchases Sales
------------------ ------------------ Realized
Dividend Loss on Value at
Affiliate Shares Cost Shares Cost Income Investments 6/30/96
- -----------------------------------------------------------------------------------------------------------
Nokia Corp Sponsored ADR
<S> <C> <C> <C> <C> <C> <C> <C>
Representing Ord A Shr 700,000 $37,996,295 200,000 $12,115,830 $376,621 $(5,174,402) $18,500,000
</TABLE>
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 June 30,
1996, there were no such borrowings.
<PAGE>
INVESCO Industrial Income Fund, Inc.
Financial Highlights
(For a Fund Share Outstanding Throughout Each Period)
<TABLE>
<CAPTION>
Year Ended June 30
--------------------------------------------------
1996 1995 1994 1993 1992
PER SHARE DATA
<S> <C> <C> <C> <C> <C>
Net Asset Value --
Beginning of Period $11.92 $11.32 $11.53 $10.67 $9.74
--------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.41 0.42 0.36 0.31 0.28
Net Gains on Securities
(Both Realized and Unrealized) 1.53 1.14 0.02 1.33 1.38
--------------------------------------------------
Total from Investment Operations 1.94 1.56 0.38 1.64 1.66
--------------------------------------------------
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.41 0.42 0.36 0.32 0.29
In Excess of Net Investment Income 0.00 0.00 0.11 0.00 0.00
Distributions from Capital Gains 0.24 0.54 0.12 0.46 0.44
--------------------------------------------------
0.65 0.96 0.59 0.78 0.73
--------------------------------------------------
Net Asset Value -- End of Period $ 13.21 $11.92 $ 11.32 $11.53 $ 10.67
==================================================
TOTAL RETURN 16.54% 14.79% 3.24% 15.66% 17.04%
RATIOS
Net Assets --
End of Period ($000 Omitted) $4,170,536 $4,009,609 $3,913,322 $3,412,527 $2,092,955
Ratio of Expenses to
Average Net Assets# 0.93%@ 0.94% 0.92% 0.96% 0.98%
Ratio of Net Investment
Income to Average Net Assets# 3.17% 3.61% 3.11% 2.94% 2.75%
Portfolio Turnover Rate 63% 54% 56% 121% 119%
<FN>
# Various expenses of the Fund were voluntarily absorbed by IFG for the
years ended June 30, 1996, 1995, 1994 and 1993. If such expenses had not
been voluntarily absorbed, ratio of expenses to average net assets would
have been 0.96%, 0.97%, 0.95% and 0.98%, respectively, and ratio of net
investment income to average net assets would have been 3.14%, 3.58%,
3.08% and 2.92%, respectively.
< Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, which is before any expense offset arrangements.
</FN>
</TABLE>
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders of
INVESCO Industrial Income 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 Industrial Income Fund,
Inc. (the "Fund") at June 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 June
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
August 1, 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
Find us on the World Wide Web:
http://www.invesco.com
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.
