ANNUAL REPORT
June 30, 1997
INVESCO
INDUSTRIAL
INCOME
FUND,
INC.
A Smart Choice For
The Foundation
of Your Portfolio
INVESCO FUNDS
<PAGE>
INVESCO Industrial Income Fund
Morningstar Risk-Adjusted Ratings Among
Domestic Equity Funds as of 7/31/97 (1)
---------------------------------------
3 Years among 2,040 ****
---------------------------------------
5 years among 1,146 ****
---------------------------------------
10 years among 622 ****
---------------------------------------
Overall among 2,040 ****
---------------------------------------
(1)Morningstar's proprietary ratings reflect historical risk-adjusted
performance and are subject to change each month. Overall ratings are calculated
from the fund's 3-, 5-, and 10-year average annual total returns (based upon
available track records) in excess of 90-day Treasury bill returns. The top 10%
of funds in an investment category receive 5 stars, and the next 22.5%, 4 stars.
Economic Overview July 1997
We are currently in the greatest bull market of all time, and wealth has
been created on a scale that has never been seen before. The strength and
longevity of this market have surprised even the staunchest market advocates. A
preemptive strike against inflation by the Federal Reserve Board in March - a 25
basis point increase in the Fed Fund's Rate - produced a pullback in the stock
market. However, since that minor correction, the broad equity market has
produced approximately 20% returns in several large-capitalization stock
indexes. This has left many investment professionals wondering if we have
reached a nearly perfect investment environment - and how long it might last.
Note that:
o The Dow Jones Industrial Average (an index composed of 30 domestic
large-capitalization stocks) has doubled in 30 months for only the fifth time
this century, and only the second time in 62 years.
o The broad market has had 18 consecutive quarters in which companies have
reported significantly more positive than negative earnings surprises.
o The DJIA has rallied 20% in two months for only the third time in 59
years.
o The wealth created by the domestic stock market in the last 10 years is
the most in history.
The driving force behind the strength of the market during the last 10
years has been low inflation, strong economic growth, and increased worker
productivity. These factors have led to above-average increases in corporate
profits and earnings, sending stock prices higher. Meanwhile, prices across the
economy (as measured by the Gross Domestic Product price deflator) rose only
1.8% in 1996 - the smallest gain since 1964. Currently, the inflation rate for
the U.S. economy is at 2.2%, and producer prices actually declined over the
first six months in 1997.
<PAGE>
Gains in worker productivity have helped curb inflation. Over the last 10
years, corporate restructuring, downsizing, and investments in technology have
increased the efficiency of American companies and workers. These gains have
outpaced wage increases. Coupled with increased international competition,
improved productivity has put downward pressure on prices - which is beneficial
for the economy as it stimulates consumer demand.
As a result, the U.S. economy has re-established itself as the global
leader. In turn, the demand for skilled labor has risen, and unemployment in May
1997 was at 4.8% (the lowest level since 1973). Some naysayers suggest that the
tight labor market will eventually lead to increased wages and inflation, which
may have negative consequences for corporate stock prices.
The fixed-income market, although producing gains over the last six months,
has not enjoyed the jubilance experienced in the equity markets. Concerns over
potential wage inflation, a slowing economy, and an increase in the Fed Funds
Rate have kept fixed-income securities in what appears to be a consolidated
trading range.
This is a good time for shareholders to re-evaluate their expectations.
Historically speaking, markets do not return 25% every year. A long-run average
return on equities of 10% to 11% is more realistic. By realizing your risk
tolerance and staying focused on your investment goals, you may be able to sleep
at night without worrying about market turbulence.
INVESCO Industrial Income Fund
For the one-year period ended 6/30/97, INVESCO Industrial Income Fund
achieved a total return of 27.33%. During the same period, the S&P 500 had a
total return of 34.62%, and the Lehman Government/Corporate Bond index had a
total return of 7.75%. (Of course, past performance is not a guarantee of future
results.)(1),(2)
Industrial Income Fund
Average Annual Total Return
as of 6/30/97 (1)
1 year 27.33%
-----------------------------------
5 years 15.26%
-----------------------------------
10 years 14.32%
-----------------------------------
As the line graph illustrates, for the 10-year period ended 6/30/97, the
value of a $10,000 investment in Industrial Income Fund, plus reinvested
dividends and capital gain distributions, would have risen to $38,131. 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. (Of course, past performance is not a guarantee of future
results.)(1),(2)
Equity Strategy
The last year proved to be rewarding for domestic equity investors and
shareholders of Industrial Income Fund. However, rewards were not produced
without increased volatility as the general market suffered two corrections, and
sector rotation was quick and severe. Within this environment, we have remained
true to our investment philosophy: first examining economic variables to
determine sectors of the economy that might outperform the market, and then
<PAGE>
selecting stocks within those sectors. After determining the appropriate
sectors, we look for companies with attributes that we call the "Mile High
Five": strong balance sheets, positive cash flows, excellent management,
market-leadership positions, and the ability to grow earnings.
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 6/30/97.
By buying companies on fundamentals rather than market momentum, we seek
to select stocks that will perform well today and in the future. This helps keep
the fund's portfolio turnover relatively low and helps reduce expenses -- a
bonus for shareholders. Over the last year, we have also kept the fund
well-balanced between sectors. This has allowed us to participate in market
appreciation while helping to limit volatility.
Over the last 12 months, many high-growth, large-capitalization companies
have provided substantial returns for the fund. Stocks in the health care and
technology sectors such as Intel Corp, International Business Machines, Lucent
Technologies, and Warner-Lambert Co. have seen phenomenal price appreciation.
Recently, we have started to trim our exposure to several large-cap,
higher-growth companies, as we feel many may be fully valued. In the technology
sector, our analysis has led us to reduce our exposure to companies like Intel
and International Business Machines, and increase our focus on more reasonably
valued companies like Motorola Inc. and Texas Instruments.
Our sector analysis has also led us to favor more conservative, reasonably
valued sectors such as capital goods and telecommunications. In the former, we
believe the sector continues to benefit from strong earnings growth, corporate
restructuring, and industry consolidation. This has improved the long-term
profitability of many capital goods companies. Companies we favor are
market-leaders such as General Electric, Champion International, and Allied
Signal. General Electric is a broadly-diversified, market-leading firm with
strong growth potential that currently is selling at a reasonable valuation
level. Champion International is a worldwide leader, and the low-cost provider
in the paper industry. Champion International continues to benefit from improved
productivity, while global demand for paper products is increasing. Allied
Signal is a diversified industrial powerhouse which - through restructuring -
has improved its efficiency and potential profitability. (Since the fund is
actively managed, composition of holdings is subject to change.)
In the telecommunications sector, our analysis shows an industry that has
benefited from consolidation and increased consumer demand for new products
(e.g. second phone lines, call waiting). Increased demand for ancillary products
should translate into accelerating earnings for many companies. An added bonus
is that many of these stocks are presently selling at substantial discounts
compared to the broad market multiple -- despite growing earnings in the 10% to
12% range while providing a 4% to 5% dividend yield. For this sector, we tend to
favor the RBOCs (Regional Bell Operating Companies), as they enjoy a strategic
position in the market. Consolidation within the industry may lead to improved
efficiencies and profitability. Some stocks to watch include Bell Atlantic,
Nynex Corp, SBC Communications, and US West Communications Group.
<PAGE>
Graph: All-Weather Industrial Income Fund*
Average Annual Total Returns 1970-1996
This bar chart represents a comparison of the average annual total returns
for the INVESCO Industrial Income Fund to the average total returns for
the S&P 500 Index for the period 1970-1996.
*The INVESCO Industrial Income Fund achieved almost all of the positive annual
returns and suffered less than 1/3 of the negative annual returns of the S&P
500.
The S&P 500, a registered trademark of Standard & Poor's Corporation, is a
unmanaged index of common stocks considered representative of the broad market.
The S&P 500 average annualized returns were 34.62% for one year, 19.73% for five
years, and 14.60% for 10 years as of 6/30/97.
Fixed-Income Strategy
The fixed-income market experienced a tightening in credit and interest
rate spreads over the last year. This compression of spreads altered the
market's risk/reward relationship, and it presently appears that fixed-income
securities may be trading in a consolidated range. Within this environment, we
have been successful by using our value-oriented bond management style to
identify corporate issuers who may experience fundamental credit quality
improvement or be acquired by a better-quality issuer.
The communications and electric utility industries illustrate this
strategy. In the former, we continue to favor companies in the competitive local
exchange market, as consolidation remains the name of the game. Firms such as
Continental Cablevision (which was acquired by US WEST Communications Group) and
MFS Communications (which was acquired by WorldCom Inc.) provided strong
performance earlier in the year. Recently, McLeod Inc. and Brooks Fiber
Properties have improved performance of the fund as they have been active in
acquiring local communications companies.
The electric utility industry also continues to enhance the performance of
the fund. Deregulation has created a situation in which many electric companies
have incurred astronomical costs associated with the building of new power
plants. These "stranded" costs are liabilities on their books for years into the
future. In an effort to help alleviate the potential problem associated with
these "stranded" costs, several states have created mechanisms for securitizing
the debt and marketing it to the public. This should create enormous cash flows
for certain electric companies, which could allow them to pay down their debt
and possibly improve their credit ratings. Companies such as New England Power
and Houston Light and Power have profited from these credit enhancements.
Finally, we have reduced our exposure to mortgage-backed securities after
a year of strong performance and tightening spreads. Concurrently, we have
increased our use of putable and yield-to-call bonds, which should help to
provide performance and stability in a potential volatile market. (Putable bonds
are debt obligations that allow holders to redeem the issue at specified
intervals before maturity and receive full face value.)
Looking Forward
Industrial Income Fund is designed for the long-term investor, and is an
appropriate core holding for many portfolios. Presently, the fund is invested in
approximately 80% equities and 20% bonds. However, our investment flexibility
allows us to reduce equity exposure to 65% (or increase it to 85%) of the fund's
net assets. This type of investment freedom produces a fund that historically
<PAGE>
has participated in market rallies, but has limited shareholders' exposure to
market declines. (see bar chart on previous page)
Fund Management
Senior Vice President and Director of Investments Charles P. Mayer has
been responsible for the equity side of the portfolio since 1993. An industry
veteran with 28 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.
Charlie is assisted by 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.
Senior Vice President 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. 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 Lehman Government/Corporate Bond
index is an unmanaged index indicative of the broad fixed-income market.
<PAGE>
INVESCO Fund Codes
These two-digit codes appear after your account number on Investment
Summaries and confirmations. You may also use them to request information about
specific funds on PAL(R), your Personal Account Line.
Money Market Funds
44 U.S. Government Money Fund
25 Cash Reserves
40 Tax-Free Money Fund
Tax-Exempt Funds
36 Tax-Free Intermediate Bond
35 Tax-Free Long-Term Bond
Income Funds
33 Short-Term Bond
32 U.S. Government Securities
47 Intermediate Government Bond
30 Select Income
31 High Yield
Growth & Income Funds
71 Balanced
70 Multi-Asset Allocation
48 Total Return
15 Industrial Income
46 Value Equity
Capital Appreciation Funds
10 Growth
20 Dynamics
74 Small Company Value
60 Small Company Growth
Sector Funds
50 Energy
59 Environmental Services
57 Financial Services
51 Gold
52 Health Sciences
53 Leisure
42 Realty
55 Technology
58 Utilities
38 Worldwide Capital Goods
39 Worldwide Communications
<PAGE>
International Funds
49 International Growth
41 Asian Growth
56 European
37 European Small Company
34 Latin American Growth
54 Pacific Basin
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 Industrial Income Fund, Inc.
Ten Largest Common Stock Holdings
June 30, 1997
Description Value
- --------------------------------------------------------------------------------
Warner-Lambert Co $124,250,000
General Electric 104,600,000
Bank of New York 104,400,000
Exxon Corp 98,400,000
Allied Signal 84,000,000
US WEST Communications Group 79,143,750
Northrop Gruman 79,031,250
Kansas City Southern Industries 77,400,000
Hilton Hotels 77,031,250
Kellogg Co 68,500,000
Composition of holdings is subject to change.
--------------------------------------
INVESCO Industrial Income Fund, Inc.
Statement of Investment Securities
June 30, 1997
- --------------------------------------------------------------------------------
Shares, Units
or Principal
Description Amount Value
- --------------------------------------------------------------------------------
COMMON STOCKS &
WARRANTS 78.75%
AEROSPACE & DEFENSE 3.44%
Lockheed Martin 500,000 $ 51,781,250
McDonnell Douglas 380,000 26,030,000
Northrop Grumman 900,000 79,031,250
-------------
156,842,500
-------------
AIR FREIGHT 0.13%
Overseas Shipholding Group 300,000 5,887,500
-------------
AUTO PARTS 1.09%
Borg-Warner Automotive 400,600 21,657,437
Cummins Engine 400,000 28,225,000
-------------
49,882,437
-------------
<PAGE>
AUTOMOBILES 1.47%
Chrysler Corp 500,000 16,406,250
Ford Motor 750,000 28,312,500
General Motors 400,000 22,275,000
-------------
66,993,750
-------------
BANKS 4.13%
Bank of New York 2,400,000 104,400,000
CoreStates Financial 300,000 16,125,000
Fleet Financial Group 500,000 31,625,000
Mellon Bank 800,000 36,100,000
-------------
188,250,000
-------------
BEVERAGES 1.47%
Anheuser-Busch Cos 1,600,000 67,100,000
-------------
BIOTECHNOLOGY 0.22%
Biogen Inc* 300,000 10,162,500
-------------
CHEMICALS 1.31%
du Pont (E I) de Nemours 500,000 31,437,500
Olin Corp 725,000 28,320,312
-------------
59,757,812
-------------
COMMUNICATIONS - EQUIPMENT
& MANUFACTURING 1.33%
Motorola Inc 800,000 60,800,000
-------------
COMPUTER RELATED 0.25%
Hewlett-Packard Co 200,000 11,200,000
-------------
CONGLOMERATES 0.69%
Tenneco Inc 700,000 31,631,250
-------------
ELECTRICAL EQUIPMENT 4.73%
Emerson Electric 1,050,000 57,815,625
General Electric 1,600,000 104,600,000
Honeywell Inc 700,000 53,112,500
-------------
215,528,125
-------------
ELECTRONICS 0.32%
General Motors Class H 250,000 14,437,500
-------------
ELECTRONICS - SEMICONDUCTOR 1.60%
Analog Devices* 1,000,000 26,562,500
Texas Instruments 550,000 46,234,375
-------------
72,796,875
-------------
<PAGE>
ENGINEERING & CONSTRUCTION 0.91%
Fluor Corp 750,000 41,390,625
-------------
FOODS 4.25%
General Mills 800,000 52,100,000
Heinz (H J) Co 1,200,000 55,350,000
Kellogg Co 800,000 68,500,000
Quaker Oats 400,000 17,950,000
-------------
193,900,000
-------------
GOLD &
PRECIOUS METALS MINING 0.68%
Newmont Mining 799,050 31,162,950
-------------
HEALTH CARE DRUGS -
PHARMACEUTICALS 7.49%
American Home Products 850,000 65,025,000
Merck & Co 200,000 20,700,000
Novo-Nordisk A/S ADR 859,172 47,147,063
Pfizer Inc 400,000 47,800,000
SmithKline Beecham PLC ADR
Representing Ord A Shrs 400,000 36,650,000
Warner-Lambert Co 1,000,000 124,250,000
-------------
341,572,063
-------------
HEALTH CARE RELATED 1.17%
Becton Dickinson 700,000 35,437,500
Tenet Healthcare* 600,000 17,737,500
-------------
53,175,000
-------------
HOUSEHOLD PRODUCTS 1.38%
Kimberly-Clark Corp 700,000 34,825,000
Procter & Gamble 200,000 28,250,000
-------------
63,075,000
-------------
INSURANCE 2.53%
Allmerica Property & Casualty 500,000 16,375,000
Lincoln National 700,000 45,062,500
SAFECO Corp 500,000 23,343,750
St Paul Cos 400,000 30,500,000
-------------
115,281,250
-------------
LODGING - HOTELS 1.69%
Hilton Hotels 2,900,000 77,031,250
-------------
MACHINERY 1.02%
Ingersoll-Rand Co 750,000 46,312,500
-------------
<PAGE>
MANUFACTURING 1.84%
Allied Signal 1,000,000 84,000,000
-------------
NATURAL GAS 0.49%
K N Energy 533,000 22,452,625
-------------
OIL & GAS RELATED 11.38%
Amoco Corp 400,000 34,775,000
Apache Corp 800,000 26,000,000
Atlantic Richfield 750,000 52,875,000
Chevron Corp 600,000 44,362,500
Dresser Industries 500,000 18,625,000
Exxon Corp 1,600,000 98,400,000
Phillips Petroleum 500,000 21,875,000
Royal Dutch Petroleum
New York Registry 5 Gldr Shrs 1,200,000 65,250,000
Schlumberger Ltd 400,000 50,000,000
Sonat Inc 500,000 25,625,000
USX-Marathon Group 1,000,000 28,875,000
Union Pacific Resources Group 1,388,778 34,545,853
Unocal Corp 450,000 17,465,625
-------------
518,673,978
-------------
PAPER & FOREST PRODUCTS 1.21%
Champion International 800,000 44,200,000
James River 300,000 11,100,000
-------------
55,300,000
-------------
PERSONAL CARE 0.46%
Avon Products 300,000 21,168,750
-------------
PHOTOGRAPHY & IMAGING 0.49%
Polaroid Corp 400,000 22,200,000
-------------
POLLUTION CONTROL 0.56%
Waste Management 800,000 25,700,000
-------------
RAILROADS 3.06%
Kansas City Southern Industries 1,200,000 77,400,000
Norfolk Southern 300,000 30,225,000
Union Pacific 450,000 31,725,000
-------------
139,350,000
-------------
REAL ESTATE INVESTMENT TRUST 2.23%
Boston Properties* 455,000 12,512,500
Health & Retirement Properties Trust SBI 1,200,000 22,575,000
Health Care Property Investors 550,000 19,387,500
<PAGE>
Healthcare Realty Trust 400,000 11,150,000
Meditrust SBI 500,000 19,937,500
Omega Healthcare Investors 500,000 16,343,750
-------------
101,906,250
-------------
RETAIL 5.14%
Dayton Hudson 875,000 46,539,063
Federated Department Stores* 600,000 20,850,000
May Department Stores 400,000 18,900,000
Penney (J C) Co 800,000 41,750,000
Sears Roebuck 600,000 32,250,000
Tandy Corp 700,000 39,200,000
Toys "R" Us* 1,000,000 35,000,000
-------------
234,489,063
-------------
SAVINGS & LOAN 0.65%
Charter One Financial 554,000 29,846,750
-------------
SERVICES 0.58%
Service Corp International 800,000 26,300,000
-------------
TELECOMMUNICATIONS -
CELLULAR & WIRELESS 0.00%
Nextlink Communications
Warrants (Exp 2009)^* 33,000 327
-------------
TELECOMMUNICATIONS - LONG DISTANCE 0.75%
AT&T Corp 800,000 28,050,000
Deutsche Telekom AG Sponsored ADR 260,000 6,272,500
-------------
34,322,500
-------------
TELEPHONE 5.44%
Bell Atlantic 700,000 53,112,500
GTE Corp 600,000 26,325,000
NYNEX Corp 800,000 46,100,000
SBC Communications 700,000 43,312,500
US WEST Communications Group 2,100,000 79,143,750
-------------
247,993,750
-------------
TOBACCO 1.17%
Philip Morris 1,200,000 53,250,000
-------------
TOTAL COMMON STOCKS & WARRANTS
(Cost $2,400,502,449) 3,591,124,880
-------------
<PAGE>
PREFERRED STOCKS 0.22%
BROADCASTING 0.09%
Granite Broadcasting, Exchangeable
Pfd^**, 12.750% 3,836 3,874,360
-------------
CABLE 0.09%
Cablevision Systems, Depository
Shrs Representing 1/100 Pfd**
Series M, 11.125% 40,511 4,071,379
-------------
TELECOMMUNICATIONS -
CELLULAR & WIRELESS 0.04%
Nextlink Communications
Sr Exchangeable Pfd**, 14.000% 38,414 2,016,735
-------------
TOTAL PREFERRED STOCKS
(Cost $8,980,568) 9,962,474
-------------
FIXED INCOME SECURITIES 16.15%
US Government Obligations 2.02%
US Treasury Bonds
10.750%, 8/15/2005 15,000,000 18,914,070
6.625%, 2/15/2027 10,000,000 9,781,250
US Treasury Notes
6.875%, 5/15/2006 20,000,000 20,412,500
6.500%, 10/15/2006 43,000,000 42,811,875
-------------
TOTAL US GOVERNMENT OBLIGATIONS
(Cost $91,226,651) 91,919,695
-------------
US Government Agency Obligations 4.82%
Federal Home Loan Mortgage
Gold, Participation Certificates
7.500%, 9/1/2024 7,639,516 7,679,623
7.000%, 6/1/2024 7,933,168 7,829,243
6.500%, 7/1/2008 28,239,022 27,865,137
6.500%, 8/1/2008 4,438,415 4,379,650
6.500%, 6/1/2010 39,081,145 38,563,711
6.500%, 8/1/2010 8,451,700 8,305,908
Federal National Mortgage Association,
Gtd Mortgage Pass-Through Certificates
7.500%, 6/1/2024 12,667,059 12,746,608
6.500%, 7/1/2008 32,657,901 32,200,038
6.000%, 10/1/2009 19,356,324 18,795,571
Government National Mortgage
Association I, Pass-Through
Certificates 7.000%,
12/15/2023 43,007,939 42,490,123
6.500%, 3/15/2026 19,625,969 18,787,940
-------------
TOTAL US GOVERNMENT
AGENCY OBLIGATIONS
(Cost $220,225,391) 219,643,552
-------------
<PAGE>
Corporate Bonds 9.31%
AIR FREIGHT 0.25%
Viking Star Shipping, 1st Pfd Ship
Mortgage Notes
9.625%, 7/15/2003 11,010,000 11,615,550
-------------
ALUMINUM 0.18%
Kaiser Aluminum & Chemical
Sr Sub Notes
12.750%, 2/1/2003 7,750,000 8,408,750
-------------
AUTOMOBILES 0.22%
General Motors Acceptance Pass-Through
Asset Trust, Series 1997^,
6.500%, 1/17/2000 10,000,000 9,964,000
-------------
BEVERAGES 0.06%
Coca-Cola Enterprises, Putable
Notes, Zero Coupon, 6/20/2020 13,000,000 2,572,934
-------------
BROADCASTING 0.34%
Allbritton Communications Sr Sub Deb
11.500%, 8/15/2004 5,010,000 5,260,500
Series B, 9.750%, 11/30/2007 5,000,000 4,875,000
Benedek Broadcasting, Sr Secured
Notes, 11.875%, 3/1/2005 4,900,000 5,414,500
-------------
15,550,000
-------------
BUILDING MATERIALS 0.25%
USG Corp, Sr Notes
8.500%, 8/1/2005 11,250,000 11,629,688
-------------
CABLE 1.01%
Diamond Cable Communications
PLC, Sr Discount Step-Up Notes^
Zero Coupon^^, 2/15/2007 5,500,000 3,162,500
Galaxy Telecom LP/Galaxy
Telecom Capital, Sr Sub Notes
12.375%, 10/1/2005 2,850,000 3,021,000
International CableTel
Conv Sub Notes, 7.000% 6/15/2008 12,000,000 11,325,000
Sr Deferred Step-Up Notes
Series B, Zero Coupon^^ 2/1/2006 8,350,000 5,782,375
Sr Notes^, 10.000%, 2/15/2007 8,000,000 8,140,000
TCI Satellite Entertainment, Sr Sub
Discount Step-Up Notes^
Zero Coupon^^, 2/15/2007 12,000,000 7,080,000
Videotron Holdings PLC, Sr Discount
Step-Up Notes Zero Coupon ^^,
8/15/2005 9,000,000 7,515,000
-------------
46,025,875
-------------
<PAGE>
COMPUTER RELATED 0.14%
AST Research, Sub Liquid Yield
Option Note, Zero Coupon 12/14/2013 15,571,000 6,481,429
-------------
DISTRIBUTION 0.11%
Di Giorgio Corp, Sr Notes^
10.000%, 6/15/2007 5,000,000 4,862,500
-------------
ELECTRIC UTILITIES 1.74%
Carolina Power & Light, 1st
Mortgage, 8.625%, 9/15/2021 6,650,000 7,534,430
DQU-II Funding, Collateral Lease
8.700%, 6/1/2016 17,500,000 18,972,345
Detroit Edison, Secured Medium-
Term Notes, 8.300%, 8/1/2022 6,000,000 6,319,404
El Paso Electric, 1st Mortgage
Series C, 8.250%, 2/1/2003 3,000,000 3,112,500
Series E, 9.400%, 5/1/2011 4,000,000 4,350,000
Jersey Central Power & Light, 1st
Mortgage, 7.500%, 5/1/2023 6,850,000 6,524,865
Long Island Lighting, Deb
8.200%, 3/15/2023 14,800,000 15,163,562
Pennsylvania Power & Light 1st Mortgage
8.500%, 5/1/2022 4,100,000 4,354,421
8.500%, 7/15/2022 2,000,000 2,120,040
7.875%, 2/1/2023 3,750,000 3,812,006
Philadelphia Electric, 1st &
Refunding Mortgage
7.750%, 5/1/2023 530,000 535,899
7.250% , 11/1/2024 6,750,000 6,422,909
-------------
79,222,381
-------------
ENTERTAINMENT 0.42%
Time Warner Entertainment LP
Sr Deb, 8.375%, 3/15/2023 8,840,000 9,060,593
Viacom International, Sub Deb
Series A, 7.000%, 7/1/2003 7,500,000 7,198,838
Series B, 7.000%, 7/1/2003 3,140,000 3,013,913
-------------
19,273,344
-------------
FOODS 0.07%
Grand Metropolitan Investment
Gtd Sr Notes, 7.450%, 4/15/2035 3,000,000 3,125,082
-------------
GAMING 0.16%
Aztar Corp, Sr Sub Notes
13.750%, 10/1/2004 3,150,000 3,591,000
<PAGE>
Trump Hotels & Casino Resorts
Holdings LP/ Trump Hotels &
Casino Resorts Funding
Sr Secured Notes 15.500%, 6/15/2005 3,000,000 3,480,000
-------------
7,071,000
-------------
GOLD &
PRECIOUS METALS MINING 0.21%
Freeport McMoRan Copper & Gold
Sr Notes, 7.200%, 11/15/2026 5,100,000 5,061,005
Haynes International, Sr Notes
11.625%, 9/1/2004 4,000,000 4,420,000
-------------
9,481,005
-------------
HEALTH CARE DRUGS -
PHARMACEUTICALS 0.30%
McKesson Corp, Sub Deb
4.500%, 3/1/2004 15,856,000 13,848,091
-------------
HEALTH CARE RELATED 0.25%
Healthsource Inc, Conv Sub Notes^
5.000%, 3/1/2003 11,591,000 11,576,512
-------------
INVESTMENT BANK/BROKER FIRM 0.13%
Donaldson Lufkin & Jenrette
Medium-Term Notes
5.625%, 2/15/2016 6,000,000 5,762,052
-------------
LEISURE TIME 0.07%
Coleman Escrow, Sr Discount Notes^
Zero Coupon, 5/15/2001 5,000,000 3,162,500
-------------
OFFICE EQUIPMENT & SUPPLIES 0.35%
Bell & Howell, Sr Discount Step-Up
Deb, Series B, Zero Coupon^^
3/1/2005 17,325,000 13,946,625
Xerox Corp, Medium-Term Notes
Series D, 6.250%, 11/15/2026 2,130,000 2,078,918
-------------
16,025,543
-------------
OIL & GAS RELATED 0.45%
DI Industries, Sr Notes
8.875%, 7/1/2007 5,000,000 4,925,000
Dual Drilling, Sr Sub Notes
9.875%, 1/15/2004 5,575,000 5,965,250
Energy Corp of America, Sr Sub^
Notes, 9.500%, 5/15/2007 9,750,000 9,652,500
-------------
20,542,750
-------------
<PAGE>
PAPER & FOREST PRODUCTS 0.31%
Quno Corp, Sr Notes
9.125%, 5/15/2005 13,050,000 14,028,750
-------------
PUBLISHING 0.26%
Affiliated Newspaper Investments
Sr Discount Step-Up Deb
Zero Coupon^^, 7/1/2006 5,000,000 4,500,000
Time Warner, Deb
6.850%, 1/15/2026 7,500,000 7,331,708
-------------
11,831,708
-------------
REAL ESTATE INVESTMENT TRUST 0.30%
Fisher Brothers Financial Realty
Secured Notes 10.750%, 12/17/2000 6,750,000 6,834,375
Rockefeller Center Properties
Conv Deb, Zero Coupon 12/31/2000 3,210,000 2,190,825
Saul (B F) REIT, Sr Secured Notes
11.625%, 4/1/2002 4,300,000 4,558,000
-------------
13,583,200
-------------
RETAIL 0.26%
Penney (J C) Co, Deb
6.900%, 8/15/2026 11,800,000 11,862,882
-------------
SAVINGS & LOAN 0.45%
Sovereign Bancorp, Medium-Term
Sub Notes, 8.000%, 3/15/2003 6,500,000 6,555,673
Western Financial Savings Bank
Sub Capital Deb 8.500%, 7/1/2003 14,000,000 14,187,530
-------------
20,743,203
-------------
TELECOMMUNICATIONS -
CELLULAR & WIRELESS 0.44%
CommNet Cellular
Sr Sub Discount Step-Up Notes
Zero Coupon^^, 9/1/2003 9,700,000 9,409,000
Sub Notes, 11.250%, 7/1/2005 2,500,000 2,881,250
NEXTEL Communications, Sr
Discount Step-Up Notes
Zero Coupon^^, 8/15/2004 4,000,000 3,080,000
PriCellular Wireless, Sr Discount
Step-Up Notes, Zero Coupon^^
10/1/2003 5,000,000 4,700,000
-------------
20,070,250
-------------
<PAGE>
TELECOMMUNICATIONS -
LONG DISTANCE 0.49%
Brooks Fiber Properties, Sr Discount
Step-Up Notes, Zero Coupon^^
3/1/2006 19,100,000 13,011,875
McLeod Inc, Sr Discount Step-Up Notes^,
Zero Coupon^^ 3/1/2007 10,000,000 6,375,000
TCI Communications, Sr Notes
6.875%, 2/15/2006 3,000,000 2,840,535
-------------
22,227,410
-------------
UTILITIES 0.09%
Camuzzi Gas Pampeana SA/
Camuzzi Gas del Sur, Medium-
Term Notes, 9.250%, 12/15/2001 4,000,000 4,200,000
-------------
TOTAL CORPORATE BONDS
(Cost $423,653,507) 424,748,389
-------------
TOTAL FIXED INCOME SECURITIES
(Cost $735,105,549) 736,311,636
-------------
OTHER SECURITIES 0.32%
CABLE 0.15%
OpTel Inc, Units^ (Each unit consists
of one $1,000 face amount Sr Note
13.000%, 2/15/2005 and 1 shr of
non-voting cmn stock) 7,000 6,685,000
-------------
TELEPHONE 0.17%
Ionica PLC, Units (Each unit consists
of one $1,000 face amount Sr
Discount Note 15.000%, 5/1/2007
and 1 wrnt to purchase 19.619
shrs of cmn stock) 15,000 7,950,000
-------------
TOTAL OTHER SECURITIES
(Cost $14,455,437) 14,635,000
-------------
SHORT-TERM INVESTMENTS -
COMMERCIAL PAPER 4.56%
CONSUMER FINANCE 1.22%
American Express Credit
5.500%, 7/2/1997 30,190,000 30,190,000
Household Finance
6.150%, 7/1/1997 25,711,000 25,711,000
-------------
55,901,000
-------------
<PAGE>
FINANCIAL 0.56%
General Electric Capital
5.670%, 7/7/1997 25,710,000 25,710,000
-------------
INSURANCE 0.68%
Prudential Funding
5.530%, 7/2/1997 30,864,000 30,864,000
-------------
OIL & GAS RELATED 0.41%
Chevron Oil Finance
5.500%, 7/3/1997 18,741,000 18,741,000
-------------
RETAIL 1.14%
Sears Roebuck Acceptance
5.480%, 7/3/1997 51,856,000 51,856,000
-------------
SERVICES 0.55%
Hertz Corp
5.570%, 7/7/1997 24,900,000 24,900,000
-------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $207,972,000) 207,972,000
-------------
TOTAL INVESTMENT SECURITIES
AT VALUE 100.00%
(Cost $3,367,016,003)
(Cost for Income Tax Purposes
$3,367,161,620) $4,560,005,990
=============
* Security is non-income producing.
^ Securities are registered pursuant to Rule 144A and may be deemed to be
restricted for resale to institutional investors.
** Security may make dividend payments in other types of securities or cash.
^^ 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.
See Notes to Financial Statements
<PAGE>
INVESCO Industrial Income Fund, Inc.
Statement of Assets and Liabilities
June 30, 1997
ASSETS
Investment Securities at Value
(Cost $3,367,016,003) $4,560,005,990
---------------
Receivables:
Investment Securities Sold 5,876,703
Fund Shares Sold 4,510,407
Dividends and Interest 15,727,551
Prepaid Expenses and Other Assets 274,204
---------------
TOTAL ASSETS 4,586,394,855
---------------
LIABILITIES
Payables:
Custodian 273,020
Distributions to Shareholders 1,826,768
Investment Securities Purchased 3,480,750
Fund Shares Repurchased 4,838,949
Accrued Distribution Expenses 899,644
Accrued Expenses and Other Payables 401,117
---------------
TOTAL LIABILITIES 11,720,248
---------------
Net Assets at Value 4,574,674,607
===============
NET ASSETS
Paid-in Capital* 3,064,468,943
Distributions in Excess of Net Investment
Income (See Note 1) (184,298)
Accumulated Undistributed Net Realized Gain
on Investment Securities and Foreign
Currency Transactions 317,399,975
Net Appreciation of Investment Securities and
Foreign Currency Transactions (See Note 1) 1,192,989,987
---------------
Net Assets at Value 4,574,674,607
===============
Net Asset Value, Offering and Redemption
Price per Share 15.31
===============
* The Fund has one billion authorized shares of common stock, par value of $1.00
per share, of which 298,771,934 were outstanding at June 30, 1997.
See Notes to Financial Statements
<PAGE>
INVESCO Industrial Income Fund, Inc.
Statement of Operations
Year Ended June 30, 1997
INVESTMENT INCOME
INCOME
Dividends $82,618,687
Interest 66,445,412
Foreign Taxes Withheld (557,461)
---------------
TOTAL INCOME 148,506,638
---------------
EXPENSES
Investment Advisory Fees 21,791,002
Distribution Expenses 10,635,344
Transfer Agent Fees 6,785,271
Administrative Fees 648,015
Custodian Fees and Expenses 598,033
Directors' Fees and Expenses 185,884
Professional Fees and Expenses 164,334
Registration Fees and Expenses 88,350
Reports to Shareholders 688,662
Other Expenses 146,525
---------------
TOTAL EXPENSES 41,731,420
Fees and Expenses Absorbed
by Investment Adviser (1,257,873)
Fees and Expenses Paid Indirectly (278,812)
---------------
NET EXPENSES 40,194,735
---------------
NET INVESTMENT INCOME 108,311,903
---------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES
Net Realized Gain on Investment Securities
and Foreign Currency Transactions 372,025,901
Change in Net Appreciation of Investment
Securities and Foreign Currency Transactions 550,539,412
---------------
NET GAIN ON INVESTMENT SECURITIES 922,565,313
---------------
Net Increase in Net Assets from Operations 1,030,877,216
===============
See Notes to Financial Statements
<PAGE>
INVESCO Industrial Income Fund, Inc.
Statement of Changes in Net Assets
Year Ended June 30
--------------------------------------
1997 1996
--------------------------------------
OPERATIONS
Net Investment Income $ 108,311,903 $ 133,033,543
Net Realized Gain on Investment
Securities and Foreign Currency
Transactions 372,025,901 291,155,395
Change in Net Appreciation of
Investment Securities and
Foreign Currency Transactions 550,539,412 217,662,186
--------------------------------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS 1,030,877,216 641,851,124
--------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income (108,045,224) (133,792,249)
Net Realized Gain on
Investment Securities (283,864,499) (77,502,041)
--------------------------------------
TOTAL DISTRIBUTIONS (391,909,723) (211,294,290)
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 688,098,414 714,175,666
Reinvestment of Distributions 369,552,898 198,324,457
--------------------------------------
1,057,651,312 912,500,123
Amounts Paid for Repurchases
of Shares (1,292,480,001) (1,182,130,063)
--------------------------------------
NET DECREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS (234,828,689) (269,629,940)
--------------------------------------
Total Increase in Net Assets 404,138,804 160,926,894
NET ASSETS
Beginning of Period 4,170,535,803 4,009,608,909
--------------------------------------
End of Period (Including
Accumulated Undistributed
(Distribution in Excess of)
Net Investment Income of
($184,298) and $91,634
respectively) (See Note 1) 4,574,674,607 4,170,535,803
======================================
<PAGE>
FUND SHARE TRANSACTIONS
Shares Sold 49,408,506 55,792,000
Shares Issued from Reinvestment
of Distributions 27,312,058 15,483,292
--------------------------------------
76,720,564 71,275,292
Shares Repurchased (93,580,782) (92,077,091)
--------------------------------------
Net Decrease in Fund Shares (16,860,218) (20,801,799)
======================================
See Notes to Financial Statements
<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.
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
<PAGE>
be comprised of stated coupon rate, market discount, original issue discount
and amortized premium is recorded on the accrual basis. Discounts and
premiums 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.
Effective January 13, 1997, the Fund began accruing income using the
effective interest method which includes amortizing premiums on purchases of
portfolio securities as adjustments to income. This method of recording
income more closely reflects the economics of holding and disposing of debt
instruments. Prior to January 13, 1997, the Fund accrued coupon interest
income, market discount and original issue discount and accounted for
purchased premiums as capital gains or losses when realized upon disposition
of the associated security. The cumulative effect of applying this
accounting change was to increase accumulated distributions in excess of
undistributed net investment income and increase net unrealized appreciation
of investment securities by $780,148. Such accounting change had no effect
on net asset value per share.
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.
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.
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. Of the ordinary income
distributions declared for the year ended June 30, 1997, 54.36% 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.
<PAGE>
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends and distributions to
shareholders are recorded by the Fund on the ex dividend/distribution date.
The Fund distributes net realized capital gains, if any, to its shareholders
at least annually, if not offset by capital loss carryovers. Income
distributions and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for mortgage-backed securities, market discounts, amortized
premiums, foreign currency transactions, nontaxable dividends, net operating
losses and expired capital loss carryforwards. For the year ended June 30,
1997, the Fund reclassified $237,537 from accumulated undistributed net
realized gain on investment securities to accumulated undistributed net
investment income. Net investment income, net realized gains 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, Distribution
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.
For the year ended June 30, 1997, Fees and Expenses Paid Indirectly
consisted of $271,474 included in Custodian Fees and Expenses, $1,756
included in Distribution Expenses and $5,582 included in Transfer Agent
Fees.
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. The voluntary fee waivers were included as an
amendment to the investment advisory agreement, effective May 15, 1997.
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.
<PAGE>
A plan of distribution pursuant to Rule 12b-1 of the Act provided for
reimbursement of marketing and advertising expenditures to IFG (the
"Distributor") to a maximum of 0.25% of annual average net assets. Amounts
accrued by the Fund are available to reimburse the Distributor for actual
expenditures incurred within a rolling twelve-month period. For the year ended
June 30, 1997, the Fund paid the Distributor $14,751,573 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
permissible activities and services in connection with the distribution of the
Fund's shares. Accordingly, the above amounts reflect reimbursements under the
plan for the six months ended December 31, 1996 and compensation under the plan
for the six months ended June 30, 1997.
NOTE 3 - PURCHASES AND SALES OF INVESTMENT SECURITIES. For the year ended June
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 $1,808,338,569 and $2,337,038,282, respectively.
The aggregate cost of purchases and proceeds from sales of U.S. Government
securities were $94,517,059 and $177,727,513, respectively.
NOTE 4 - APPRECIATION AND DEPRECIATION. At June 30, 1997, the gross appreciation
of securities in which there was an excess of value over tax cost amounted to
$1,218,576,586 and the gross depreciation of securities in which there was an
excess of tax cost over value amounted to $25,732,216, resulting in net
appreciation of $1,192,844,370.
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 June 30, 1997, included in Directors'
Fees and Expenses in the Statement of Operations were $59,190. Unfunded accrued
pension costs of $169,489 and pension liability of $353,788 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 June 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 188,366,712 0 6,793,827 195,160,539
Dan J. Hesser 189,019,842 0 6,140,697 195,160,539
Fred A. Deering 188,944,292 0 6,216,247 195,160,539
Victor L. Andrews 188,181,339 0 6,979,200 195,160,539
Bob R. Baker 188,115,278 0 7,045,261 195,160,539
Lawrence H. Budner 188,212,416 0 6,948,123 195,160,539
Daniel D. Chabris 187,947,289 0 7,213,250 195,160,539
A. D. Frazier, Jr. 188,993,790 0 6,166,749 195,160,539
Hubert L. Harris, Jr. 188,219,655 0 6,940,844 195,160,539
Kenneth T. King 188,743,112 0 6,417,427 195,160,539
John W. McIntyre 188,957,908 0 6,202,631 195,160,539
Proposal 1 186,838,257 2,185,467 6,136,814 195,160,538
Proposal 2 182,887,315 4,154,596 8,118,627 195,160,538
Proposal 3 182,643,914 4,345,388 8,171,234 195,160,536
</TABLE>
<PAGE>
INVESCO Industrial Income Fund, Inc.
Financial Highlights
(For a Fund Share Outstanding Throughout Each Period)
<TABLE>
<CAPTION>
Year Ended June 30
-----------------------------------------------------------------------------------
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value -
Beginning of Period $13.21 $11.92 $11.32 $11.53 $10.67
-----------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.35 0.41 0.42 0.36 0.31
Net Gain on Securities
(Both Realized and
Unrealized) 3.05 1.53 1.14 0.02 1.33
-----------------------------------------------------------------------------------
Total from Investment
Operations 3.40 1.94 1.56 0.38 1.64
-----------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from Net
Investment Income 0.35 0.41 0.42 0.36 0.32
In Excess of Net
Investment Income 0.00 0.00 0.00 0.11 0.00
Distributions from
Capital Gains 0.95 0.24 0.54 0.12 0.46
-----------------------------------------------------------------------------------
Total Distributions 1.30 0.65 0.96 0.59 0.78
-----------------------------------------------------------------------------------
Net Asset Value -
End of Period 15.31 13.21 11.92 11.32 11.53
===================================================================================
TOTAL RETURN 27.33% 16.54% 14.79% 3.24% 15.66%
RATIOS
Net Assets - End of Period
($000 Omitted) $ 4,574,675 $ 4,170,536 $ 4,009,609 $3,913,322 $ 3,412,527
Ratio of Expenses to
Average Net Assets# 0.95%@ 0.93%@ 0.94% 0.92% 0.96%
Ratio of Net Investment
Income to Average
Net Assets# 2.54% 3.17% 3.61% 3.11% 2.94%
Portfolio Turnover Rate 47% 63% 54% 56% 121%
Average Commision Rate Paid^^ $0.0370 - - - -
</TABLE>
<PAGE>
# Various expenses of the Fund were voluntarily absorbed by IFG for the years
ended June 30, 1997, 1996, 1995, 1994 and 1993. If such expenses had not been
voluntarily absorbed, ratio of expenses to average net assets would have been
0.98%, 0.96%, 0.97%, 0.95% and 0.98%, respectively, and ratio of net
investment income to average net assets would have been 2.51%, 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.
^^ The average commision rate paid is the total brokerage commisions paid on
applicable purchases and sales of securities for the period divided by the
total number of related shares pruchased 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 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, 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 June
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
August 1, 1997
<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
on 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 to 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.
<PAGE>
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
<PAGE>
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, period 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.
<PAGE>
INVESCO FUNDS
We're easy to stay in touch with:
Investor Services Representatives,
1-800-525-8085
PAL(R), your Personal Account Line,
1-800-424-8085
On the World Wide Web:
http://www.invesco.com
Denver Investor Centers:
Cherry Creek, 155-B Fillmore Street;
Denver Tech Center, 7800 E. Union
Avenue, Lobby Level
INVESCO Funds Group, Inc.,(SM)Distributor
Post Office Box 173706
Denver, Colorado 80217-3706
This information must be preceded or
accompanied by a current prospectus.
