INVESCO Specialty Funds, Inc.
(February 15, 1995)
INVESCO International Funds, Inc.
(February 28, 1995)
Supplement to Statements of Additional Information of Above Funds
Date of Which is Indicated in Parentheses
The second and third paragraphs in the section of the above Funds'
Statements of Additional Information entitled "How Shares are Valued" are
amended to read as follows:
The net asset value per share of each Fund is calculated by dividing the
value of all securities held by the Fund and its other assets (including
dividends and interest accrued but not collected), less the Fund's
liabilities (including accrued expenses), by the number of outstanding
shares of that Fund. Securities traded on national securities exchanges,
the NASDAQ National Market System, the NASDAQ Small Cap market and foreign
markets are valued at their last sale prices on the exchanges or markets
where such securities are primarily traded. Securities traded in the
over-the-counter market for which last sale prices are not available, and
listed securities for which no sales were reported on a particular date,
are valued at their highest closing bid prices (or, for debt securities,
yield equivalents thereof) obtained from one or more dealers making
markets for such securities. If market quotations are not readily
available, securities will be valued at their fair values as determined in
good faith by the Company's board of directors or pursuant to procedures
adopted by the board of directors. The above procedures may include the
use of valuations furnished by a pricing service which employs a matrix to
determine valuations for normal institutional-size trading units of debt
securities. Prior to utilizing a pricing service, the Fund's board of
directors reviews the methods used by such service to assure itself that
securities will be valued at their fair values. The Fund's board of
directors also periodically monitors the methods used by such pricing
services. Debt securities with remaining maturities of 60 days or less at
the time of purchase are normally valued at amortized cost.
The values of securities held by the Funds, and other assets used in
computing net asset value, generally are determined as of the time regular
trading in such securities or assets is completed each day. Since regular
trading in most foreign securities markets is completed simultaneously
with, or prior to, the close of regular trading on the New York Stock
Exchange, closing prices for foreign securities usually are available for
purposes of
1
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computing the Funds' net asset value. However, in the event that the
closing price of a foreign security is not available in time to calculate
a Fund's net asset value on a particular day, the Company's board of
directors has authorized the use of the market price for the security
obtained from an approved pricing service at an established time during
the day which may be prior to the close of regular trading in the
security. The value of all assets and liabilities initially expressed in
foreign currencies will be converted into U.S. dollars at the spot rate of
such currencies against U.S. dollars provided by an approved pricing
service.
The date of this Supplement is April 24, 1995.
2
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STATEMENT OF ADDITIONAL INFORMATION
February 15, 1995
INVESCO SPECIALTY FUNDS, INC.
Address: Mailing Address:
7800 E. Union Avenue Post Office Box 173706
Denver, Colorado 80237 Denver, Colorado 80217-3706
Telephone:
In continental U.S., 1-800-525-8085
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INVESCO SPECIALTY FUNDS, INC. (the "Company") is a diversified, managed,
no-load mutual fund consisting of four separate portfolios of investments,
INVESCO Worldwide Capital Goods Fund (the "Capital Goods Fund"); INVESCO
Worldwide Communications Fund (the "Communications Fund"); INVESCO European
Small Company Fund (the "European Small Company Fund"); and INVESCO Latin
American Growth Fund (the "Latin American Growth Fund") (collectively, the
"Funds" and individually, a "Fund").
The Capital Goods Fund seeks to achieve capital appreciation by investing,
under normal circumstances, at least 65% of its total assets in companies that
are primarily engaged in the design, development, manufacture, distribution,
sale or service of capital goods, or in the mining, processing, manufacture or
distribution of raw materials and intermediate goods used by industry and
agriculture. The Communications Fund seeks to achieve a high total return on
investment through capital appreciation and current income by investing, under
normal circumstances, at least 65% of its total assets in companies that are
primarily engaged in the design, development, manufacture, distribution or sale
of communications services and equipment. Up to 35% of the Communication Fund's
assets will be invested, under normal circumstances, in companies that are
engaged in developing, constructing or operating infrastructure projects
throughout the world, or in supplying equipment or services to such companies.
Under normal circumstances, the Capital Goods Fund and Communications Fund will
invest at least 65% of their total assets in issuers domiciled in at least three
countries, one of which may be the United States, although the Capital Goods
Fund's and Communications Fund's investment adviser expects the Capital Goods
Fund's and Communications Fund's investments to be allocated among a larger
number of countries. The percentage of the Capital Goods Fund's and
Communication Fund's assets invested in United States securities normally will
be higher than that invested in securities issued by companies in any other
single country. However, it is possible that at times the Capital Goods Fund or
the Communications Fund may have 65% or more of its total assets invested in
foreign securities.
The European Small Company Fund seeks to achieve capital appreciation by
investing, under normal circumstances, at least 65% of its total assets in
equity securities of European companies whose individual equity market
capitalizations would place them (at the time of purchase) in the same size
range of companies in approximately the lowest 25% of market capitalization of
companies that have equity securities listed on a U.S. national securities
exchange. Under normal circumstances, the European Small Company Fund will
invest at least 65% of its total assets in issuers domiciled in at least five
countries, although the European Small Company Fund's investment adviser expects
the European Small
<PAGE>
Company Fund's investments to be allocated among a larger number of countries.
In this regard, no more than 50% of the European Small Company Fund's total
assets will be invested in issuers domiciled in any one country.
The Latin American Growth Fund seeks to achieve capital appreciation by
investing, under normal circumstances, at least 65% of its total assets in
securities of issuers domiciled in Latin America. For purposes of this Fund,
Latin America will include: Mexico, Central America, South America, and the
Spanish speaking islands of the Caribbean.
Investors may purchase shares of any or all of the Funds. Additional funds
may be added in the future.
Prospectuses for the Capital Goods Fund, the Communications Fund, the
European Small Company Fund and the Latin American Growth Fund, each dated
February 15, 1995, which provide the basic information you should know before
investing in a Fund, may be obtained without charge from INVESCO Funds Group,
Inc., P.O. Box 173706, Denver, Colorado 80217-3706. This Statement of Additional
Information is not a Prospectus, but contains information in addition to and
more detailed than that set forth in the Prospectus. It is intended to provide
you with additional information regarding the activities and operations of the
Funds and should be read in conjunction with the Prospectus.
Investment Adviser and Distributor: INVESCO FUNDS GROUP, INC.
<PAGE>
TABLE OF CONTENTS Page
INVESTMENT POLICIES AND RESTRICTIONS 7
THE FUNDS AND THEIR MANAGEMENT 19
HOW SHARES CAN BE PURCHASED 31
HOW SHARES ARE VALUED 34
FUND PERFORMANCE 35
SERVICES PROVIDED BY THE FUNDS 36
TAX-SHELTERED RETIREMENT PLANS 37
HOW TO REDEEM SHARES 37
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES 38
INVESTMENT PRACTICES 39
ADDITIONAL INFORMATION 41
REPORT OF INDEPENDENT ACCOUNTANTS 45
FINANCIAL STATEMENTS 46
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INVESTMENT POLICIES AND RESTRICTIONS
As discussed in the Prospectus in the section entitled "Investment
Objectives and Policies," the Funds may invest in a variety of securities, and
employ a broad range of investment techniques in seeking to achieve their
respective investment objectives. Such securities and techniques include the
following:
Types of Equity Securities
As described in the Prospectuses, equity securities which may be purchased
by the Funds consist of common, preferred and convertible preferred stocks, and
securities having equity characteristics such as rights, warrants and
convertible debt securities. Common stocks and preferred stocks represent equity
ownership interests in a corporation and participate in the corporation's
earnings through dividends which may be declared by the corporation. Unlike
common stocks, preferred stocks are entitled to stated dividends payable from
the corporation's earnings, which in some cases may be "cumulative" if prior
stated dividends have not been paid. Dividends payable on preferred stock have
priority over distributions to holders of common stock, and preferred stocks
generally have preferences on the distribution of assets in the event of the
corporation's liquidation. Preferred stocks may be "participating," which means
that they may be entitled to dividends in excess of the stated dividend in
certain cases. The rights of common and preferred stocks are generally
subordinate to rights associated with a corporation's debt securities. Rights
and warrants are securities which entitle the holder to purchase the securities
of a company (generally, its common stock) at a specified price during a
specified time period. Because of this feature, the values of rights and
warrants are affected by factors similar to those which determine the prices of
common stocks and exhibit similar behavior. Rights and warrants may be purchased
directly or acquired in connection with a corporate reorganization or exchange
offer.
Convertible securities which may be purchased by the Funds include
convertible debt obligations and convertible preferred stock. A convertible
security entitles the holder to exchange it for a fixed number of shares of
common stock (or other equity security), usually at a fixed price within a
specified period of time. Until conversion, the holder receives the interest
paid on a convertible bond or the dividend preference of a preferred stock.
Convertible securities have an "investment value" which is the theoretical
value determined by the yield they provide in comparison with similar securities
without the conversion feature. Investment value changes are based upon
prevailing interest rates and other factors. They also have a "conversion value"
which is the worth in market value if the securities were exchanged for their
underlying equity securities. Conversion value fluctuates directly with the
price of the underlying security. If conversion value is substantially below
investment value, the price of the convertible security is governed principally
by its investment value. If the conversion value is near or above investment
value, the price of the convertible security generally will rise above
investment value and may represent a premium over conversion value due to the
combination of the convertible security's right to interest (or dividend
preference) and the possibility of capital appreciation from the conversion
feature. A convertible security's price, when price is influenced primarily by
its conversion value, generally will yield less than a senior non-convertible
security of comparable investment value. Convertible securities may be purchased
at varying price levels
<PAGE>
above their investment values or conversion values. However, there is no
assurance that any premium above investment value or conversion value will be
recovered because prices change and, as a result, the ability to achieve capital
appreciation through conversion may be eliminated.
Restricted/144A Securities
In recent years, a large institutional market has developed for certain
securities that are not registered under the Securities Act of 1933 (the "1933
Act"). Institutional investors generally will not seek to sell these instruments
to the general public, but instead will often depend on an efficient
institutional market in which such unregistered securities can readily be resold
or on an issuer's ability to honor a demand for repayment. Therefore, the fact
that there are contractual or legal restrictions on resale to the general public
or certain institutions is not dispositive of the liquidity of such investments.
Rule 144A under the 1933 Act establishes a "safe harbor" from the
registration requirements of the 1933 Act for resales of certain securities to
qualified institutional buyers. Institutional markets for restricted securities
that might develop as a result of Rule 144A could provide both readily
ascertainable values for restricted securities and the ability to liquidate an
investment in order to satisfy share redemption orders. An insufficient number
of qualified institutional buyers interested in purchasing a Rule 144A-eligible
security held by a Fund, however, could affect adversely the marketability of
such portfolio security and the Fund might be unable to dispose of such security
promptly or at reasonable prices.
Municipal Bonds
The Funds may invest in municipal bonds, the interest from which is exempt
from federal income taxes, when Fund Management believes that the potential
total return on the investment is better than the return that otherwise would be
achieved by investing in fixed-income securities issued by corporations or the
U.S. government or its agencies, the interest from which is not exempt from
federal income taxes. Municipal bonds are issued by or on behalf of states,
territories and possessions of the United States and the District of Columbia,
and their political subdivisions, agencies and instrumentalities, to obtain
funds for various public purposes, including: the construction of a wide range
of public facilities such as airports, bridges, highways, housing, hospitals,
mass transportation, schools, streets, and water and sewer works; refunding
outstanding obligations; and obtaining funds for general operating expenses. The
Funds' investments in municipal bonds, as is true for any debt securities,
generally will be subject to both credit risk and market risk. See the section
of the Prospectuses entitled "Risk Factors."
Obligations of Domestic Banks
These obligations consist of certificates of deposit ("CDs") and banker's
acceptances issued by domestic banks (including their foreign branches) having
total assets in excess of $5 billion, which meet the Funds' minimum rating
requirements. CDs are issued against deposits in a commercial bank for a
specified period and rate and are normally negotiable. Eurodollar CDs are
certificates issued by a foreign branch (usually London) of a U.S. domestic
bank, and, as such, the credit is deemed to be that of the domestic bank.
<PAGE>
Bankers' acceptances are short-term credit instruments evidencing the
promise of the bank (by virtue of the bank's "acceptance") to pay at maturity a
draft which has been drawn on it by a customer (the "drawer"). These instruments
are used to finance the import, export, transfer, or storage of goods and
reflect the obligation of both the bank and the drawer to pay the face amount.
Commercial Paper
The Funds may invest in these obligations, which are short-term promissory
notes issued by domestic corporations to meet current working capital
requirements. Such paper may be unsecured or backed by a letter of credit.
Commercial paper issued with a letter of credit is, in effect, "two party
paper," with the issuer directly responsible for payment, plus a bank's
guarantee that if the note is not paid at maturity by the issuer, the bank will
pay the principal and interest to the buyer. Commercial paper is sold either as
interest-bearing or on a discounted basis, with maturities not exceeding 270
days. The Funds will only invest in commercial paper which at the date of
purchase is rated A-2 or higher by Standard & Poor's Ratings Group or Prime-2 or
higher by Moody's Investors Service, Inc. or, if unrated, commercial paper that
is judged by Fund Management to be equivalent in quality to commercial paper
having such ratings. A commercial paper rating of A-2 or Prime-2 indicates a
strong capacity for repayment of short-term promissory obligations.
Mortgage-Backed Securities
The Funds may invest in mortgage-backed securities issued or guaranteed by
the U.S. government, its agencies or instrumentalities, or institutions such as
banks, insurance companies, and savings and loans. Some of these securities,
such as Government National Mortgage Association ("GNMA") certificates, are
backed by the full faith and credit of the U.S. Treasury while others, such as
Federal Home Loan Mortgage Corporation ("Freddie Mac") certificates, are not.
The Funds currently do not intend to invest more than 5% of their respective net
assets in mortgage-backed securities.
Mortgage-backed securities represent interests in a pool of mortgages.
Principal and interest payments made on the mortgages in the underlying mortgage
pool are passed through to the Funds. Unscheduled prepayments of principal
shorten the securities' weighted average life and may lower their total return.
The value of these securities also may change because of changes in the market's
perception of the creditworthiness of the federal agency or private institution
that issued them. In addition, the mortgage securities market in general may be
adversely affected by changes in governmental regulation or tax policies.
<PAGE>
Asset-Backed Securities
Asset-backed securities represent interests in pools of consumer loans
(generally unrelated to mortgage loans) and most often are structured as
pass-through securities. Interest and principal payments ultimately depend on
payment of the underlying loans by individuals, although the securities may be
supported by letters of credit or other credit enhancements. The underlying
assets (e.g., loans) are subject to prepayments which shorten the securities'
weighted average life and may lower their returns. If the credit support or
enhancement is exhausted, losses or delays in payment may result if the required
payments of principal and interest are not made. The value of these securities
also may change because of changes in the market's perception of the
creditworthiness of the servicing agent for the pool, the originator of the
pool, or the financial institution providing the credit support or enhancement.
The Funds currently do not intend to invest more than 5% of their respective net
assets in asset-backed securities.
Zero Coupon Bonds
The Funds may invest in zero coupon bonds or "strips." Zero coupon bonds
do not make regular interest payments; rather, they are sold at a discount from
face value. Principal and accredited discount (representing interest accrued but
not paid) are paid at maturity. "Strips" are debt securities that are stripped
of their interest after the securities are issued, but otherwise are comparable
to zero coupon bonds. The issuers of all zero coupon bonds, and the obligor of
all "strips" purchased by the Funds, will be the U.S. government or its agencies
or instrumentalities. The market value of "strips" and zero coupon bonds
generally fluctuates in response to changes in interest rates to a greater
degree than interest-paying securities of comparable term and quality. In order
for a Fund to maintain its qualification as a regulated investment company, it
may be required to distribute income recognized on zero coupon bonds or "strips"
even though no cash may be paid to the Fund until the maturity or call date of
the bond, and any such distribution could reduce the amount of cash available
for investment by the Fund. The Funds currently do not intend to invest more
than 5% of their respective net assets in zero coupon bonds or "strips."
Futures and Options on Futures and Securities
As described in each Fund's Prospectus, the Funds may enter into futures
contracts, and purchase and sell ("write") options to buy or sell futures
contracts and other securities, which are included in the types of instruments
sometimes known as derivatives. The Funds will comply with and adhere to all
limitations in the manner and extent to which they effect transactions in
futures and options on such futures currently imposed by the rules and policy
guidelines of the Commodity Futures Trading Commission (the "CFTC") as
conditions for exemption of a mutual fund, or investment advisers thereto, from
registration as a commodity pool operator. Under those restrictions, a Fund will
not, as to any positions, whether long, short or a combination thereof, enter
into futures and options thereon for which the aggregate initial margins and
premiums exceed 5% of the fair market value of the Fund's total assets after
taking into account unrealized profits and losses on options it has entered
into. In the case of an option that is "in-the-money," as defined in the
Commodity Exchange Act (the "CEA"), the in-the-money amount may be excluded in
computing such 5%. (In general a call option on a future is "in-the-money" if
the value of the future exceeds the
<PAGE>
exercise ("strike") price of the call; a put option on a future is
"in-the-money" if the value of the future which is the subject of the put is
exceeded by the strike price of the put.) The Funds may use futures and options
thereon solely for bona fide hedging or for other non-speculative purposes
within the meaning and intent of the applicable provisions of the CEA and the
regulations thereunder. As to long positions which are used as part of the
Funds' portfolio management strategies and are incidental to their activities in
the underlying cash market, the "underlying commodity value" of the Funds'
futures and options thereon must not exceed the sum of (i) cash set aside in an
identifiable manner, or short-term U.S. debt obligations or other
dollar-denominated high-quality, short-term money instruments so set aside, plus
sums deposited on margin; (ii) cash proceeds from existing investments due in 30
days; and (iii) accrued profits held at the futures commission merchant. The
"underlying commodity value" of a future is computed by multiplying the size of
the future by the daily settlement price of the future. For an option on a
future, that value is the underlying commodity value of the future underlying
the option.
Unlike when a Fund purchases or sells a security, no price is paid or
received by a Fund upon the purchase or sale of a futures contract. Instead, the
Fund will be required to deposit in a segregated asset account with the broker
an amount of cash or qualifying securities (currently U.S. Treasury bills),
currently in a minimum amount of $15,000. This is called "initial margin." Such
initial margin is in the nature of a performance bond or good faith deposit on
the contract. However, since losses on open contracts are required to be
reflected in cash in the form of variation margin payments, the Fund may be
required to make additional payments during the term of the contracts to its
broker. Such payments would be required, for example, where, during the term of
an interest rate futures contract purchased by a Fund, there was a general
increase in interest rates, thereby making the Fund's portfolio securities less
valuable. In all instances involving the purchase of financial futures contracts
by a Fund, an amount of cash together with such other securities as permitted by
applicable regulatory authorities to be utilized for such purpose, at least
equal to the market value of the futures contracts, will be deposited in a
segregated account with the Fund's custodian to collateralize the position. At
any time prior to the expiration of a futures contract, the Fund may elect to
close its position by taking an opposite position which will operate to
terminate the Fund's position in the futures contract. For a more complete
discussion of the risks involved in futures and options on futures and other
securities, refer to Appendix A ("Description of Futures and Options
Contracts").
Where futures are purchased to hedge against a possible increase in the
price of a security before a Fund is able in an orderly fashion to invest in the
security, it is possible that the market may decline instead. If the Fund, as a
result, concluded not to make the planned investment at that time because of
concern as to possible further market decline or for other reasons, the Fund
would realize a loss on the futures contract that is not offset by a reduction
in the price of securities purchased.
In addition to the possibility that there may be an imperfect correlation
or no correlation at all between movements in the futures contract and the
portion of the portfolio being hedged, the price of futures may not correlate
perfectly with movements in the prices due to certain market distortions. All
participants in the futures market are subject to margin deposit and maintenance
requirements. Rather than meeting additional margin deposit requirements,
investors may close
<PAGE>
futures contracts through offsetting transactions which could distort the normal
relationship between the underlying securities and the value of the futures
contract. Moreover, the deposit requirements in the futures market are less
onerous than margin requirements in the securities market and may therefore
cause increased participation by speculators in the futures market. Such
increased participation may also cause temporary price distortions. Due to the
possibility of price distortion in the futures market and because of the
imperfect correlation between movements in the value of the underlying
securities and movements in the prices of futures contracts, the value of
futures contracts as a hedging device may be reduced.
In addition, if the Fund has insufficient available cash, it may at times
have to sell securities to meet variation margin requirements. Such sales may
have to be effected at a time when it may be disadvantageous to do so.
Options on Futures Contracts
The Funds may buy and write options on futures contracts for hedging
purposes, which are included in the types of instruments sometimes known as
derivatives. The purchase of a call option on a futures contract is similar in
some respects to the purchase of a call option on an individual security.
Depending on the pricing of the option compared to either the price of the
futures contract upon which it is based or the price of the underlying
instrument, ownership of the option may or may not be less risky than ownership
of the futures contract or the underlying instrument. As with the purchase of
futures contracts, when a Fund is not fully invested it may buy a call option on
a futures contract to hedge against a market advance.
The writing of a call option on a futures contract constitutes a partial
hedge against declining prices of the security or foreign currency which is
deliverable under, or of the index comprising, the futures contract. If the
futures price at the expiration of the option is below the exercise price, a
Fund will retain the full amount of the option premium which provides a partial
hedge against any decline that may have occurred in the Fund's portfolio
holdings. The writing of a put option on a futures contract constitutes a
partial hedge against increasing prices of the security or foreign currency
which is deliverable under, or of the index comprising, the futures contract. If
the futures price at expiration of the option is higher than the exercise price,
the Fund will retain the full amount of the option premium which provides a
partial hedge against any increase in the price of securities which the Fund is
considering buying. If a call or put option the Fund has written is exercised,
the Fund will incur a loss which will be reduced by the amount of the premium it
received. Depending on the degree of correlation between change in the value of
its portfolio securities and changes in the value of the futures positions, the
Fund's losses from existing options on futures may to some extent be reduced or
increased by changes in the value of portfolio securities.
The purchase of a put option on a futures contract is similar in some
respects to the purchase of protective put options on portfolio securities. For
example, a Fund may buy a put option on a futures contract to hedge the Fund's
portfolio against the risk of falling prices.
The amount of risk a Fund assumes when it buys an option on a futures
contract is the premium paid for the option plus related transaction costs. In
<PAGE>
addition to the correlation risks discussed above, the purchase of an option
also entails the risk that changes in the value of the underlying futures
contract will not be fully reflected in the value of the options bought.
Forward Foreign Currency Contracts
The Funds may enter into forward currency contracts, which are included in
the types of instruments sometimes known as derivatives, to purchase or sell
foreign currencies (i.e., non-U.S. currencies) as a hedge against possible
variations in foreign exchange rates. A forward foreign currency contract is an
agreement between the contracting parties to exchange an amount of currency at
some future time at an agreed upon rate. The rate can be higher or lower than
the spot rate between the currencies that are the subject of the contract. A
forward contract generally has no deposit requirement, and such transactions do
not involve commissions. By entering into a forward contract for the purchase or
sale of the amount of foreign currency invested in a foreign security
transaction, a Fund can hedge against possible variations in the value of the
dollar versus the subject currency either between the date the foreign security
is purchased or sold and the date on which payment is made or received or during
the time the Fund holds the foreign security. Hedging against a decline in the
value of a currency in the foregoing manner does not eliminate fluctuations in
the prices of portfolio securities or prevent losses if the prices of such
securities decline. Furthermore, such hedging transactions preclude the
opportunity for gain if the value of the hedged currency should rise. The Funds
will not speculate in forward currency contracts. If a Fund enters into a
"position hedging transaction," which is the sale of forward non-U.S. currency
with respect to a portfolio security denominated in such foreign currency, its
custodian bank will place cash or liquid equity or debt securities, which may be
denominated in U.S. dollars or in a foreign currency, in a separate account of
the Fund in an amount equal to the value of the Fund's total assets committed to
the consummation of such forward contract. If the value of the securities placed
in the account declines, additional cash or securities will be placed in the
account so that the value of the account will equal the amount of the Fund's
commitments with respect to such contracts. Although the Funds have not adopted
any limitations on their ability to use forward contracts as a hedge against
fluctuations in foreign exchange rates, the Funds do not attempt to hedge all of
their non-U.S. portfolio positions and will enter into such transactions only to
the extent, if any, deemed appropriate by their investment adviser or
sub-adviser. The Funds will not enter into forward contracts for a term of more
than one year.
Swaps and Swap-Related Products
Interest rate swaps involve the exchange by a Fund with another party of
their respective commitments to pay or receive interest, e.g., an exchange of
floating rate payments for fixed rate payments. The exchange commitments can
involve payments to be made in the same currency or in different currencies. The
purchase of an interest rate cap entitles the purchaser, to the extent that a
specified index exceeds a predetermined interest rate, to receive payments of
interest on a contractually-based principal amount from the party selling the
interest rate cap. The purchase of an interest rate floor entitles the
purchaser, to the extent that a specified index falls below a predetermined
interest rate, to receive payments of interest on a contractually-based
principal amount from the party selling the interest rate floor.
<PAGE>
The Funds may enter into interest rate swaps, caps and floors, which are
included in the types of instruments sometimes known as derivatives, on either
an asset-based or liability-based basis, depending upon whether they are hedging
their assets or their liabilities, and usually will enter into interest rate
swaps on a net basis, i.e., the two payment streams are netted out, with a Fund
receiving or paying, as the case may be, only the net amount of the two
payments. The net amount of the excess, if any, of a Fund's obligations over its
entitlement with respect to each interest rate swap will be calculated on a
daily basis, and an amount of cash or high-grade liquid assets having an
aggregate net asset value at least equal to the accrued excess will be
maintained in a segregated account by the Funds' custodian. If a Fund enters
into an interest rate swap on other than a net basis, the Fund would maintain a
segregated account in the full amount accrued on a daily basis of the Fund's
obligations with respect to the swap. The Funds will not enter into any interest
rate swap, cap or floor transaction unless the unsecured senior debt or the
claims-paying ability of the other party thereto is rated in one of the three
highest rating categories of at least one nationally recognized statistical
rating organization at the time of entering into such transaction. The Funds'
adviser or sub-adviser will monitor the creditworthiness of all counterparties
on an ongoing basis. If there is a default by the other party to such a
transaction, a Fund would have contractual remedies pursuant to the agreements
related to the transaction.
The swap market has grown substantially in recent years with a large
number of banks and investment banking firms acting both as principals and as
agents utilizing standardized swap documentation. The Funds' adviser and
sub-adviser have determined that, as a result, the swap market has become
relatively liquid. Caps and floors are more recent innovations for which
standardized documentation has not yet been developed and, accordingly, they are
less liquid than swaps. To the extent a Fund sells (i.e., writes) caps and
floors, it will maintain in a segregated account cash or high-grade liquid
assets having an aggregate net asset value at least equal to the full amount,
accrued on a daily basis, of the Fund's obligations with respect to any caps or
floors.
There is no limit on the amount of interest rate swap transactions that
may be entered into by a Fund. These transactions may in some instances involve
the delivery of securities or other underlying assets by a Fund or its
counterparty to collateralize obligations under the swap. The documentation
currently used in those markets attempts to limit the risk of loss with respect
to interest rate swaps to the net amount of the payments that a party is
contractually obligated to make. If the other party to an interest rate swap
that is not collateralized defaults, the Fund would anticipate losing the net
amount of the payments that the Fund contractually is entitled to receive over
the payments that the Fund is contractually obligated to make. The Funds may buy
and sell (i.e., write) caps and floors without limitation, subject to the
segregated account requirement described above as well as the Funds' other
investment restrictions set forth below.
Investment Restrictions
As described in the section of the Funds' Prospectuses entitled
"Investment Objectives and Policies," the Funds operate under certain investment
restrictions which are fundamental and may not be changed with respect to a
particular Fund without the prior approval of the holders of a majority, as
defined in the Investment Company Act of 1940, of the outstanding voting
securities of that Fund.
<PAGE>
For purposes of the following limitations, all percentage limitations apply
immediately after a purchase or initial investment. Any subsequent change in a
particular percentage resulting from fluctuations in value does not require
elimination of any security from a Fund.
Each Fund, unless otherwise indicated, may not:
1. With respect to seventy-five percent (75%) of each Fund's total
assets, purchase the securities of any one issuer (except cash items
and "Government securities" as defined under the Investment Company
Act of 1940, as amended (the "1940 Act")), if the purchase would
cause the Fund to have more than 5% of the value of its total assets
invested in the securities of such issuer or to own more than 10% of
the outstanding voting securities of such issuer;
2. Borrow money or issue senior securities (as defined in the 1940 Act)
except that the Fund may borrow money for temporary or emergency
purposes (not for leveraging or investment) and may enter into
reverse repurchase agreements in an aggregate amount not exceeding
33-1/3% of the value of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings
that come to exceed 33-1/3% of the value of the Fund's total assets
by reason of a decline in total assets will be reduced within three
business days to the extent necessary to comply with the 33-1/3%
limitation. This restriction shall not prohibit deposits of assets
to margin or guarantee positions in futures, options, swaps or
forward contracts, or the segregation of assets in connection with
such contracts.
3. Invest directly in real estate or interests in real estate; however,
the Fund may own debt or equity securities issued by companies
engaged in those businesses.
4. Purchase or sell physical commodities other than foreign currencies
unless acquired as a result of ownership of securities (but this
shall not prevent the Fund from purchasing or selling options,
futures, swaps and forward contracts or from investing in securities
or other instruments backed by physical commodities).
5. Lend any security or make any other loan if, as a result, more than
33- 1/3% of its total assets would be lent to other parties (but
this limitation does not apply to purchases of commercial paper,
debt securities or to repurchase agreements.)
6. Act as an underwriter of securities issued by others, except to the
extent that it may be deemed an underwriter in connection with the
disposition of portfolio securities of the Fund.
7. The European Small Company Fund and the Latin American Growth Fund
may not invest more than 25% of the value of their respective total
assets in any particular industry (other than Government
securities).
As a fundamental policy in addition to the above, each Fund may,
notwithstanding any other investment policy or limitation (whether or not
fundamental), invest all of its assets in the securities of a single open-end
<PAGE>
management investment company with substantially the same fundamental investment
objectives, policies and limitations as the Fund.
Furthermore, the board of directors has adopted additional investment
restrictions for each Fund, unless specifically noted to the contrary. These
restrictions are operating policies of each Fund and may be changed by the board
of directors without shareholder approval. The additional investment
restrictions adopted by the board of directors to date include the following:
(a) The Fund's investments in warrants, valued at the lower of cost or
market, may not exceed 5% of the value of its net assets. Included
within that amount, but not to exceed 2% of the value of the Fund's
net assets, may be warrants that are not listed on the New York or
American Stock Exchanges. Warrants acquired by the Fund in units or
attached to securities shall be deemed to be without value unless
such warrants are separately transferable and current market prices
are available, or unless otherwise determined by the board of
directors.
(b) The Fund will not (i) enter into any futures contracts or options on
futures contracts if immediately thereafter the aggregate margin
deposits on all outstanding futures contracts positions held by the
Fund and premiums paid on outstanding options on futures contracts,
after taking into account unrealized profits and losses, would
exceed 5% of the market value of the total assets of the Fund, or
(ii) enter into any futures contracts if the aggregate net amount
of the Fund's commitments under outstanding futures contracts
positions of the Fund would exceed the market value of the total
assets of the Fund.
(c) The Fund does not currently intend to sell securities short, unless
it owns or has the right to obtain securities equivalent in kind and
amount to the securities sold short without the payment of any
additional consideration therefor, and provided that transactions in
options, swaps and forward futures contracts are not deemed to
constitute selling securities short.
(d) The Fund does not currently intend to purchase securities on margin,
except that the Fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that
margin payments and other deposits in connection with transactions
in options, futures, swaps and forward contracts shall not be deemed
to constitute purchasing securities on margin.
(e) The Fund does not currently intend to (i) purchase securities of
closed and investment companies, except in the open market where no
commission except the ordinary broker's commission is paid, or (ii)
purchase or retain securities issued by other open-end investment
companies. Limitations (i) and (ii) do not apply to money market
funds or to securities received as dividends, through offers of
exchange, or as a result of a reorganization, consolidation, or
merger. If the Fund invests in a money market fund, the Fund's
investment adviser will waive its advisory fee on the assets of the
Fund which are invested in the money market fund during the time
that those assets are so invested.
<PAGE>
(f) The Fund may not mortgage or pledge any securities owned or held by
the Fund in amounts that exceed, in the aggregate, 15% of the Fund's
net assets, provided that this limitation does not apply to reverse
repurchase agreements or in the case of assets deposited to margin
or guarantee positions in futures, options, swaps or forward
contracts or placed in a segregated account in connection with such
contracts.
(g) The Fund does not currently intend to purchase securities of any
issuer(other than U.S. Government agencies and instrumentalities or
instruments guaranteed by an entity with a record of more than three
years' continuous operation, including that of predecessors) with a
record of less than three years' continuous operation (including
that of predecessors) if such purchase would cause the Fund's
investments in all such issuers to exceed 5% of the Fund's total
assets taken at market value at the time of such purchase.
(h) The Fund does not currently intend to invest directly in oil, gas,
or other mineral development or exploration programs or leases;
however, the Fund may own debt or equity securities of companies
engaged in those businesses.
(i) The Fund does not currently intend to purchase any security or enter
into a repurchase agreement if, as a result,more than 15% of its net
assets would be invested in repurchase agreements not entitling the
holder to payment of principal and interest within seven days and in
securities that are illiquid by virtue of legal or contractual
restrictions on resale or the absence of a readily available market.
The board of directors, or the Fund's investment adviser acting
pursuant to authority delegated by the board of directors, may
determine that a readily available market exists for securities
eligible for resale pursuant to Rule 144A under the Securities Act
of 1933, or any successor to such rule, and therefore that such
securities are not subject to the foregoing limitation.
(j) The Fund may not invest in companies for the purpose of exercising
control or management, except to the extent that exercise by the
Fund of its rights under agreements related to portfolio securities
would be deemed to constitute such control.
With respect to investment restriction (i) above, the board of directors
has delegated to the Funds' investment adviser the authority to determine
whether a liquid market exists for securities eligible for resale pursuant to
Rule 144A under the Securities Act of 1933, or any successor to such rule, and
whether such securities are subject to restriction (i) above. Under guidelines
established by the board of directors, the adviser will consider the following
factors in making this determination: (1) the unregistered nature of a Rule 144A
security, (2) the frequency of trades and quotes for the security; (3) the
number of dealers willing to purchase or sell the security and the number of
other potential purchasers; (4) dealer undertakings to make a market in the
security; and (5) the nature of the security and the nature of marketplace
trades (e.g., the time needed to dispose of the security, the method of
soliciting offers and the mechanics of transfer).
On behalf of some of the Funds, the Company has given undertakings to a
number of state securities regulators and may provide additional such
undertakings
<PAGE>
in the future. Upon a change in position by any such regulator, any undertaking
given to such regulator may be modified or withdrawn without notice. The
undertakings currently in effect include the following:
The Company has given an undertaking to the State of Arizona that it will
notify the State immediately in the event of a change to its fiscal year.
The Company has given undertakings to the States of Arizona,
Massachusetts, Missouri, and Texas that it will comply with the Guidelines for
Registration of Master Fund/Feeder Funds adopted by the membership of the North
American Securities Administrators Association, Inc. then in effect in the event
that, in the future, any of the Funds is converted into a feeder fund in a
master fund/feeder fund structure. The Company has additionally undertaken to
the State of Massachusetts that, in the event that in the future the Company
determines that any of the Funds will be so converted, and if the NASAA
Guidelines at such time include a requirement for shareholder approval of
conversion of a fund into a feeder fund in a Master Fund/Feeder Fund structure,
the Company expressly agrees to obtain such approval prior to effecting the
conversion.
The Company has given an undertaking to the State of Arkansas that no Fund
will purchase puts, calls, straddles, spreads or any combination thereof if, by
reason thereof, the value of the Fund's aggregate investment in such classes of
securities would exceed 5% of the Fund's total assets. The European Small
Company Fund and the Latin American Growth Fund have also undertaken not to
invest more than 10% of each Fund's total assets in securities of issuers that
are restricted from being sold to the public without registration under the
Securities Act of 1933, excluding restricted securities eligible for resale
pursuant to Rule 144A under the Securities Act of 1933 that have been determined
to be liquid by the Company's Board of Directors based upon the trading markets
for the securities.
The Company has given an undertaking to the State of California that its
option transactions will comply with Rule 260.140.85(b) under the California
Corporate Securities Law of 1968, and that the aggregate value of the securities
underlying the calls written by a Fund, or the obligations underlying the puts
written by a Fund, as of the date the options are sold shall not exceed 25% of
the Fund's net assets.
The Company has given an undertaking to the State of Maryland that the
European Small Company Fund will invest in no more than 15% of its total assets
in lower rated debt securities, commonly known as "junk bonds."
The Company has given undertakings to the State of Ohio that: (1) no Fund
will purchase or retain the securities of any issuer if the officers, directors,
advisers or managers of the Fund owning beneficially more than .50% of the
securities of an issuer together own beneficially more than 5% of the securities
of that issuer;(2) the Capital Goods Fund, the Communications Fund, the European
Small Company Fund, and the Latin American Growth Fund will not invest more than
15% of their respective net assets in the securities of issuers which, together
with any predecessors, have a record of less than three years continuous
operation, or securities of issuers which are restricted as to disposition; and
(3) the Latin American Growth Fund will comply with the provisions of Rule
1301:6-3-09(E)(10) of the Ohio Revised Code, which states that the borrowing,
pledging, mortgaging, or hypothecating of assets on behalf of the Latin American
Growth Fund in amounts in excess of one-third of total fund assets is
prohibited. In
<PAGE>
addition, the Company has undertaken to the State of Ohio that it will not
invest in the securities of other investment companies, except by purchase in
the open market where no commission or profit to a sponsor or dealer results
from the purchase other than the customary broker's commission, or except when
the purchase is part of a plan of merger, consolidation, reorganization, or
acquisition.
The Company has given an undertaking to the State of Texas that the Funds
will not purchase or sell real estate limited partnership interests.
THE FUNDS AND THEIR MANAGEMENT
The Company. The Company was incorporated on April 12, 1994, under the
lawsof Maryland.
The Investment Adviser. INVESCO Funds Group, Inc., a Delaware corporation
("INVESCO"), is employed as the Company's investment adviser. INVESCO was
established in 1932 and also serves as an investment adviser to INVESCO
Diversified Funds, Inc., INVESCO Dynamics Fund, Inc., INVESCO Emerging
Opportunity Funds, Inc., INVESCO Growth Fund, Inc., INVESCO Income Funds, Inc.,
INVESCO Industrial Income Fund, Inc., INVESCO International Funds, Inc., INVESCO
Money Market Funds, Inc., INVESCO Multiple Asset Funds, Inc., INVESCO Strategic
Portfolios, Inc., INVESCO Tax-Free Income Funds, Inc., INVESCO Value Trust, and
INVESCO Variable Investment Funds, Inc.
The Sub-Advisers. INVESCO, as investment adviser, has contracted with
INVESCO Trust Company ("INVESCO Trust") to provide investment advisory and
research services on behalf of the Capital Goods Fund and Communications Fund.
INVESCO Trust has the primary responsibility for providing portfolio investment
management services to these Funds. INVESCO Trust, a trust company founded in
1969, is a wholly-owned subsidiary of INVESCO.
Additionally, INVESCO, as investment adviser, has contracted with MIM
International Limited ("MIL") to provide investment advisory and research
services on behalf of the European Small Company Fund and Latin American Growth
Fund. MIL has the primary responsibility for providing portfolio investment
management services to these Funds. MIL is an indirect wholly-owned subsidiary
of INVESCO/PLC.
INVESCO is a wholly-owned subsidiary of INVESCO North American Holdings,
Inc. ("INAH"), a Delaware corporation, which is an indirect wholly-owned
subsidiary of INVESCO PLC. INVESCO PLC was organized in 1935. Its ordinary
shares are held by approximately 16,500 shareholders and are traded on the
London Stock Exchange, with a market valuation of over $660 million as of June
30, 1994. INVESCO PLC is the holding company for a group of companies engaged in
financial services. Through subsidiaries in London, Denver, Atlanta, Boston,
Louisville, Dallas, Tokyo, Hong Kong, and the Channel Islands, INVESCO PLC
managed over $64 billion on behalf of mutual funds, pension and insurance funds
and private individuals as June 30, 1994. INVESCO Fund Managers Ltd., one of the
largest unit trust management companies in the United Kingdom, managed the
assets of over 34 authorized unit trusts having approximately 168,000
unitholders and assets exceeding $2.0 billion as of June 30, 1994. INVESCO
International Ltd. (incorporated in Jersey, Channel Islands) offers a broad
range of offshore trusts (designed for international investors other than
residents of the United States). As of June 30, 1994, funds under management in
Jersey amounted to some $1.3
<PAGE>
billion on behalf of some 27,600 unitholders. INVESCO was acquired by INAH in
1982 and as of June 30, 1994, managed thirteen mutual funds, consisting of 34
separate portfolios, on behalf of over 860,000 shareholders. INVESCO Management
& Research, Inc. formerly known as Gardner and Preston Moss, Inc. of Boston,
Massachusetts, was acquired by INAH in 1983, and managed funds in excess of $2.8
billion as of June 30, 1994, predominantly in pension and endowment accounts.
In May 1986, INVESCO PLC acquired INVESCO Asset Management Limited
("Management Limited"), an investment management company located in the United
Kingdom. The principal business of Management Limited is the management of
pension funds, investment trusts, unit trusts, and various investment portfolios
on behalf of private clients, charities, corporations, and foreign financial
institutions.
In December 1988, INVESCO PLC, through one of its wholly-owned
subsidiaries, purchased INVESCO Capital Management, Inc.'s general partnership
interest in INVESCO Capital Management, L.P. The limited partnership interest in
INVESCO Capital Management, L.P. had been acquired by INVESCO PLC in December
1986. The business of INVESCO Capital Management, Inc. is the management of
institutional investment portfolios, consisting primarily of discretionary
employee benefit plans for corporations and state and local governments, and
endowment funds. INVESCO Capital Management, Inc. is the sole shareholder of
INVESCO Services, Inc., a registered broker/dealer whose primary business is the
distribution of shares of two registered investment companies.
In December 1990, INVESCO PLC purchased the business and assets of PRIMCO
Capital Management, Inc. ("PRIMCO"). PRIMCO, which was established in 1985 and
is based in Louisville, Kentucky, specializes in managing stable return
investments, principally on behalf of Section 401(k) retirement plans. As of
June 30, 1994, PRIMCO managed assets of over $16.4 billion on behalf of
approximately 50 clients.
Based in Dallas, Texas, INVESCO Realty Advisors, Inc. ("IRA") is
responsible for providing advisory services in the U.S. real estate markets for
INVESCO PLC's clients worldwide. Established in 1983 as a registered investment
adviser and qualified professional asset manager, funds under management have
grown, to $971 million as of June 30, 1994. As of June 30, 1994, its portfolio
contained 73 properties totalling over 18.4 million square feet of commercial
real estate and 3,329 apartment units. Clients include corporate plans, public
pension funds as well as endowment and foundation accounts.
The corporate headquarters of INVESCO PLC are located at 11 Devonshire
Square, London, EC2M 4YR, England. The dollar figures set forth in the above
paragraphs were obtained by converting British pounds sterling into U.S. dollars
as of June 30, 1994, at $1.54. All of the information contained in the above
five paragraphs was furnished by INVESCO PLC.
Investment Advisory Agreement. INVESCO serves as investment adviser
pursuant to an investment advisory agreement (the "Agreement") with the Company
which was approved on April 20, 1994, by a vote cast in person by a majority of
the directors of the Company, including a majority of the directors who are not
"interested persons" of the Company or INVESCO at a meeting called for such
purpose. The Agreement was approved by INVESCO Funds Group, Inc. on July 12,
1994, as the then sole shareholder of the Capital Goods Fund and Communications
<PAGE>
Fund. The Agreement is for an initial term expiring April 30, 1996. Thereafter,
the Agreement may be continued from year to year as to each Fund as long as each
such continuance is specifically approved at least annually by the board of
directors of the Company, or by a vote of the holders of a majority, as defined
in the Investment Company Act of 1940, of the outstanding shares of the Fund.
Any such continuance also must be approved by a majority of the Company's
directors who are not parties to the Agreement or interested persons (as defined
in the Investment Company Act of 1940) of any such party, cast in person at a
meeting called for the purpose of voting on such continuance. The Agreement may
be terminated at any time without penalty by either party upon sixty (60) days'
written notice and terminates automatically in the event of an assignment to the
extent required by the Investment Company Act of 1940 and the rules thereunder.
With respect to INVESCO European Small Company Fund and Latin American Growth
Fund, the agreement was approved by INVESCO on February 8, 1995 as the then sole
shareholder of each Fund.
The Agreement provides that INVESCO shall manage the investment portfolios
of the Funds in conformity with the Funds' investment policies (either directly
or by delegation to a sub-adviser, which may be a party affiliated with
INVESCO). Further, INVESCO shall perform all administrative, internal accounting
(including computation of net asset value), clerical, statistical, secretarial
and all other services necessary or incidental to the administration of the
affairs of the Funds excluding, however, those services that are the subject of
separate agreement between the Company and INVESCO or any affiliate thereof,
including the distribution and sale of Fund shares and provision of transfer
agency, dividend disbursing agency, and registrar services, and services
furnished under an Administrative Services Agreement with INVESCO dated as of
May 2, 1994. Services provided under the Agreement include, but are not limited
to: supplying the Company with officers, clerical staff and other employees, if
any, who are necessary in connection with the Funds' operations; furnishing
office space, facilities, equipment, and supplies; providing personnel and
facilities required to respond to inquiries related to shareholder accounts;
conducting periodic compliance reviews of the Funds' operations; preparation and
review of required documents, reports and filings by INVESCO's in-house legal
and accounting staff (including the prospectus, statement of additional
information, proxy statements, shareholder reports, tax returns, reports to the
SEC, and other corporate documents of the Funds), except insofar as the
assistance of independent accountants or attorneys is necessary or desirable;
supplying basic telephone service and other utilities; and preparing and
maintaining certain of the books and records required to be prepared and
maintained by the Funds under the Investment Company Act of 1940. Expenses not
assumed by INVESCO are borne by the Funds.
As full compensation for its advisory services to the Company, INVESCO
receives a monthly fee. The fee is based upon a percentage of each Fund's
average net assets, determined daily. With respect to the Capital Goods Fund and
the Communications Fund, the fee is calculated at the annual rate of: 0.65% of
the first $500 million of each Fund's average net assets; 0.55% of the next $500
million of each Fund's average net assets; and 0.45% of each Fund's average net
assets over $1 billion. With respect to the European Small Company Fund and the
Latin American Growth Fund, the fee is calculated at the annual rate of: 0.75%
of the first $500 million of each Fund's average net assets; 0.65% of the next
$500 million of each Fund's average net assets; and 0.55% of each Fund's average
net assets over $1 billion. For the four-month period ended November 30, 1994,
the
<PAGE>
Capital Goods Fund and the Communications Fund paid INVESCO advisory fees of $-
6,751 and $15,614, respectively, prior to the voluntary absorption of certain
Fund expenses by INVESCO and the applicable sub-adviser. The European Small
Company Fund and Latin American Growth Fund paid INVESCO no advisory fees, as of
the date of this Statement of Additional Information since they did not commence
a public offering of securities until February 15, 1995.
Certain states in which the shares of the Funds are qualified for sale
currently impose limitations on the expenses of each of the Funds. At the date
of this Statement of Additional Information, the most restrictive state-imposed
annual expense limitation requires that INVESCO absorb the amount necessary to
prevent any Fund's aggregate ordinary operating expenses (excluding interest,
taxes, Rule 12b-1 fees, brokerage fees and commissions, and extraordinary
charges such as litigation costs) from exceeding in any fiscal year 2.5% of that
Fund's first $30 million of average net assets, 2.0% of the next $70 million of
average net assets and 1.5% of the remaining average net assets. No payment of
the investment advisory fee will be made to INVESCO which would result in a
Fund's expenses exceeding on a cumulative annualized basis this state
limitation.
Sub-Advisory Agreements. INVESCO Trust serves as sub-adviser to the
Capital Goods Fund and Communications Fund pursuant to a sub-advisory agreement
(the "Capital Goods and Communications Sub-Agreement") with INVESCO which was
approved on April 20, 1994, by a vote cast in person by a majority of the
directors of the Company, including a majority of the directors who are not
"interested persons" of the Company, INVESCO or INVESCO Trust at a meeting
called for such purpose. The Capital Goods and Communications Sub-Agreement was
approved on July 12, 1994, by INVESCO as the then sole shareholder of the
Capital Goods Fund and Communications Fund for an initial term expiring April
30, 1996. Thereafter, the Capital Goods and Communications Sub-Agreement may be
continued from year to year as to each Fund as long as each such continuance is
specifically approved by the board of directors of the Company, or by a vote of
the holders of a majority, as defined in the Investment Company Act of 1940, of
the outstanding shares of the Fund. Each such continuance also must be approved
by a majority of the directors who are not parties to the Capital Goods and
Communications Sub-Agreement or interested persons (as defined in the Investment
Company Act of 1940) of any such party, cast in person at a meeting called for
the purpose of voting on such continuance. The Capital Goods and Communications
Sub-Agreement may be terminated at any time without penalty by either party or
the Company upon sixty (60) days' written notice, and terminates automatically
in the event of an assignment to the extent required by the Investment Company
Act of 1940 and the rules thereunder.
MIL serves as sub-adviser to the European Small Company Fund and the Latin
American Growth Fund pursuant to a sub-advisory agreement (the "European and
Latin American Sub-Agreement") with INVESCO which was approved on October 19,
1994, by a vote cast in person by a majority of the directors of the Company,
including a majority of the directors who are not "interested persons" of the
Company, INVESCO or MIL at a meeting called for such purpose. The European and
Latin American Sub- Agreement was approved on February 8, 1995, by INVESCO as
the then sole shareholder of the European Small Company Fund and the Latin
American Growth Fund for an initial term expiring April 30, 1996. Thereafter,
the European and Latin American Sub-Agreement may be continued from year to year
as to each Fund as long as each such continuance is specifically approved by the
board of directors of the Company, or by a vote of the holders of a majority, as
defined in the Investment Company Act of 1940, of the outstanding shares of the
Fund. Each such continuance
<PAGE>
also must be approved by a majority of the directors who are not parties to the
European and Latin American Sub-Agreement or interested persons (as defined in
the Investment Company Act of 1940) of any such party, cast in person at a
meeting called for the purpose of voting on such continuance. The European and
Latin American Sub-Agreement may be terminated at any time without penalty by
either party or the Company upon sixty (60) days' written notice, and terminates
automatically in the event of an assignment to the extent required by the
Investment Company Act of 1940 and the rules thereunder.
The Sub-Agreements provide that INVESCO Trust and MIL, subject to the
supervision of INVESCO, shall manage the investment portfolios of the respective
Funds in conformity with each Fund's investment policies. These management
services would include: (a) managing the investment and reinvestment of all the
assets, now or hereafter acquired, of the Funds, and executing all purchases and
sales of portfolio securities; (b) maintaining a continuous investment program
for the Funds, consistent with (i) each Fund's investment policies as set forth
in the Company's Articles of Incorporation, Bylaws, and Registration Statement,
as from time to time amended, under the Investment Company Act of 1940, as
amended, and in any prospectus and/or statement of additional information of the
Company, as from time to time amended and in use under the Securities Act of
1933, as amended, and (ii) the Company's status as a regulated investment
company under the Internal Revenue Code of 1986, as amended; (c) determining
what securities are to be purchased or sold for each of the Funds, unless
otherwise directed by the directors of the Company or INVESCO, and executing
transactions accordingly; (d) providing the Funds the benefit of all of the
investment analysis and research, the reviews of current economic conditions and
trends, and the consideration of long-range investment policy now or hereafter
generally available to investment advisory customers of the Sub-Advisers; (e)
determining what portion of each of the Funds should be invested in the various
types of securities authorized for purchase by each Fund; and (f) making
recommendations as to the manner in which voting rights, rights to consent to
Company action and any other rights pertaining to the portfolio securities of
each Fund shall be exercised.
The Capital Goods and Communications Sub-Agreements provide that as
compensation for its services, INVESCO Trust shall receive from INVESCO, at the
end of each month, a fee based upon the average daily value of the Capital Goods
Fund's and Communications Fund's net assets at the following annual rates:
0.325% of the first $500 million of each Fund's average net assets; 0.275% of
the next $500 million of each Fund's average net assets; and 0.225% of each
Fund's average net assets over $1 billion. The European and Latin American
Sub-Agreement provides that as compensation for its services, MIL shall receive
from INVESCO, at the end of each month, a fee based upon the average daily value
of the European Small Company Fund's and Latin American Growth Fund's net assets
at the following annual rates: 0.375% of the first $500 million of each Fund's
average net assets; 0.325% of the next $500 million of each Fund's average net
assets; and 0.275% of each Fund's average net assets over $1 billion. The
Sub-Advisory fees are paid by INVESCO, NOT the Funds.
Administrative Services Agreement. INVESCO, either directly or through
affiliated companies, provides certain administrative, sub-accounting, and
recordkeeping services to the Funds pursuant to an Administrative Services
Agreement dated May 2, 1994 (the "Administrative Agreement"). The Administrative
Agreement was approved on April 20, 1994, by a vote cast in person by all of the
directors of the Company, including all of the directors who are not "interested
<PAGE>
persons" of the Company or INVESCO at a meeting called for such purpose. The
Administrative Agreement is for an initial term expiring April 30, 1995. The
Administrative Agreement may be continued from year to year thereafter as long
as each such continuance is specifically approved by the board of directors of
the Company, including a majority of the directors who are not parties to the
Administrative Agreement or interested persons (as defined in the Investment
Company Act of 1940) of any such party, cast in person at a meeting called for
the purpose of voting on such continuance. The Administrative Agreement may be
terminated at any time without penalty by INVESCO on sixty (60) days' written
notice, or by the Company upon thirty (30) days' written notice, and terminates
automatically in the event of an assignment unless the Company's board of
directors approves such assignment.
The Administrative Agreement provides that INVESCO shall provide the
following services to the Funds: (A) such sub-accounting and recordkeeping
services and functions as are reasonably necessary for the operation of the
Funds; and (B) such sub-accounting, recordkeeping, and administrative services
and functions, which may be provided by affiliates of INVESCO, as are reasonably
necessary for the operation of Fund shareholder accounts maintained by certain
retirement plans and employee benefit plans for the benefit of participants in
such plans.
As full compensation for services provided under the Administrative
Agreement, each Fund pays a monthly fee to INVESCO consisting of a base fee of
$10,000 per year, plus an additional incremental fee computed daily and paid
monthly at an annual rate of 0.015% per year of the average net assets of the
Fund. For the four-month period ended November 30, 1994, the Capital Goods Fund
and the Communications Fund paid INVESCO administrative service fees in the
amount of $3,489 and $3,693, respectively, prior to the voluntary absorption of
certain Fund expenses by INVESCO and the applicable sub-adviser. The European
Small Company Fund and Latin American Growth Fund paid INVESCO no administrative
services fees as of the date of this Statement of Additional Information, since
they did not commence a public offering of securities until February 15, 1995.
Transfer Agency Agreement. INVESCO also performs transfer agent, dividend
disbursing agent, and registrar services for the Funds pursuant to a Transfer
Agency Agreement which was approved by the board of directors of the Company,
including a majority of the Company's directors who are not parties to the
Transfer Agency Agreement or "interested persons" of any such party, on April
20, 1994, for an initial term expiring April 30, 1995, and may be continued from
year to year as to each Fund as long as such continuance is specifically
approved at least annually by the board of directors of the Company, or by a
vote of the holders of a majority of the outstanding shares of the Fund. Any
such continuance also must be approved by a majority of the Company's directors
who are not parties to the Transfer Agency Agreement or interested persons (as
defined by the Investment Company Act of 1940) of any such party, cast in person
at a meeting called for the purpose of voting on such continuance. The Transfer
Agency Agreement may be terminated at any time without penalty by either party
upon sixty (60) days' written notice and terminates automatically in the event
of assignment.
The Transfer Agency Agreement provides that the Funds will pay to INVESCO
a fee of $14.00 per shareholder account and omnibus account participant per
year. This fee is paid monthly at 1/12 of the annual fee and is based upon the
actual
<PAGE>
number of shareholder accounts and omnibus account participants in existence
during each month. For the four-month period ended November 30, 1994, the
Capital Goods Fund and the Communications Fund paid INVESCO transfer agency fees
of $4,268 and $9,653, respectively, prior to the voluntary absorption of certain
Fund expenses by INVESCO and the applicable sub-adviser. The European Small
Company Fund and Latin American Growth Fund paid INVESCO no transfer agency
fees, as of the date of this Statement of Additional Information, since they did
not commence a public offering of securities until February 15, 1995.
Officers and Directors of the Company. The overall direction and
supervision of the Company is the responsibility of the board of directors,
which has the primary duty of seeing that the general investment policies and
programs of each of the Funds are carried out and that the Funds are properly
administered. The officers of the Company, all of whom are officers and
employees of, and paid by, INVESCO, are responsible for the day-to-day
administration of the Company and each of the Funds. The investment adviser for
each Fund has the primary responsibility for making investment decisions on
behalf of that Fund. These investment decisions are reviewed by the investment
committee of INVESCO.
All of the officers and directors of the Company hold comparable positions
with INVESCO Diversified Funds, Inc., INVESCO Dynamics Fund, Inc., INVESCO
Emerging Opportunity Funds, Inc., INVESCO Growth Fund, Inc., INVESCO Income
Funds, Inc., INVESCO Industrial Income Fund, Inc., INVESCO International Funds,
Inc., INVESCO Money Market Funds, Inc., INVESCO Multiple Asset Funds, Inc.,
INVESCO Strategic Portfolios, Inc., INVESCO Tax-Free Income Funds, Inc. and
INVESCO Variable Investment Funds, Inc. All of the directors of the Company also
serve as trustees of INVESCO Value Trust. In addition, all of the directors of
the Company also are: with the exception of Mr. Sim, trustees of INVESCO
Treasurer's Series Trust; and, with the exception of Messrs. Hesser and Sim,
directors of The EBI Funds, Inc. All of the officers of the Company also hold
comparable positions with INVESCO Value Trust. Set forth below is information
with respect to each of the Company's officers and directors. Unless otherwise
indicated, the address of the directors and officers is Post Office Box 173706,
Denver, Colorado 80217-3706. Their affiliations represent their principal
occupations during the past five years.
CHARLES W. BRADY,*+ Chairman of the Board. Chief Executive Officer and
Director of INVESCO PLC, London, England, and of various subsidiaries thereof;
Chairman of the Board of The EBI Funds, Inc., INVESCO Treasurer's Series Trust,
and The Global Heath Sciences Fund. Address: 1315 Peachtree Street, NE,
Atlanta, Georgia. Born: May 11, 1935.
FRED A. DEERING,+# Vice Chairman of the Board. Vice Chairman of The EBI
Funds, Inc. and INVESCO Treasurer's Series Trust. Trustee of The Global Health
Sciences Fund. Chairman of the Executive Committee and, formerly, Chairman of
the Board of Security Life of Denver Insurance Company, Denver, Colorado;
Chairman of the Board of Midwestern United Life Insurance Company, Inc., Denver,
Colorado. Director of NN Financial, Toronto, Ontario, Canada. Chairman of First
Columbia Financial Corporation, Englewood, Colorado. Address: Security Life
Center, 1290 Broadway, Denver, Colorado. Born: January 12, 1928.
DAN J. HESSER,+* President and Director. Chairman of the Board, President
and Chief Executive Officer of INVESCO Funds Group, Inc. and Director of INVESCO
<PAGE>
Trust Company. Trustee of The Global Health Sciences Fund. Born: December 27,
1939.
VICTOR L. ANDREWS,** Director. Mills Bee Lane Professor of Banking and
Finance and Chairman of the Department of Finance at Georgia State University,
Atlanta, Georgia, since 1968; since October 1984, Director of the Center for the
Study of Regulated Industry at Georgia State University; formerly, member of the
faculties of the Harvard Business School and the Sloan School of Management of
MIT. Dr. Andrews is also a Director of The Southeastern Thrift and Bank Fund,
Inc. and The Sheffield Funds, Inc. Address: Department of Finance, Georgia State
University, University Plaza, Atlanta, Georgia. Born: June 23, 1930.
BOB R. BAKER,+** Director. President and Chief Executive Officer of AMC
Cancer Research Center, Denver, Colorado, since January 1989; until mid-December
1988, Vice Chairman of the Board of First Columbia Financial Corporation (a
financial institution), Englewood, Colorado. Formerly, Chairman of the Board and
Chief Executive Officer of First Columbia Financial Corporation. Address: 1775
Sherman Street, #1000, Denver, Colorado. Born: August 7, 1936.
FRANK M. BISHOP*, Director. President and Chief Operating Officer of
INVESCO Inc. since February, 1993; Director of INVESCO Funds Group, Inc. since
March 1993; Director (since February 1993), Vice President (since December
1991), and Portfolio Manager (since February 1987), of INVESCO Capital
Management, Inc. (and predecessor firms) Atlanta, Georgia. Address: 1315
Peachtree Street, N.E., Atlanta, Georgia. Born: December 7, 1943.
LAWRENCE H. BUDNER,# Director. Trust Consultant; prior to June 30, 1987,
Senior Vice President and Senior Trust Officer of InterFirst Bank, Dallas, Texas
Address: 7608 Glen Albens, Dallas, Texas. Born: July 25, 1930.
DANIEL D. CHABRIS,+# Director. Financial Consultant; Assistant Treasurer
of Colt Industries Inc., New York, New York, from 1966 to 1988. Address: 15
Sterling Road, Armonk, New York. Born: August 1, 1923.
KENNETH T. KING,** Director. Formerly, Chairman of the Board of The Capitol
Life Insurance Company, Providence Washington Insurance Company, and Director of
numerous subsidiaries thereof in the U.S. Formerly, Chairman of the Board of The
Providence Capitol Companies in the United Kingdom and Guernsey. Chairman of the
Board of the Symbion Corporation (a high technology company) until 1987.
Address: 4080 North Circulo Manzanillo, Tucson, Arizona. Born: November 16,
1925.
R. DALTON SIM*, Director. Chairman of the Board (since March 1993) and
President (since January 1991) of INVESCO Trust Company; Director since June
1987 and, formerly, Executive Vice President and Chief Investment Officer (June
1987 to January 1991) of INVESCO Funds Group, Inc.; President (since 1994) and
Trustee (since 1991) of The Global Health Sciences Fund. Born: July 18, 1939.
JONATHAN F. ZESCHIN, Vice President. Executive Vice President of INVESCO
Funds Group, Inc. since October 1993; formerly (January 1992 to October 1993)
Senior Vice President of INVESCO Funds Group, Inc.; Trust Officer of INVESCO
Trust Company since January 1993; Senior Vice President and director of
marketing of SteinRoe & Farnham, Inc., Chicago, Illinois, from January 1987 to
December 1991.
Born: September 4, 1953.
<PAGE>
GLEN A. PAYNE, Secretary. Vice President, General Counsel and Secretary of
INVESCO Funds Group, Inc. and INVESCO Trust Company. Born: September 25, 1947.
RONALD L. GROOMS, Treasurer. Senior Vice President and Treasurer of INVESCO
Funds Group, Inc. and INVESCO Trust Company. Born: October 1, 1946.
WILLIAM J. GALVIN, JR., Assistant Secretary. Vice President of INVESCO
Funds Group, Inc. and Trust Officer of INVESCO Trust Company since August 1992;
Vice President of 440 Financial Group from June 1990 to August 1992; Assistant
Vice President of Putnam Companies from November 1986 to June 1990. Born: August
21, 1956.
ALAN I. WATSON, Assistant Secretary. Vice President of INVESCO Funds Group,
Inc. and Trust Officer of INVESCO Trust Company. Born: September 14, 1941.
JUDY P. WIESE, Assistant Treasurer. Vice President of INVESCO Funds Group
Inc. and Trust Officer of INVESCO Trust Company. Born: February 3, 1948.
#Member of the audit committee of the Company.
+Member of the executive committee of the Company. On occasion, the
executive committee acts upon the current and ordinary business of the Company
between meetings of the board of directors. Except for certain powers which,
under applicable law, may only be exercised by the full board of directors, the
executive committee may exercise all powers and authority of the board of
directors in the management of the business of the Company. All decisions are
subsequently submitted for ratification by the board of directors.
*These directors are "interested persons" of the Company as defined in the
Investment Company Act of 1940.
**Member of the management liaison committee of the Company.
As of January 17, 1995, officers and directors of the Company, as a group,
beneficially owned less than 1% of the Company's outstanding shares and less
than 1% of each Fund's outstanding shares.
Director Compensation
The following table sets forth, for the fiscal year ending July 31, 1995:
the estimated compensation to be paid by the Company to its six independent
directors for services rendered in their capacities as directors of the Company;
the estimated benefits to be accrued as Company expenses with respect to the
Defined Benefit Deferred Compensation Plan discussed below; and the estimated
annual benefits to be received by these directors upon retirement as a result of
their service to the Company. In addition, the table sets forth the total
compensation paid by all of the mutual funds distributed by INVESCO Funds Group,
Inc. (including the Company), The EBI Funds, Inc., INVESCO Treasurer's Series
Trust and The Global Health Sciences Fund (collectively, the "INVESCO Complex")
(45 funds in total) to these directors for services rendered in their capacities
as directors or trustees during the year ended December 31, 1994.
Benefits
Aggregate Accrued As Estimated Total Compensa-
<PAGE>
Name of Compensa- Part of Annual tion From INVESCO
Person, tion From Company Benefits Upon Complex Paid To
Position Company1 Expenses2 Retirement3 Directors1
Fred A.Deering, $ 614 $ 20 $ 18 $ 89,350
Vice Chairman of
the Board
Victor L. Andrews 607 19 21 68,000
Bob R. Baker 612 17 28 75,350
Lawrence H. Budner 607 19 21 68,000
Daniel D. Chabris 612 22 15 73,350
Kenneth T. King 608 21 16 71,000
------ ---- --------
Total $3,660 $118 $445,050
% of Net Assets .0190%4 .0006%4 .0045%5
1The vice chairman of the board, the chairmen of the audit, management
liaison and compensation committees, and the members of the executive and
valuation committees each receive compensation for serving in such capacities in
addition to the compensation paid to all independent directors.
2Represents estimated benefits accrued with respect to the Defined Benefit
Deferred Compensation Plan discussed below, and not compensation deferred at the
election of the directors.
3These figures represent the Company's share of the estimated annual
benefits payable by the INVESCO Complex (excluding The Global Health Sciences
Fund, which does not participate in any retirement plan) upon the directors'
retirement, calculated using the current method of allocating director
compensation among the funds in the INVESCO Complex. These estimated benefits
assume retirement at age 72 and that the basic retainer payable to the directors
will be adjusted periodically for inflation, for increases in the number of
funds in the INVESCO Complex, and for other reasons during the period in which
retirement benefits are accrued on behalf of the respective directors. This
results in lower estimated benefits for directors who are closer to retirement
and higher estimated benefits for directors who are further from retirement.
Each of these directors has served as a director/trustee of one or more of the
funds in the INVESCO Complex for the minimum five-year period required to be
eligible to participate in the Defined Benefit Deferred Compensation Plan.
4Totals as a percentage of the Company's net assets as of December 31,
1994.
5Total as a percentage of the net assets of the INVESCO Complex as of
December 31, 1994.
Messrs. Bishop, Brady, Hesser and Sim, as "interested persons" of the
Company and of the other funds in the INVESCO Complex, receive compensation as
officers
<PAGE>
or employees of INVESCO or its affiliated companies, and do not receive any
director's fees or other compensation from the Company or the other funds in the
INVESCO Complex for their service as directors.
The board of directors has adopted a retirement policy for directors who
have attained 72 years of age. The retirement date for each director is the last
day of the calendar quarter in which he or she turns 72; provided, however, that
a majority of the directors may annually extend a director's retirement date for
a maximum period of three years, or through the calendar quarter in which the
director turns 75.
The boards of directors/trustees of the mutual funds managed by INVESCO,
The EBI Funds, Inc. and INVESCO Treasurer's Series Trust have adopted a Defined
Benefit Deferred Compensation Plan for the non-interested directors and trustees
of the funds. Under this plan, each director or trustee who is not an interested
person of the funds (as defined in the Investment Company Act of 1940) and who
has served for at least five years (a "qualified director") is entitled to
receive, upon retiring from the boards at the mandatory retirement age of 72 (or
the retirement age of 73 or 74, if the retirement date is extended by the board
for one or two years but less than three years) continuation of payment for one
year (the "first year retirement benefit") of the annual basic retainer payable
by the funds to the qualified director at the time of his retirement (the "basic
retainer"). Commencing with any such director's second year of retirement, and
commencing with the first year of retirement of a director whose retirement has
been extended by the board for three years, a qualified director shall receive
quarterly payments at an annual rate equal to 25% of the basic retainer. These
payments will continue for the remainder of the qualified director's life or ten
years, whichever is longer (the "reduced retainer payments"). If a qualified
director dies or becomes disabled after age 72 and before age 74 while still a
director of the funds, the first year retirement benefit and the reduced
retainer payments will be made to him or to his beneficiary or estate. If a
qualified director becomes disabled or dies either prior to age 72 or during
his/her 74th year while still a director of the funds, the director will not be
entitled to receive the first year retirement benefit; however, the reduced
retainer payments will be made to his beneficiary or estate. The plan is
administered by a committee of three directors who are also participants in the
plan and one director who is not a plan participant. The cost of the plan will
be allocated among the INVESCO, EBI and Treasurer's Series funds in a manner
determined to be fair and equitable by the committee. Although the Company is
not making any payments to directors under the plan as of the date of this
Statement of Additional Information, it has begun to accrue, as a current
expense, a proportionate amount of the estimated future cost of these benefits.
The Company has no stock options or other pension or retirement plans for
management or other personnel and pays no salary or compensation to any of its
officers.
The Company has an audit committee which consists of three of the
directors who are not interested persons of the Company. The committee meets
periodically with the Company's independent accountants and officers to review
accounting principles used by the Company, the adequacy of internal controls,
the responsibilities and fees of the independent accountants, and other matters.
The Company also has a management liaison committee which meets quarterly
with various management personnel of INVESCO in order (a) to facilitate better
understanding of management and operations of the Company, and (b) to review
legal
<PAGE>
and operational matters which have been assigned to the committee by the board
of directors in furtherance of the board of directors' overall duty of
supervision.
HOW SHARES CAN BE PURCHASED
Shares of each Fund are sold on a continuous basis at the respective net
asset value per share of the Fund next calculated after receipt of a purchase
order in good form. The net asset value per share is computed separately for
each Fund and is determined once each day that the New York Stock Exchange is
open as of the close of regular trading on that Exchange, but may also be
computed at other times. See "How Shares Are Valued." INVESCO acts as the Funds'
Distributor under a distribution agreement with the Company under which it
receives no compensation and bears all expenses, including the costs of printing
and distributing prospectuses, incident to marketing of the Funds' shares,
except for such distribution expenses which are paid out of Fund assets under
the Company's Plan of Distribution which has been adopted by the Company in
accordance with Rule 12b-1 under The Investment Company Act of 1940.
Distribution Plan. As discussed under "How Shares Can Be Purchased" in the
Prospectuses, the Company has adopted a Plan and Agreement of Distribution (the
"Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940 ("the
Act"). The Plan provides that each of the Funds may make monthly payments to
INVESCO of amounts computed at an annual rate no greater than 0.25% of the
Fund's average net assets during any 12-month period to reimburse it for
expenses incurred by it in connection with the distribution of each Fund's
shares to investors. During the four-month period ended November 30, 1994, the
Capital Goods Fund and Communications Fund incurred $2,597 and $6,005 in
distribution expenses, respectively, prior to the voluntary absorption of
certain Fund expenses by INVESCO and the applicable sub-adviser. As noted in the
Prospectuses, one type of reimbursable expenditure is the payment of
compensation to securities companies and other financial institutions and
organizations in order to obtain various distribution-related and/or
administrative services for the Funds. Each Fund is authorized by the Plan to
use its assets to finance the payments made to obtain those services. Payments
will be made by INVESCO to broker-dealers who sell shares of the Funds and may
be made to banks, savings and loan associations and other depository
institutions. Although the Glass-Steagall Act limits the ability of certain
banks to act as underwriters of mutual fund shares, the Company does not believe
that these limitations would affect the ability of such banks to enter into
arrangements with INVESCO, but can give no assurance in this regard. However, to
the extent it is determined otherwise in the future, arrangements with banks
might have to be modified or terminated, and, in that case, the size of one or
more of the Funds possibly could decrease to the extent that the banks would no
longer invest customer assets in a particular Fund. Neither the Company nor its
investment adviser will give any preference to banks or other depository
institutions which enter into such arrangements when selecting investments to be
made by each Fund.
For the four-month period ended November 30, 1994, allocation of 12b-1
amounts paid by the Capital Goods Fund and Communications Fund for the following
categories of expenses were, respectively: advertising--$744 and $1,355; sales
literature, printing, and postage--$264 and $474; direct mail--$662 and $1,201;
public relations/promotion--$13 and $47; compensation to securities dealers and
other organizations--$0 and $0; marketing personnel--$34 and $65. The European
Small Company Fund and Latin American Growth Fund paid no 12b-1 fees as of the
<PAGE>
date of this Statement of Additional Information since they did not commence a
public offering of securities until February 15, 1995.
The nature and scope of services which are provided by securities dealers
and other organizations may vary by dealer but include, among other things,
processing new stockholder account applications, preparing and transmitting to
the Company's Transfer Agent computer-processable tapes of each Fund's
transactions by customers, serving as the primary source of information to
customers in answering questions concerning each Fund, and assisting in other
customer transactions with each Fund.
The Plan was approved on April 20, 1994, at a meeting called for such
purpose by a majority of the directors of the Company, including a majority of
the directors who neither are "interested persons" of the Company nor have any
financial interest in the operation of the Plan ("12b-1 directors"). The Plan
was approved by INVESCO on July 12, 1994, as the then sole shareholder of the
Capital Goods Fund and Communications Fund for an initial term expiring April
30, 1995. With respect to the INVESCO European Small Company Fund and Latin
American Growth Fund, the Plan was approved by INVESCO on February 8, 1995 as
the then sole shareholder of each Fund.
The Plan provides that it shall continue in effect with respect to each
Fund for so long as such continuance is approved at least annually by the vote
of the board of directors of the Company cast in person at a meeting called for
the purpose of voting on such continuance. The Plan also can be terminated at
any time with respect to any Fund, without penalty, if a majority of the 12b-1
directors, or shareholders of such Fund, vote to terminate the Plan. The Company
may, in its absolute discretion, suspend, discontinue or limit the offering of
the shares of any Fund at any time. In determining whether any such action
should be taken, the board of directors intends to consider all relevant factors
including, without limitation, the size of the Funds, the investment climate for
any particular Fund, general market conditions, and the volume of sales and
redemptions of Fund shares. The Plan may continue in effect and payments may be
made under the Plan following any such temporary suspension or limitation of the
offering of a Fund's shares; however, the Company is not contractually obligated
to continue the Plan for any particular period of time. Suspension of the
offering of a Fund's shares would not, of course, affect a shareholder's ability
to redeem his shares. So long as the Plan is in effect, the selection and
nomination of persons to serve as independent directors of the Company shall be
committed to the independent directors then in office at the time of such
selection or nomination. The Plan may not be amended to increase materially the
amount of any Fund's payments thereunder without approval of the shareholders of
that Fund, and all material amendments to the Plan must be approved by the board
of directors of the Company, including a majority of the 12b-1 directors. Under
the agreement implementing the Plan, INVESCO or the Funds, the latter by vote of
a majority of the 12b-1 directors or of the holders of a majority of any Fund's
outstanding voting securities, may terminate such agreement without penalty upon
30 days' written notice to the other party. No further payments will be made by
any Fund under the Plan in the event of its termination as to that Fund.
To the extent that the Plan constitutes a plan of distribution adopted
pursuant to Rule 12b-1 under the Act, it shall remain in effect as such, so as
to authorize the use of each Fund's assets in the amounts and for the purposes
set forth therein, notwithstanding the occurrence of an assignment, as defined
by the
<PAGE>
Act, and rules thereunder. To the extent it constitutes an agreement pursuant to
a plan, each Fund's obligation to make payments to INVESCO shall terminate
automatically, in the event of such "assignment," in which event the Funds may
continue to make payments, pursuant to the Plan, to INVESCO or another
organization only upon the approval of new arrangements, which may or may not be
with INVESCO, regarding the use of the amounts authorized to be paid by it under
the Plan, by the directors, including a majority of the 12b-1 directors, by a
vote cast in person at a meeting called for such purpose.
Information regarding the services rendered under the Plan and the amounts
paid therefor by each Fund are provided to, and reviewed by, the directors on a
quarterly basis. In the quarterly review, the directors determine whether, and
to what extent, INVESCO will be reimbursed for expenditures which it has made
that are reimbursable under the Company's Rule 12b-1 Plan. On an annual basis,
the directors consider the continued appropriateness of the Plan at the level of
compensation provided therein.
The only directors or interested persons, as that term is defined in
Section 2(a)(19) of the Act, of the Company who have a direct or indirect
financial interest in the operation of the Plan are the officers and directors
of the Company listed under "Officers and Directors of the Company" who are also
officers either of INVESCO or companies affiliated with INVESCO. The benefits
which the Company believes will be reasonably likely to flow to the Funds and
their shareholders under the Plan include the following:
(1) Enhanced marketing efforts, if successful, should result in an
increase in net assets through the sale of additional shares and
afford greater resources with which to pursue the investment
objectives of the Funds;
(2) The sale of additional shares reduces the likelihood that redemption
of shares will require the liquidation of securities of the Funds in
amounts and at times that are disadvantageous for investment
purposes;
(3) The positive effect which increased Fund assets will have on its
revenues could allow INVESCO:
(a) To have greater resources to make the financial commitments
necessary to improve the quality and level of each Fund's
shareholder services (in both systems and personnel),
(b) To increase the number and type of mutual funds available to
investors from INVESCO (and support them in their infancy),
and thereby expand the investment choices available to all
shareholders, and
(c) To acquire and retain talented employees who desire to be
associated with a growing organization; and
(4) Increased Fund assets may result in reducing each investor's share
of certain expenses through economies of scale (e.g. exceeding
established breakpoints in the advisory fee schedule and allocating
fixed expenses over a larger asset base), thereby partially
offsetting the costs of the Plan.
<PAGE>
HOW SHARES ARE VALUED
As described in the section of the Funds' Prospectuses entitled "How
Shares Can Be Purchased," the net asset value of shares of each Fund of the
Company is computed once each day that the New York Stock Exchange is open as of
the close of regular trading on that Exchange (generally 4:00 p.m., New York
time) and applies to purchase and redemption orders received prior to that time.
Net asset value per share is also computed on any other day on which there is a
sufficient degree of trading in the securities held by a Fund that the current
net asset value per share of such Fund might be materially affected by changes
in the value of the securities held, but only if on such day the Fund receives a
request to purchase or redeem shares. Net asset value per share is not
calculated on days the New York Stock Exchange is closed, such as federal
holidays, including New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving, and Christmas.
The net asset value per share of each Fund is calculated by dividing the
value of all securities held by the Fund and its other assets (including
dividends and interest accrued but not collected), less the Fund's liabilities
(including accrued expenses), by the number of outstanding shares of the Fund.
Securities traded on national securities exchanges, the NASDAQ National Market
System, the NASDAQ Small Cap market and foreign markets are valued at their last
sale prices on the exchanges or markets where such securities are primarily
traded. Securities traded in the over-the-counter market for which last sale
prices are not available, and listed securities for which no sales were reported
on a particular date, are valued at their highest closing bid prices (or, for
debt securities, yield equivalents thereof) obtained from one or more dealers
making markets for such securities. If market quotations are not readily
available, securities will be valued at their fair values as determined in good
faith by the board of directors or pursuant to procedures adopted by the board
of directors. The above procedures may include the use of valuations furnished
by a pricing service which employs a matrix to determine valuations for normal
institutional-size trading units of debt securities. Prior to utilizing a
pricing service, the Company's board of directors reviews the methods used by
such service to assure itself that securities will be valued at their fair
values. The Company's board of directors also periodically monitors the methods
used by such pricing services. Debt securities with remaining maturities of 60
days or less at the time of purchase are normally valued at amortized cost.
The values of securities held by the Funds and other assets used in
computing net asset value are determined as of the time trading in such
securities is completed each day, which, in the case of foreign securities,
generally occurs at various times prior to the close of the New York Stock
Exchange. The value of all assets and liabilities initially expressed in foreign
currencies will be converted into U.S. dollars at the spot rate of such
currencies against U.S. dollars provided by an approved pricing service.
FUND PERFORMANCE
As discussed in the Funds' Prospectuses, the Company advertises the total
return performance of the Funds. The total return performance for the Capital
Goods Fund and the Communications Fund for the period August 1, 1994 (inception)
through November 30, 1994 was as follows:
<PAGE>
Fund Total Return*
Capital Goods Fund (4.70)%
Communications Fund 5.70 %
*not annualized
The European Small Company Fund and Latin American Growth Fund did not commence
operations until February 15, 1995, so they do not have any investment results
for the period indicated.
Average annual total return performance is computed by finding the average
annual compounded rates of return that would equate the initial amount invested
to the ending redeemable value, according to the following formula:
P(1 + T)n = ERV
where: P = initial payment of $1000
T = average annual total return
n = number of years
ERV = ending redeemable value of initial payment
In conjunction with performance reports, comparative data between the Funds'
performance for a given period and other types of investment vehicles, including
certificates of deposit, may be provided to prospective investors and
shareholders.
From time to time, evaluations of performance made by independent sources may
also be used in advertisements, sales literature or shareholder reports,
including reprints of, or selections from, editorials or articles about the
Funds. Sources for Fund performance information and articles about the Funds
include, but are not limited to, the following:
American Association of Individual Investors' Journal
Banxquote
Barron's
Business Week
CDA Investment Technologies
CNBC
CNN
Consumer Digest
Financial Times
Financial World
Forbes
Fortune
Ibbotson Associates, Inc.
Institutional Investor
Investment Company Data, Inc.
Investor's Business Daily
Kiplinger's Personal Finance
Lipper Analytical Services, Inc.'s Mutual Fund Performance Analysis
Money
Morningstar
Mutual Fund Forecaster
No-Load Analyst
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No-Load Fund X
Personal Investor
Smart Money
The New York Times
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U.S. News and World Report
United Mutual Fund Selector
USA Today
Wall Street Journal
Wiesenberger Investment Companies Services
Working Woman
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SERVICES PROVIDED BY THE FUNDS
Periodic Withdrawal Plan. As described in the section of the Funds'
Prospectus entitled "Services Provided by the Funds," each Fund offers a
Periodic Withdrawal Plan. All dividends and distributions on shares owned by
shareholders participating in this Plan are reinvested in additional shares.
Since withdrawal payments represent the proceeds from sales of shares, the
amount of shareholders' investments in a Fund will be reduced to the extent that
withdrawal payments exceed dividends and other distributions paid and
reinvested. Any gain or loss on such redemptions must be reported for tax
purposes. In each case, shares will be redeemed at the close of business on or
about the 20th day of each month preceding payment and payments will be mailed
within five business days thereafter.
The Periodic Withdrawal Plan involves the use of principal and is not a
guaranteed annuity. Payments under such Plan do not represent income or a return
on investment.
A Periodic Withdrawal Plan may be terminated at any time by sending a written
request to INVESCO. Upon termination, all future dividends and capital gain
distributions will be reinvested in additional shares unless a shareholder
requests otherwise.
Exchange Privilege. As discussed in the section of the Funds' Prospectus
entitled "Services Provided by the Funds," the Funds offer shareholders the
privilege of exchanging shares of the Funds for shares of another fund or for
shares of certain other no-load mutual funds advised by INVESCO. Exchange
requests may be made either by telephone or by written request to INVESCO Funds
Group, Inc., using the telephone number or address on the cover of this
Statement of Additional Information. Exchanges made by telephone must be in an
amount of at least $250, if the exchange is being made into an existing account
of one of the INVESCO funds. All exchanges that have established a new account
must meet the fund's applicable minimum initial investment requirements. Written
exchange requests into an existing account have no minimum requirements other
than the fund's applicable minimum subsequent investment requirements. Any gain
or loss realized on such an exchange is recognized for federal income tax
purposes. This privilege is not an option or right to purchase securities, but
is a revocable privilege permitted under the present policies of each of the
funds and is not available in any state or other jurisdiction where the shares
of the mutual fund into which transfer is to be made are not qualified for sale,
or when the net
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asset value of the shares presented for exchange is less than the minimum dollar
purchase required by the appropriate prospectus.
TAX-SHELTERED RETIREMENT PLANS
As described in the section of the Funds' Prospectus entitled "Services
Provided by the Funds," shares of a Fund may be purchased as the investment
medium for various tax-sheltered retirement plans. Persons who request
information regarding these plans from INVESCO will be provided with prototype
documents and other supporting information regarding the type of plan requested.
Each of these plans involves a long-term commitment of assets and is subject to
possible regulatory penalties for excess contributions, premature distributions
or for insufficient distributions after age 70-1/2. The legal and tax
implications may vary according to the circumstances of the individual investor.
Therefore, the investor is urged to consult with an attorney or tax adviser
prior to the establishment of such a plan.
HOW TO REDEEM SHARES
Normally, payments for shares redeemed will be mailed within seven days
following receipt of the required documents as described in the section of the
Funds' Prospectus entitled "How to Redeem Shares." The right of redemption may
be suspended and payment postponed when: (a) the New York Stock Exchange is
closed for other than customary weekends and holidays; (b) trading on that
exchange is restricted; (c) an emergency exists as a result of which disposal by
a Fund of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Fund fairly to determine the value of its net
assets; or (d) the Securities and Exchange Commission by order so permits.
It is possible that in the future conditions may exist which would, in the
opinion of the Company's investment adviser, make it undesirable for a Fund to
pay for redeemed shares in cash. In such cases, the investment adviser may
authorize payment to be made in portfolio securities or other property of the
Fund. However, the Company is obligated under the Investment Company Act of 1940
to redeem for cash all shares of a Fund presented for redemption by any one
shareholder having a value up to $250,000 (or 1% of the Fund's net assets if
that is less) in any 90-day period. Securities delivered in payment of
redemptions are selected entirely by the investment adviser based on what is in
the best interests of the Fund and its shareholders, and are valued at the value
assigned to them in computing the Fund's net asset value per share. Shareholders
receiving such securities are likely to incur brokerage costs on their
subsequent sales of the securities.
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES
Each Fund intends to conduct its business and maintain the necessary
diversification of assets and source of income requirements to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code. As
a result, it is anticipated that the Funds will pay no federal income taxes and
will be accorded conduit or "pass through" treatment for federal income tax
purposes.
Dividends paid by the Funds from net investment income, as well as
distributions of net realized short-term capital gains paid by them are, for
federal income tax
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purposes, taxable as ordinary income to shareholders. After the end of each
calendar year, each Fund sends shareholders information regarding the amount and
character of dividends paid in the year, including the dividends eligible for
the dividends-received deduction for corporations. Such amounts will be limited
to the aggregate amount of qualifying dividends which the Fund derives from its
portfolio investments.
Distributions by the Funds of net realized long-term capital gains are, for
federal income tax purposes, taxable as long-term capital gains regardless of
how long a shareholder has held shares of a Fund. Such distributions are
identified as such and are not eligible for the dividends-received deduction.
All dividends and distributions are regarded as taxable to the investor,
whether or not such dividends and distributions are reinvested in additional
shares. If the net asset value of the shares of the Funds should be reduced
below a shareholder's cost as a result of a distribution of such realized
capital gains, such distribution would be taxable to the shareholder although a
portion would be, in effect, a return of invested capital. The net asset value
of shares of the Funds reflects accrued net investment income and undistributed
realized capital gains; therefore, when a distribution is made, the net asset
value is reduced by the amount of the distribution. If shares are purchased
shortly before a distribution, the full price for the shares will be paid and
some portion of the price may then be returned to the shareholder as a taxable
dividend or capital gain. However, the net asset value per share will be reduced
by the amount of the distribution, which would reduce any gain (or increase any
loss) for tax purposes on any subsequent redemption of shares.
Dividends and interest received by the Funds may give rise to withholding and
other taxes imposed by foreign countries. Tax treaties between certain countries
and the United States may reduce or eliminate such taxes.
INVESCO may provide Fund shareholders with information concerning the average
cost basis of their shares in order to help them prepare their tax returns. This
information is intended as a convenience to shareholders, and will not be
reported to the Internal Revenue Service (the "IRS"). The IRS permits the use of
several methods to determine the cost basis of mutual fund shares. The cost
basis information provided by INVESCO will be computed using the single-category
average cost method, although neither INVESCO nor the Company recommends any
particular method of determining cost basis. Other methods may result in
different tax consequences. If a shareholder has reported gains or losses for a
Fund in past years, the shareholder must continue to use the method previously
used, unless the shareholder applies to the IRS for permission to change
methods.
Shareholders should consult their own tax advisers regarding specific
questions as to federal, state and local taxes. Dividends and capital gains
distributions will generally be subject to applicable state and local taxes.
Qualification as a regulated investment company under the Internal Revenue Code
for income tax purposes does not entail government supervision of management or
investment policies.
INVESTMENT PRACTICES
Portfolio Turnover. There are no fixed limitations regarding the portfolio
turnover of the Funds. The rate of portfolio turnover can fluctuate under
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constantly changing economic conditions and market circumstances. Securities
initially satisfying the basic policies and objectives of a Fund may be disposed
of when they are no longer suitable. Brokerage costs to these Funds are
commensurate with the rate of portfolio activity. As of the date of this
Statement of Additional Information, the European Small Company Fund and Latin
American Growth Fund had not commenced a public offering of their shares, and
therefore had not experienced any portfolio turnover. For the four-month period
ended November 30, 1994, the portfolio turnover rates for the Capital Goods Fund
and Communications Fund were 25% and 48%, respectively (not annualized). In
computing portfolio turnover rates, all investments with maturities or
expiration dates at the time of acquisition of one year or less are excluded.
Subject to this exclusion, the turnover rate is calculated by dividing (A) the
lesser of purchases or sales of portfolio securities for the fiscal year by (B)
the monthly average of the value of portfolio securities owned by the Fund
during the fiscal year.
Placement of Portfolio Brokerage. Either INVESCO, as the Company's investment
adviser, or INVESCO Trust or MIL, as the Company's sub-advisers, places orders
for the purchase and sale of securities with brokers and dealers based upon
INVESCO's, INVESCO Trust's or MIL's evaluation of their financial
responsibility, subject to their ability to effect transactions at the best
available prices. INVESCO, INVESCO Trust or MIL evaluates the overall
reasonableness of brokerage commissions or underwriting discounts (the
difference between the full acquisition price to acquire the new offering and
the discount offered to members of the underwriting syndicate) paid by reviewing
the quality of executions obtained on portfolio transactions of each Fund,
viewed in terms of the size of transactions, prevailing market conditions in the
security purchased or sold, and general economic and market conditions. In
seeking to ensure that the commissions or discounts charged the Funds are
consistent with prevailing and reasonable commissions or discounts, INVESCO,
INVESCO Trust or MIL also endeavor to monitor brokerage industry practices with
regard to the commissions or discounts charged by brokers and dealers on
transactions effected for other comparable institutional investors. While
INVESCO, INVESCO Trust or MIL seek reasonably competitive rates, the Funds do
not necessarily pay the lowest commission, spread or discount available.
Consistent with the standard of seeking to obtain the best execution on
portfolio transactions, INVESCO, INVESCO Trust or MIL may select brokers that
provide research services to effect such transactions. Research services consist
of statistical and analytical reports relating to issuers, industries,
securities and economic factors and trends, which may be of assistance or value
to INVESCO, INVESCO Trust or MIL in making informed investment decisions.
Research services prepared and furnished by brokers through which the Funds
effect securities transactions may be used by INVESCO, INVESCO Trust or MIL in
servicing all of their respective accounts and not all such services may be used
by INVESCO, INVESCO Trust or MIL in connection with the Funds.
In recognition of the value of the above-described brokerage and research
services provided by certain brokers, INVESCO, INVESCO Trust or MIL, consistent
with the standard of seeking to obtain the best execution on portfolio
transactions, may place orders with such brokers for the execution of
transactions for the Funds on which the commissions or discounts are in excess
of those which other brokers might have charged for effecting the same
transactions.
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Portfolio transactions may be effected through qualified broker/dealers who
recommend the Funds to their clients, or who act as agent in the purchase of any
of the Fund's shares for their clients. When a number of brokers and dealers can
provide comparable best price and execution on a particular transaction, the
Company's adviser may consider the sale of Fund shares by a broker or dealer in
selecting among qualified broker/dealers.
Charles Schwab & Co., Inc. ("Schwab") is paid a fee for recordkeeping,
shareholder communications and other services provided by Schwab to investors
purchasing shares of the Funds through the One Source(R) program offered by
Schwab as part of its Mutual Fund Marketplace(R). This fee is based on the
average daily value of the investments in each Fund made by Schwab on behalf of
investors participating in the Schwab program. The directors of the Company have
authorized each Fund to apply dollars generated from the Company's Plan and
Agreement of Distribution pursuant to Rule 12b-1 under the Act to pay this fee
to Schwab The directors of the Company have further authorized INVESCO to place
a portion of each Fund's brokerage transactions with Schwab, if INVESCO
reasonably believes that, in effecting the Fund's transactions in portfolio
securities, Schwab is able to provide the best execution of orders at the most
favorable prices. Commissions earned by Schwab from executing portfolio
transactions on behalf of a specific Fund may be credited by Schwab against the
fee charged by Schwab to that Fund, on a basis which has resulted from
negotiations between INVESCO and Schwab. Any Rule 12b-1 fees which are not
expended as a result of the application of any such credit may be used to
reimburse INVESCO for other expenses incurred by INVESCO in distributing that
Fund's shares to the extent contemplated by the Fund's Plan and Agreement of
Distribution.
Neither INVESCO, INVESCO Trust nor MIL receives any brokerage commissions on
portfolio transactions effected on behalf of the Funds, and there is no
affiliation between INVESCO, INVESCO Trust, MIL, or any person affiliated with
INVESCO, INVESCO Trust, MIL or the Funds and any broker or dealer that executes
transactions for the Funds. The European Small Company Fund and Latin American
Growth Fund have paid no brokerage commissions as of the date of this Statement
of Additional Information, since the Funds did not commence a public offering of
securities until February 15, 1995. The brokerage commissions paid by the
Capital Goods Fund and Communications Fund will be available in February 1995.
At November 30, 1994, the Capital Goods Fund and Communications Fund held
securities of their regular brokers or dealers, or their parents, as follows:
Value of Securities
Fund Broker or Dealer at 11/30/94
Capital Goods None
Communications State Street Bank and $9,360,000
Trust Company
Neither INVESCO, INVESCO Trust nor MIM International Limited receives any
brokerage commissions on portfolio transactions effected on behalf of the Funds,
and there is no affiliation between INVESCO, INVESCO Trust, and MIL, or any
person affiliated with INVESCO, INVESCO Trust and MIL, or the Funds and any
broker or dealer that executes transactions for the Funds.
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ADDITIONAL INFORMATION
Common Stock. The Company was incorporated with 500,000,000 authorized shares
of common stock with a par value of $0.01 per share. Of the Company's authorized
shares, 100,000,000 shares have been allocated to each of the four series,
representing the Company's four Funds. As of November 30, 1994, 419,055 shares
of the Capital Goods Fund and 1,429,534 shares of the Communications Fund were
outstanding. The board of directors has the authority to designate additional
series of common stock without seeking the approval of shareholders, and may
classify and reclassify any authorized but unissued shares.
Shares of each series represent the interests of the shareholders of such
series in a particular portfolio of investments of the Company. Each series of
the Company's shares is preferred over all other series in respect of the assets
specifically allocated to that series, and all income, earnings, profits and
proceeds from such assets, subject only to the rights of creditors, are
allocated to shares of that series. The assets of each series are segregated on
the books of account and are charged with the liabilities of that series and
with a share of the Company's general liabilities. The board of directors
determines those assets and liabilities deemed to be general assets or
liabilities of the Company, and these items are allocated among series in a
manner deemed by the board of directors to be fair and equitable. Generally,
such allocation will be made based upon the relative total net assets of each
series. In the unlikely event that a liability allocable to one series exceeds
the assets belonging to the series, all or a portion of such liability may have
to be borne by the holders of shares of the Company's other series.
All shares, regardless of series, have equal voting rights. Voting with
respect to certain matters, such as ratification of independent accountants or
election of directors, will be by all series of the Company. When not all series
are affected by a matter to be voted upon, such as approval of an investment
advisory contract or changes in a Fund's investment policies, only shareholders
of the series affected by the matter may be entitled to vote. Company shares
have noncumulative voting rights, which means that the holders of a majority of
the shares voting for the election of directors can elect 100% of the directors
if they choose to do so. In such event, the holders of the remaining shares
voting for the election of directors will not be able to elect any person or
persons to the board of directors. After they have been elected by shareholders,
the directors will continue to serve until their successors are elected and have
qualified or they are removed from office, in either case by a shareholder vote,
or until death, resignation, or retirement. They may appoint their own
successors, provided that always at least a majority of the directors have been
elected the Company's shareholders. It is the intention of the Company not to
hold annual meetings of shareholders. The directors will call annual or special
meetings of shareholders for action by shareholder vote as may be required by
the Investment Company Act of 1940 or the Company's Articles of Incorporation,
or at their discretion.
Principal Shareholders. As of February 1, 1995, the following entities held
more than 5% of the Funds' outstanding equity securities.
Amount and Nature
Name and Address of Ownership Percent of Class
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INVESCO Worldwide
Capital Goods Fund
Charles Schwab & Co. Inc. 36,065.879 9.453%
Reinvest Account Record
101 Montgomery St.
San Francisco, CA 94104
INVESCO Funds Group, Inc. 30,000.00 7.863%
P.O. Box 173706 Record and Beneficial
Denver, CO 80217-3706
INVESCO Trust Co. 25,000.00 6.552%
P.O. Box 173706 Record and Beneficial
Denver, CO 80217-3706
INVESCO Worldwide Communications Fund
Charles Schwab & Co. Inc. 117,518.869 7.294%
Reinvest Acct. Record
101 Montgomery St.
San Francisco, CA 94104
INVESCO European Small Company Fund
-0- -0- -0-
INVESCO Latin American Growth Fund
-0- -0- -0-
Independent Accountants. Price Waterhouse LLP, 950 Seventeenth Street,
Denver, Colorado, has been selected as the independent accountants of the
Company. The independent accountants are responsible for auditing the financial
statements of the Company.
Custodian. State Street Bank and Trust Company, P.O. Box 351, Boston,
Massachusetts, has been designated as custodian of the cash and investment
securities of the Company. The bank is also responsible for, among other things,
receipt and delivery of the investment securities of the Company's Funds in
accordance with procedures and conditions specified in the custody agreement.
Transfer Agent. The Company is provided with transfer agent, registrar,
and dividend disbursing agent services by INVESCO Funds Group, Inc., 7800 E.
Union Avenue, Denver, Colorado 80237, pursuant to the Transfer Agency Agreement
described herein. Such services include the issuance, cancellation and transfer
of shares of the Funds, and the maintenance of records regarding the ownership
of
such shares.
Reports to Shareholders. The Company's fiscal year ends on July 31. The
Company distributes reports at least semiannually to its shareholders. Financial
statements regarding the Company, audited by the independent accountants, are
sent to shareholders annually.
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Legal Counsel. The firm of Kirkpatrick & Lockhart is legal counsel for the
Company. The firm of Moye, Giles, O'Keefe, Vermeire & Gorrell, Denver, Colorado,
acts as special counsel to the Company.
Financial Statements. The audited Statement of Assets and Liabilities
as of July 12, 1994 for the Capital Goods Fund and Communication Fund, the
Capital Goods and Communications Funds' unaudited financial statements and
schedules for the period August 1, 1994 (inception) through November 30, 1994
and the audited Statement of Assets and Liabilities as of February 8, 1995 for
the Latin American Growth Fund and European Small Company Fund are attached
hereto.
Prospectus. The Company will furnish, without charge, a copy of any
Fund's Prospectus upon request. Such requests should be made to the Company at
the mailing address or telephone number set forth on the first page of this
Statement of Additional Information.
Registration Statement. This Statement of Additional Information and
the related Prospectuses do not contain all of the information set forth in the
Registration Statement the Company has filed with the Securities and Exchange
Commission. The complete Registration Statement may be obtained from the
Securities and Exchange Commission upon payment of the fee prescribed by the
rules and regulations of the Commission.
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APPENDIX A
DESCRIPTION OF FUTURES AND OPTIONS CONTRACTS
Options on Securities
An option on a security provides the purchaser, or "holder," with the
right, but not the obligation, to purchase, in the case of a "call" option, or
sell, in the case of a "put" option, the security or securities underlying the
option, for a fixed exercise price up to a stated expiration date. The holder
pays a non-refundable purchase price for the option, known as the "premium." The
maximum amount of risk the purchaser of the option assumes is equal to the
premium plus related transaction costs, although the entire amount may be lost.
The risk of the seller, or "writer," however, is potentially unlimited, unless
the option is "covered," which is generally accomplished through the writer's
ownership of the underlying security, in the case of a call option, or the
writer's segregation of an amount of cash or securities equal to the exercise
price, in the case of a put option. If the writer's obligation is not so
covered, it is subject to the risk of the full change in value of the underlying
security from the time the option is written until exercise.
Upon exercise of the option, the holder is required to pay the purchase
price of the underlying security, in the case of a call option, or to deliver
the security in return for the purchase price, in the case of a put option.
Conversely, the writer is required to deliver the security, in the case of a
call option, or to purchase the security, in the case of a put option. Options
on securities which have been purchased or written may be closed out prior to
exercise or expiration by entering into an offsetting transaction on the
exchange on which the initial position was established, subject to the
availability of a liquid secondary market.
Options on securities are traded on national securities exchanges, such
as the Chicago Board of Options Exchange and the New York Stock Exchange, which
are regulated by the Securities and Exchange Commission. The Options Clearing
Corporation guarantees the performance of each party to an exchange-traded
option, by in effect taking the opposite side of each such option. A holder or
writer may engage in transactions in exchange-traded options on securities and
options on indices of securities only through a registered broker/dealer which
is a member of the exchange on which the option is traded.
An option position in an exchange-traded option may be closed out only
on an exchange which provides a secondary market for an option of the same
series. Although the Funds will generally purchase or write only those options
for which there appears to be an active secondary market, there is no assurance
that a liquid secondary market on an exchange will exist for any particular
option at any particular time. In such event it might not be possible to effect
closing transactions in a particular option with the result that the Funds would
have to exercise the option in order to realize any profit. This would result in
the Funds incurring brokerage commissions upon the disposition of underlying
securities acquired through the exercise of a call option or upon the purchase
of underlying securities upon the exercise of a put option. If these Funds as
covered call option writers are unable to effect a closing purchase transaction
in a secondary market, unless the Funds are required to deliver the securities
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pursuant to the assignment of an exercise notice, they will not be able to sell
the underlying security until the option expires.
Reasons for the potential absence of a liquid secondary market on an
exchange include the following: (i) there may be insufficient trading interest
in certain options; (ii) restrictions may be imposed by an exchange on opening
transactions or closing transactions or both; (iii) trading halts, suspensions
or other restrictions may be imposed with respect to particular classes or
series of options or underlying securities: (iv) unusual or unforeseen
circumstances may interrupt normal operations on an exchange; (v) the facilities
of an exchange or a clearing corporation may not at all times be adequate to
handle current trading volume or (vi) one or more exchanges could, for economic
or other reasons, decide or be compelled at some future date to discontinue the
trading of options (or particular class or series of options) in which event the
secondary market on that exchange (or in the class or series of options) would
cease to exist, although outstanding options on that exchange which had been
issued by a clearing corporation as a result of trades on that exchange would
continue to be exercisable in accordance with their terms. There is no assurance
that higher than anticipated trading activity or other unforeseen events might
not, at a particular time, render certain of the facilities of any of the
clearing corporations inadequate and thereby result in the institution by an
exchange of special procedures which may interfere with the timely execution of
customers' orders. However, the Options Clearing Corporation, based on forecasts
provided by the U.S. exchanges, believes that its facilities are adequate to
handle the volume of reasonably anticipated options transactions, and such
exchanges have advised such clearing corporation that they believe their
facilities will also be adequate to handle reasonably anticipated volume.
In addition, options on securities may be traded over-the-counter
through financial institutions dealing in such options as well as the underlying
instruments. OTC options are purchased from or sold (written) to dealers or
financial institutions which have entered into direct agreements with the Funds.
With OTC options, such variables as expiration date, exercise price and premium
will be agreed upon between the Funds and the transacting dealer, without the
intermediation of a third party such as the OCC. If the transacting dealer fails
to make or take delivery of the securities underlying an option it has written,
in accordance with the terms of that option as written, the Funds would lose the
premium paid for the option as well as any anticipated benefit of the
transaction. The Fund will engage in OTC option transactions only with primary
U.S. Government securities dealers recognized by the Federal Reserve Bank of New
York.
Futures Contracts
A Futures Contract is a bilateral agreement providing for the purchase
and sale of a specified type and amount of a financial instrument or foreign
currency, or for the making and acceptance of a cash settlement, at a stated
time in the future, for a fixed price. By its terms, a Futures Contract provides
for a specified settlement date on which, in the case of the majority of
interest rate and foreign currency futures contracts, the fixed income
securities or currency underlying the contract are delivered by the seller and
paid for by the purchaser, or on which, in the case of stock index futures
contracts and certain interest rate and foreign currency futures contracts, the
difference between the price at which the contract was entered into and the
contract's closing value is settled between the purchaser and seller in cash.
Futures Contracts differ from options
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in that they are bilateral agreements, with both the purchaser and the seller
equally obligated to complete the transaction. In addition, Futures Contracts
call for settlement only on the expiration date, and cannot be "exercised" at
any other time during their term.
The purchase or sale of a Futures Contract also differs from the
purchase or sale of a security or the purchase of an option in that no purchase
price is paid or received. Instead, an amount of cash or cash equivalent, which
varies but may be as low as 5% or less of the value of the contract, must be
deposited with the broker as "initial margin." Subsequent payments to and from
the broker, referred to as "variation margin," are made on a daily basis as the
value of the index or instrument underlying the Futures Contract fluctuates,
making positions in the Futures Contract more or less valuable, a process known
as "marking to market."
A Futures Contract may be purchased or sold only on an exchange, known
as a "contract market," designated by the Commodity Futures Trading Commission
for the trading of such contract, and only through a registered futures
commission merchant which is a member of such contract market. A commission must
be paid on each completed purchase and sale transaction. The contract market
clearing house guarantees the performance of each party to a Futures Contract,
by in effect taking the opposite side of such Contract. At any time prior to the
expiration of a Futures Contract, a trader may elect to close out its position
by taking an opposite position on the contract market on which the position was
entered into, subject to the availability of a secondary market, which will
operate to terminate the initial position. At that time, a final determination
of variation margin is made and any loss experienced by the trader is required
to be paid to the contract market clearing house while any profit due to the
trader must be delivered to it.
Interest rate futures contracts currently are traded on a variety of
fixed income securities, including long-term U.S. Treasury Bonds, Treasury
Notes, Government National Mortgage Association modified pass-through
mortgage-backed securities, U.S. Treasury Bills, bank certificates of deposit
and commercial paper. In addition, interest rate futures contracts include
contracts on indices of municipal securities. Foreign currency futures contracts
currently are traded on the British pound, Canadian dollar, Japanese yen, Swiss
franc, West German mark and on Eurodollar deposits.
Options on Futures Contracts
An Option on a Futures Contract provides the holder with the right to
enter into a "long" position in the underlying Futures Contract, in the case of
a call option, or a "short" position in the underlying Futures Contract, in the
case of a put option, at a fixed exercise price to a stated expiration date.
Upon exercise of the option by the holder, the contract market clearing house
establishes a corresponding short position for the writer of the option, in the
case of a call option, or a corresponding long position, in the case of a put
option. In the event that an option is exercised, the parties will be subject to
all the risks associated with the trading of Futures Contracts, such as payment
of variation margin deposits. In addition, the writer of an Option on a Futures
contract, unlike the holder, is subject to initial and variation margin
requirements on the option position.
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A position in an Option on a Futures Contract may be terminated by the
purchaser or seller prior to expiration by effecting a closing purchase or sale
transaction, subject to the availability of a liquid secondary market, which is
the purchase or sale of an option of the same series (i.e., the same exercise
price and expiration date) as the option previously purchased or sold. The
difference between the premiums paid and received represents the trader's profit
or loss on the transaction.
An option, whether based on a Futures Contract, a stock index or a
security, becomes worthless to the holder when it expires. Upon exercise of an
option, the exchange or contract market clearing house assigns exercise notices
on a random basis to those of its members which have written options of the same
series and with the same expiration date. A brokerage firm receiving such
notices then assigns them on a random basis to those of its customers which have
written options of the same series and expiration date. A writer therefore has
no control over whether an option will be exercised against it, nor over the
time of such exercise.
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APPENDIX B
BOND RATINGS
The following is a description of Standard & Poor's Ratings Group
("Standard & Poor's") and Moody's Investors Service, Inc. ("Moody's") bond
rating categories:
Moody's Investors Service, Inc. Corporate Bond Ratings
Aaa - Bonds rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt-edged." Interest payments are protected by a large or by an exceptionally
stable margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa - Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risk appear somewhat larger than in Aaa securities.
A - Bonds rated A possess many favorable investment attributes, and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa - Bonds rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba - Bonds rated Ba are judged to have speculative elements. Their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or maintenance of other
terms of the contract over any longer period of time may be small.
Caa - Bonds rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
<PAGE>
Standard & Poor's Ratings Group Corporate Bond Ratings
AAA - This is the highest rating assigned by Standard & Poor's to a
debt obligation and indicates an extremely strong capacity to pay principal and
interest.
AA - Bonds rated AA also qualify as high-quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority of
instances they differ from AAA issues only in small degree.
A - Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB - Bonds rated BBB are regarded as having an adequate capability to
pay principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in higher rated categories.
BB - Bonds rated BB have less near-term vulnerability to default than
other speculative issues. However, they face major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments.
B - Bonds rated B have a greater vulnerability to default but currently
have the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal.
CCC - Bonds rated CCC have a currently identifiable vulnerability to
default and are dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial, or economic conditions, they are not
likely to have the capacity to pay interest and repay principal.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholder of
INVESCO Specialty Funds, Inc.
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of the INVESCO
Worldwide Capital Goods Fund and the INVESCO Worldwide Communications Fund,
constituting the INVESCO Specialty Funds, Inc., (hereafter referred to as the
"Fund"), at July 12, 1994, in conformity with generally accepted accounting
principles. This financial statement is the responsibility of the Fund's
management; our responsibility is to express an opinion on this financial
statement based on our audit. We conducted our audit of this financial statement
in accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statement is 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 audit provides a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
Denver, Colorado
July 12, 1994
<PAGE>
INVESCO SPECIALTY FUNDS, INC.
Statement of Assets and Liabilities
July 12, 1994
Worldwide Worldwide
Capital Goods Communications
Fund Fund
--------------- ---------------
Assets
Cash held by custodian $50,000 $50,000
Net Assets $50,000 $50,000
=============== ===============
Net assets applicable to 5,000
shares issued and outstanding
(par value $0.01 per share.
500 million shares authorized:
100 million have been allocated
to each Fund.) $50,000 $50,000
=============== ===============
Net asset value, offering and
redemption price per share. $10.00 $10.00
=============== ===============
See accompanying Notes to Statement of Assets and Liabilities
<PAGE>
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
July 12, 1994
Note 1 - Organization and Registration
INVESCO Speciality Funds, Inc. (the "Fund"), a Maryland corporation,
was incorporated on April 12, 1994 as a diversified, open-end
management investment company. The Fund consists of two separate funds.
Worldwide Capital Goods Fund and Worldwide Communications Fund. The
Fund has been inactive since that date except for matters relating to
its organization and registration as an investment company under the
Investment Company Act of 1940 and the Securities Act of 1933.
On July 12, 1994 INVESCO Funds Group, Inc. ("INVESCO"), the Fund's
investment advisor and underwriter, purchased 5,000 shares of each Fund
at a net asset value of $10.00 per share. Organization costs of the
Fund are de minimis and were voluntarily absorbed by INVESCO.
Note 2 - Investment Advisory and Other Agreements
INVESCO serves as the Fund's investment advisor. As compensation for
its services to the Fund, INVESCO receives an investment advisory fee
which is accrued daily at the applicable rate and paid monthly. The fee
for each Fund is based on the annual rate of 0.65% on the first $500
million of average net assets and at a lower rate for average net
assets in excess of $500 million.
In accordance with a Sub-Advisory Agreement between INVESCO and INVESCO
Trust Company ("ITC"), investment decisions for the Fund are made by
ITC. Fees for such sub-advisory services are paid by INVESCO.
In accordance with an Administrative Agreement, the Fund pays INVESCO
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 calculated daily and paid
monthly.
INVESCO receives a transfer agent fee of $14.00 per shareholder account
per year or may, for omnibus accounts of sub-transfer agents or for
tax-qualified retirement plans, receive $14.00 per participant account
per year. This fee is paid monthly at one-twelfth of the annual fee and
based upon the actual number of accounts in existence during the month.
Certain of the Fund's officers and directors are also officers and
directors of INVESCO or ITC.
<PAGE>
<TABLE>
<CAPTION>
INVESCO Specialty Funds, Inc.
Statement of Investment Securities
November 30, 1994
UNAUDITED
Shares or
Industry Principal
Description Code Amount Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
WORLDWIDE CAPITAL GOODS Fund
COMMON STOCKS 98.38%
ARGENTINA 4.11%
CIA Naviera Perez Companc
SA Series B Shrs* DV 10,000 $48,700
Mirgor SACIFIA Sponsored
ADR Representing
Class C Shrs* AM 5,750 45,281
Siderca SA* MM 85,000 63,155
---------
157,136
---------
AUSTRALIA 0.60%
Broken Hill Proprietary
Sponsored ADR MM 400 22,950
---------
BELGIUM 1.22%
Solvay SA CH 100 46,860
---------
CANADA 2.41%
Avenor Inc* FP 2,700 49,078
Fletcher Challenge Canada Ltd
Class A* PP 3,400 42,953
---------
92,031
---------
CHILE 2.01%
Madeco SA ADR CR 1,300 37,700
Maderas y Sinteticos
SA ADR FP 1,400 39,375
---------
77,075
---------
CHINA 1.92%
Shanghai Petrochemical Ltd
H Shrs OG 124,000 36,478
Zhenhai Refining &
Chemical*@ OG 120,000 36,935
---------
73,413
---------
COLUMBIA 1.44%
Cementos Paz Del Rio SA
Sponsored ADR*@ CR 2,500 55,000
---------
<PAGE>
FINLAND 5.12%
Benefon Oy Vappa* IB 200 51,493
Kymmene Oy PP 1,600 42,183
Nokia AB Oy Series K Shrs EL 500 68,383
Rautaruuki Oy* MM 4,100 34,033
---------
196,092
---------
GERMANY 4.15%
Krupp (Fried) AG Hoesch-Krupp
Bearer Shrs* MM 530 67,221
Thyssen AG* MM 220 39,191
Veba AG DV 160 52,518
---------
158,930
---------
HONG KONG 6.13%
Chen Hsong Holdings MY 100,000 62,714
Chevalier International EG 250,000 33,943
Hopewell Holdings RE 100,000 86,636
Johnson Electric Holdings EE 20,000 51,206
---------
234,499
---------
INDONESIA 2.22%
Indah Kiat Pulp & Paper
Foreign Shrs PP 37,800 39,905
Kabelmetal Indonesia EE 20,000 25,016
Tjiwi Kimia PP 9,000 19,932
---------
84,853
---------
ITALY 7.10%
Ansaldo Trasporti EE 8,000 29,664
Italcementi SpA* CR 8,000 50,824
Olivetti (Ing C) & C SpA* OE 32,000 38,168
Sasib SpA MY 9,000 43,717
Stet-Societa Financiaria
Telefonica TC 18,000 52,227
Unicem SpA* CR 9,000 57,289
---------
271,889
---------
JAPAN 1.93%
Kobe Steel Ltd* DV 5,000 15,874
Mitsubishi Heavy Industries MY 5,000 37,107
Toshiba Corp DV 3,000 20,990
---------
73,971
---------
MALAYSIA 4.25%
Cement Industries of Malaysia
Berhad CR 12,000 37,779
Ekran Berhad DV 11,000 38,287
Ho Hup Construction Berhad CR 11,000 44,740
Kuala Lumpur Kepong Berhad AG 16,000 41,924
---------
162,730
---------
MEXICO 13.48%
CEMEX SA Class B ADR CR 3,500 64,563
Desc Sociedad de Fomento
<PAGE>
Industrial SA de CV ADR* DV 1,200 35,100
Empresas ICA Sociedad
Controladora SA de CV ADR CR 1,800 55,575
Grupo Industrial Alfa
SA de CV ADR DV 6,000 93,777
Grupo Industrial Durango SA
de CV Sponsored ADR
Representing two Certificates
of Participation* PP 3,800 69,350
Grupo Tribasa SA de CV ADR* CR 1,500 49,313
Hylsamex SA de CV ADR*@ MM 3,500 83,125
Vitro SA ADR GC 3,100 65,100
---------
515,903
---------
NETHERLANDS 4.06%
AKZO NV CH 400 44,394
Koninklijke Hoogovens NV Ltd* MM 600 24,929
Philips Electronics NV EE 2,850 86,213
---------
155,536
---------
SINGAPORE 4.09%
Jurong Cement Ltd CR 12,000 41,789
Jurong Engineering Ltd* CR 3,750 24,454
Jurong Shipyard Ltd SH 3,200 25,347
Osprey Maritime Ltd* TR 20,000 41,600
Singapore Shipbuilding &
Engineering Ltd SH 10,000 23,489
---------
156,679
---------
SOUTH KOREA 1.66%
Pohang Iron & Steel Ltd
Sponsored ADR* MM 2,000 63,500
---------
SWEDEN 1.25%
SEA Class B Free Shrs UT 275 19,543
SKF AB B Free Shrs* MM 1,600 28,320
---------
47,863
---------
THAILAND 7.33%
Sahaviriya Steel Industry* MM 27,000 68,982
Siam Cement Ltd CR 1,100 61,038
Siam Chemicals Ltd* CH 26,000 62,275
Sino-Thai Engineering &
Construction CR 7,000 88,303
---------
280,598
---------
UNITED KINGDOM 1.14%
Hanson PLC Sponsored ADR DV 2,400 43,800
---------
UNITED STATES 20.76%
Albany International Class A PP 2,800 49,350
Borg-Warner Automotive AM 2,500 58,750
Capco Automotive* AM 5,500 71,500
Case Corp MY 3,200 62,800
Caterpillar Inc MY 1,000 54,000
Cooper Industries DV 1,200 41,700
Cummins Engine AM 1,600 69,600
<PAGE>
Deere & Co MY 400 25,700
Federal-Mogul Corp MA 2,400 48,600
Fruehauf Trailer* AM 6,000 27,750
Harris (Del) Corp EL 1,000 41,000
International Paper PP 900 64,350
Louisiana-Pacific Corp CR 1,700 47,600
Methanex Corp* CH 2,600 38,675
Silicon Graphics* CO 900 27,675
Stewart & Stevenson MA 450 14,062
Union Carbide Holding CH 1,800 51,525
---------
794,637
---------
TOTAL COMMON STOCKS
(Cost $4,025,925) 3,765,945
---------
PREFERRED STOCKS 1.62%
BRAZIL 1.62%
Iochpe Maxion SA Sponsored ADR
Representing Pfd Shrs
(Cost $53,400) MY 3,400 61,826
---------
TOTAL INVESTMENT
SECURITIES AT VALUE 100.00%
(Cost $4,079,325#) $3,827,771
=========
WORLDWIDE COMMUNICATIONS Fund
COMMON STOCKS 34.84%
ARGENTINA 0.58%
Telefonica de Argentina SA
Sponsored ADR Representing
Ord B Shrs UT 1,500 $83,438
---------
CANADA 6.01%
BC Telecom UT 4,700 81,588
Call-Net Enterprises Class B* TC 1,500 6,750
Newbridge Networks* TC 6,500 218,563
Rogers Cantel Mobile
Communications Class B* TC 5,000 146,875
Rogers Communications
Class B* CB 10,000 138,147
SR Telecom TC 8,000 67,619
Teleglobe Inc TC 9,500 122,605
TELUS Corp TC 7,000 81,434
---------
863,581
---------
DENMARK 0.18%
Tele Danmark A/S Sponsored
ADR Representing Class
B Shrs* TC 1,000 25,875
---------
HONG KONG 0.50%
Oriental Press Group PR 32,000 16,551
Sing Tao Holdings Ltd PR 26,000 15,129
Television Broadcasts Ltd BR 10,000 40,086
---------
71,766
---------
ISRAEL 0.55%
ECI Telecom Ltd TC 3,000 52,125
Gilat Satellite Networks* TC 2,000 27,500
<PAGE>
---------
79,625
---------
ITALY 0.36%
Telecom Italia Savings Shrs* UT 25,000 51,758
---------
MEXICO 3.16%
Grupo Iusacell SA de CV
Sponsored ADR Representing
Series L Shrs* TC 1,000 29,000
Grupo Televisa SA de CV
Sponsored ADR Representing
Ord Participation Certificates BR 1,300 58,825
Telefonos de Mexico SA de CV
Sponsored ADR Representing
Ord Series L Shrs UT 6,900 365,700
---------
453,525
---------
NETHERLANDS 0.82%
Madge NV* CO 10,000 117,500
---------
SPAIN 0.35%
Telefonica de Espana SA
Sponsored ADR UT 1,300 50,213
---------
SWEDEN 0.39%
Ericsson (L M) Telephone
Class B ADR TC 1,000 $55,500
---------
UNITED KINGDOM 1.50%
Bell Cablemedia PLC
Sponsored ADR* CB 2,000 45,000
British Telecommunications
PLC ADR TC 300 17,812
Cable & Wireless PLC
Sponsored ADR UT 1,000 18,125
Comcast UK Cable
Partners Ltd* CB 6,500 111,313
Pearson PLC PR 2,500 24,053
---------
216,303
---------
UNITED STATES 20.44%
AT&T Corp TC 500 24,562
Affiliated Computer Services
Class A* CO 8,000 156,000
AirTouch Communications* TC 1,000 27,250
Allen Group TC 500 12,000
American Media Class A PR 1,000 14,875
American Paging* TC 5,500 37,812
Apertus Technologies* CO 15,000 148,125
BellSouth Corp UT 1,000 51,875
Boston Technology* TC 4,000 67,500
Brooktrout Technology* CO 4,000 47,000
California Microwave* TC 400 12,650
Centigram Communications* TC 2,000 40,000
cisco Systems* CO 2,400 77,400
Comcast Corp Class A CB 4,000 62,500
Communication Cable AV 1,000 12,250
COMSAT Corp TC 5,000 96,875
Comverse Technology* CO 3,500 44,187
<PAGE>
DSC Communications* TC 500 15,625
DSP Group* EL 500 11,250
Data Translation* CO 2,000 30,000
Digital Link* CO 2,000 50,000
Digital Microwave* EL 2,000 34,250
Dow Jones & Co PR 2,800 81,200
Electro Scientific Industries* EL 2,000 38,750
GTECH Holdings* RR 1,500 27,938
General Communication
Class A* TC 6,000 26,250
General Instrument* TC 2,800 84,000
General Motors Class H AE 1,500 50,062
General Signal EE 700 22,575
Individual Investor Group* PR 4,000 17,000
International CableTel* TC 1,000 29,250
Kuhlman Corp EE 5,000 60,625
LEGENT Corp* CO 1,000 32,000
Lincoln Telecommunications TC 5,000 72,500
MCI Communications TC 6,000 117,000
Natural Microsystems* TC 1,000 15,250
NetWorth Inc* CO 1,500 20,625
NYNEX Corp UT 1,200 45,150
Octel Communications* TC 500 10,750
Pacific Telesis Group UT 1,500 43,500
Pico Products* EE 5,200 13,650
QUALCOMM Inc* TC 1,600 49,200
Satellite Technology
Management* TC 2,000 21,500
Southern New England
Telecommunications UT 2,900 95,700
Southwestern Bell UT 1,000 41,375
Sprint Corp UT 8,000 239,000
Standard Microsystems* CO 2,000 47,750
Synopsys Inc* CO 500 20,594
Systems & Computer
Technology* CO 2,000 38,500
T/SF Communications* PR 3,000 17,250
Technitrol Inc EL 5,000 73,125
Teknekron Communications
Systems* TC 3,000 30,000
TESSCO Technologies* TC 15,000 243,750
U S WEST UT 600 21,150
USA Mobile Communications
Holdings* TC 3,000 27,750
United International Holdings
Class A* BR 1,000 15,000
Viewlogic Systems* CO 1,200 25,800
WinStar Communications* TC 5,000 46,406
---------
2,935,911
---------
TOTAL COMMON STOCKS
(Cost $4,895,117) 5,004,995
---------
SHORT-TERM OBLIGATIONS
UNDER REPURCHASE
AGREEMENTS 65.16%
UNITED STATES 65.16%
Repurchase Agreement with State Street Bank & Trust Co dated 11/30/1994 due
12/1/1994 at 5.550%, repurchased at
<PAGE>
$9,361,443 (Collateralized
by US Treasury Notes due
10/15/1998 at 4.750%,
value $9,556,325)
(Cost $9,360,000) RA $9,360,000 9,360,000
---------
TOTAL INVESTMENT
SECURITIES AT VALUE 100.00%
(Cost $14,255,117#) $14,364,995
===========
* Security is non-income producing.
# Also represents cost for income tax purposes.
<PAGE>
@ The following are restricted securites at November 30, 1994:
Value as
Acquisition Acquisition % of
Description Date Cost Net Assets
- ------------------------------------------------------------------------------
Worldwide Capital Goods Fund
Cementos Paz Del Rio
SA Sponsored ADR 9/21/94 $52,500 1.38%
Hylsamex SA de CV ADR 10/27/94 72,250 2.08
Mirgor SACIFIA Sponsored ADR
Representing Class C Shares 10/20/94 51,750 1.13
Zhenhai Refining & Chemical 11/22/94 36,961 0.93
--------
5.52%
========
<PAGE>
Summary of Investments by Industry
% of
Industry Investment
Industry Code Securities Value
- ------------------------------------------------------------------------------
Worldwide Capital Goods
Agriculture AG 1.09% $41,924
Automobile Related AM 7.13 272,881
Chemicals CH 6.37 243,729
Computer Related CO 0.72 27,675
Construction Related CR 18.70 715,967
Diversified DV 10.21 390,746
Electrical Equipment EE 2.77 105,886
Electronics EL 5.11 195,596
Engineering EG 0.89 33,943
Forest Products FP 2.31 88,453
Glass & Ceramics Products GC 1.70 65,100
Investment Brokers IB 1.34 51,493
Machinery MY 9.09 347,864
Manufacturing MA 1.64 62,662
Metals & Mining MM 12.94 495,406
Office Equipment OE 1.00 38,168
Oil & Gas Related OG 1.92 73,413
Paper & Paper Products PP 8.57 328,023
Real Estate Related RE 2.26 86,636
Ship Building SH 1.28 48,836
Telecommunications TC 1.36 52,227
Transportation TR 1.09 41,600
Utilities UT 0.51 19,543
------------ ------------
100.00% $3,827,771
============ ============
% of
Industry Investment
Industry Code Securities Value
- ------------------------------------------------------------------------------
Worldwide Communications Fund
Aerospace & Defense AE 0.35% $50,062
Audio/Visual AV 0.09 12,250
Broadcasting BR 0.79 113,911
Cable Television CB 2.48 356,960
Computer Related CO 5.96 855,481
Electrical Equipment EE 0.67 96,850
Electronics EL 1.10 157,375
Printing & Publishing PR 1.30 186,058
Recreation Related RR 0.19 27,938
Repurchase Agreement RA 65.16 9,360,000
Telecommunications TC 13.64 1,959,538
Utilities UT 8.27 1,188,572
------------ ------------
100.00% $14,364,995
============ ============
<FN>
See Notes to Financial Statements
</FN>
<PAGE>
INVESCO Specialty Funds, Inc.
Statement of Assets and Liabilities
November 30, 1994
UNAUDITED
Worldwide Worldwide
Capital Goods Communications
Fund Fund
--------------- ---------------
ASSETS
Investment Securities:
At Cost $4,079,325 $4,895,117
=============== ===============
At Value $3,827,771 $5,004,995
Repurchase Agreements at Value~ 0 9,360,000
Cash 46,335 14,538
Receivables:
Investment Securities Sold 46,629 723,517
Fund Shares Sold 50,647 279,459
Dividends and Interest 4,448 5,347
Prepaid Expenses and Other Assets 45,701 35,764
--------------- ---------------
TOTAL ASSETS 4,021,531 15,423,620
--------------- ---------------
LIABILITIES
Payables:
Investment Securities Purchased 15,000 288,054
Fund Shares Repurchased 13,514 29,139
Accrued Distribution Expenses 880 2,862
Accrued Expenses 315 18
--------------- ---------------
TOTAL LIABILITIES 29,709 320,073
--------------- ---------------
Net Assets at Value $3,991,822 $15,103,547
=============== ===============
NET ASSETS
Paid-in Capital* $4,262,562 $14,857,281
Accumulated Undistributed Net
Investment Income (Loss) (2,511) 39,926
Accumulated Undistributed Net
Realized Gain (Loss) on
Investment Securities (16,671) 96,479
Net Appreciation (Depreciation)
of Investment Securities (251,558) 109,861
--------------- ---------------
Net Assets at Value $3,991,822 $15,103,547
=============== ===============
Shares Outstanding 419,055 1,429,534
Net Asset Value, Offering and
Redemption Price per Share $9.53 $10.57
=============== ===============
~ Also represents cost.
* The Fund has 500 million authorized shares of common stock, par value of $0.01
per share. Of such shares, 100 million have been allocated to each individual
Fund.
<FN>
See Notes to Financial Statements
</FN>
<PAGE>
Statement of Operations
Period Ended November 30, 1994 (Note 1)
UNAUDITED
Worldwide Worldwide
Capital Goods Communications
Fund Fund
--------------- ---------------
INVESTMENT INCOME
INCOME
Dividends $8,886 $9,976
Interest 9,412 78,298
Foreign Taxes Withheld (36) (305)
--------------- ---------------
TOTAL INCOME 18,262 87,969
--------------- ---------------
EXPENSES
Investment Advisory Fees 6,751 15,614
Distribution Expenses 2,597 6,005
Transfer Agent Fees 4,268 9,653
Administrative Fees 3,489 3,693
Custodian Fees and Expenses 1,830 1,034
Professional Fees and Expenses 8,847 9,033
Registration Fees and Expenses 11,483 11,483
Reports to Shareholders 23 25
Other Expenses 490 491
--------------- ---------------
TOTAL EXPENSES 39,778 57,031
Fees and Expenses Absorbed by
Investment Adviser (19,005) (8,988)
--------------- ---------------
NET EXPENSES 20,773 48,043
--------------- ---------------
NET INVESTMENT INCOME (LOSS) (2,511) 39,926
--------------- ---------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENT SECURITIES
Net Realized Gain (Loss) on
Investment Securities (16,671) 96,479
Change in Net Appreciation
(Depreciation) of Investment
Securities (251,558) 109,861
--------------- ---------------
NET GAIN (LOSS) ON INVESTMENT
SECURITIES (268,229) 206,340
--------------- ---------------
Net Increase (Decrease) in Net
Assets from Operations $(270,740) $246,266
=============== ===============
<FN>
See Notes to Financial Statements
</FN>
<PAGE>
INVESCO Specialty Funds, Inc.
Statement of Changes in Net Assets
Period Ended November 30, 1994 (Note 1)
UNAUDITED
Worldwide Worldwide
Capital Goods Communications
Fund Fund
--------------- ---------------
OPERATIONS
Net Investment Income (Loss) $(2,511) $39,926
Net Realized Gain (Loss) on
Investment Securities (16,671) 96,479
Change in Net Appreciation
(Depreciation) of Investment
Securities (251,558) 109,861
--------------- ---------------
NET INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS (270,740) 246,266
--------------- ---------------
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 6,977,425 16,885,855
Amounts Paid for Repurchases
of Shares (2,764,863) (2,078,574)
--------------- ---------------
NET INCREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS 4,212,562 14,807,281
--------------- ---------------
Total Increase in Net Assets 3,941,822 15,053,547
NET ASSETS
Initial Subscription (Note 1) 50,000 50,000
--------------- ---------------
End of Period $3,991,822 $15,103,547
=============== ===============
Accumulated Undistributed
Net Investment Income (Loss)
Included in Net Assets
at End of Period $(2,511) $39,926
FUND SHARE TRANSACTIONS
Initial Subscription (Note 1) 5,000 5,000
Shares Sold 690,353 1,623,227
--------------- ---------------
695,353 1,628,227
Shares Repurchased (276,298) (198,693)
--------------- ---------------
Net Increase in Fund Shares 419,055 1,429,534
=============== ===============
<FN>
See Notes to Financial Statements
</FN>
</TABLE>
<PAGE>
INVESCO Specialty Funds, Inc.
Notes to Financial Statements
UNAUDITED
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES. INVESCO Specialty Funds, Inc. (the
"Fund"), a Maryland Corporation, was incorporated on April 12, 1994 and consists
of two separate Funds: Worldwide Capital Goods Fund and Worldwide Communications
Fund, both of which commended operations on August 1, 1994. 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.
A. SECURITY VALUATION - Equity securities traded on national securities
exchanges or in the over-the-counter market are valued at the last sale
price in the market where such securities are primarily traded. If last sale
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.
Values of foreign securities are determined as of the time that
trading of such securities is completed each day on the principal stock
exchange on which it is listed, generally at various times 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, or market value
if maturity is greater than 60 days.
B. REPURCHASE AGREEMENTS - Repurchase agreements held by the Fund are fully
collateralized by U.S. Government securities and such collateral is in the
possession of the Fund's custodian. The collateral is evaluated daily to
ensure its market value exceeds the current market value of the repurchase
agreements including accrued interest.
C. 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 ex dividend date. Cost is determined
on the specific identification basis.
The Fund may have elements of risk due to concentrated investments
in foreign issuers located in a specific country. Such concentrations may
subject the Fund to additional risks resulting from future political or
economic conditions and possible imposition of adverse foreign governmental
laws or currency exchange restrictions.
Restricted securities held by Worldwide Capital Goods 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.
D. FEDERAL AND STATE TAXES - The Fund has complied 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.
<PAGE>
Investment income received by each Fund from foreign sources may be
subject to foreign withholding taxes. Dividend income is shown gross of
foreign withholding taxes in the accompanying financial statements.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends and distributions
to shareholders are recorded by the Fund on the ex dividend/distribution
date. The Fund distributes net realized capital gains, if any, to its
shareholders at least annually, if not offset by capital loss carryovers.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally
accepted accounting principles. These differences are primarily due to
differing treatments for foreign currency transactions, nontaxable
dividends, net operating losses, expiring capital loss carryforwards and
deferral of wash sales. As of November 30, 1994, there were no such
differences.
F. EXPENSES - Each of the Funds bears expenses incurred specifically on its
behalf and, in addition, each Fund bears a portion of general expenses,
based on the relative net assets of each Fund.
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 for each Fund is based on
the annual rate of 0.65% on the first $500 million of average net assets;
reduced to 0.55% on the next $500 million of average net assets; and 0.45% of
average net assets in excess of $1 billion.
In accordance with a Sub-Advisory Agreement between IFG and INVESCO Trust
Company ("ITC"), a wholly owned subsidiary of IFG, investment decisions of each
Fund are made by ITC. Fees for such sub-advisory services are paid by IFG.
In accordance with an Administrative Agreement, each 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 of $14.00 per shareholder account, and is
entitled to receive $14.00 per participant for omnibus accounts per year which
is then paid 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 shareholder
and participant accounts in existence during each month.
A plan of distribution pursuant to Rule 12b-1 of the Act provides for
reimbursement of marketing and advertising expenditures to IFG (the
"Distributor") to a maximum of 0.25% of 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 period from
August 1, 1994 to November 30, 1994, Worldwide Capital Goods and Worldwide
Communications Funds paid the Distributor $1,717 and $3,143, respectively, for
reimbursement of expenses incurred.
IFG has voluntarily agreed, in some instances, to absorb certain fees and
expenses incurred by each Fund. NOTE 3 - PURCHASES AND SALES OF INVESTMENT
SECURITIES. For the period ended November 30, 1994, the aggregate cost of
purchases and proceeds from sales of investment securities (excluding all U.S.
Government securities and short-term securities) were as follows:
Fund Purchases Sales
- -----------------------------------------------------------------------------
Worldwide Capital Goods Fund $4,736,778 $640,782
Worldwide Communications Fund 6,099,986 1,301,348
There were no purchases or sales of U.S. Government securities.
NOTE 4 - APPRECIATION AND DEPRECIATION. At November 30, 1994, the gross
appreciation of securities in which there was an excess of value over tax cost,
the gross depreciation of securities in which there was an excess of tax cost
<PAGE>
over value and the resulting net appreciation (depreciation) by Fund were as
follows:
Net
Gross Gross Appreciation
Fund Appreciation Depreciation (Depreciation)
- -----------------------------------------------------------------------------
Worldwide Capital Goods Fund $82,305 $333,859 $(251,554)
Worldwide Communications Fund 321,166 211,288 109,878
NOTE 5 - TRANSACTIONS WITH AFFILIATES. Certain of the Fund's officers and
directors are also officers and directors of IFG or ITC.
The Fund has adopted an unfunded noncontributory defined benefit pension
plan covering all independent directors of the Fund who will have served as an
independent director for at least five years at the time of retirement. Benefits
under this plan are based on an annual rate equal to 25% of the retainer fee at
the time of retirement. Pension expenses for the period ended November 30, 1994
were insignificant.
<PAGE>
<TABLE>
<CAPTION>
INVESCO Specialty Funds, Inc.
Financial Highlights
(For a Fund Share Outstanding throughout the Period) Period Ended November 30,
1994 (Note 1)
UNAUDITED
Worldwide Worldwide
Capital Goods Communications
Fund Fund
--------------- ---------------
<S> <C> <C>
PER SHARE DATA
Net Asset Value --
Beginning of Period $10.00 $10.00
-------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.01) 0.03
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (0.46) 0.54
-------- --------
Total from Investment Operations (0.47) 0.57
-------- --------
Net Asset Value-- End of Period $9.53 $10.57
======== ========
TOTAL RETURN (4.70%)+ 5.70%+
RATIOS
Net Assets -- End of Period
($000 Omitted) $3,992 $15,104
Ratio of Expenses to Average
Net Assets# 0.67%+ 0.67%+
Ratio of Net Investment Income
(Loss) to Average Net Assets# (0.08%)+ 0.55%+
Portfolio Turnover Rate 25%+ 48%+
<FN>
+ These amounts are based on operations for the period shown and, accordingly,
are not representative of a full year.
# Various expenses of Worldwide Capital Goods and Worldwide Communications Funds
were voluntarily absorbed by IFG for the period ended November 30, 1994. If such
expenses had not been voluntarily absorbed, unannualized ratio of expenses to
average net assets would have been 1.28% and 0.79%, respectively, and
unannualized ratio of net investment income (loss) to average net assets would
have been (0.69%) and 0.43%, respectively.
</FN>
<PAGE>
INVESCO Specialty Funds, Inc.
Financial Highlights
(For a Fund Share Outstanding throughout the Period) Period Ended November 30,
1994 (Note 1)
UNAUDITED
Worldwide Worldwide
Capital Goods Communications
Fund Fund
--------------- ---------------
PER SHARE DATA
Net Asset Value --
Beginning of Period $10.00 $10.00
-------- --------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.01) 0.03
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (0.46) 0.54
-------- --------
Total from Investment Operations (0.47) 0.57
-------- --------
Net Asset Value-- End of Period $9.53 $10.57
======== ========
TOTAL RETURN (4.70%)+ 5.70%+
RATIOS
Net Assets -- End of Period
($000 Omitted) $3,992 $15,104
Ratio of Expenses to Average
Net Assets# 0.67%+ 0.67%+
Ratio of Net Investment Income
(Loss) to Average Net Assets# (0.08%)+ 0.55%+
Portfolio Turnover Rate 25%+ 48%+
<FN>
+ These amounts are based on operations for the period shown and, accordingly,
are not representative of a full year.
# Various expenses of Worldwide Capital Goods and Worldwide Communications Funds
were voluntarily absorbed by IFG for the period ended November 30, 1994. If such
expenses had not been voluntarily absorbed, unannualized ratio of expenses to
average net assets would have been 1.28% and 0.79%, respectively, and
unannualized ratio of net investment income (loss) to average net assets would
have been (0.69%) and 0.43%, respectively.
</FN>
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
INVESCO Specialty Funds, Inc.
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of the INVESCO European
Small Company Fund and the INVESCO Latin American Growth Fund, (two of the
portfolios of INVESCO Specialty Funds, Inc.), hereafter referred to as the
"Funds"), at February 8, 1995, in conformity with generally accepted accounting
principles. This financial statement is the responsibility of the Fund's
management; our responsibility is to express an opinion on this financial
statement based on our audit. We conducted our audit of this financial statement
in accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statement is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statement, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
Denver, Colorado
February 8, 1995
<PAGE>
<TABLE>
<CAPTION>
INVESCO SPECIALTY FUNDS, INC.
Statement of Assets and Liabilities
February 8, 1995
European Latin
Small Company American Growth
Fund Fund
--------------- ---------------
<S> <C> <C>
Assets
Cash held by custodian $10 $10
--------------- ---------------
Liabilities 0 0
--------------- ---------------
Net Assets $10 $10
=============== ===============
Net Assets
Paid-in Capital applicable to 1 share of each Fund issued and outstanding (par
value $0.01 per share, 500 million shares authorized; 100 million shares have
been allocated
to each Fund.) $10 $10
=============== ===============
Net asset value, offering and
redemption price per share. $10.00 $10.00
=============== ===============
<FN>
See accompanying Notes to Statement of Assets and Liabilities
</FN>
</TABLE>
<PAGE>
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
February 8, 1995
Note 1 - Organization and Registration
INVESCO Speciality Funds, Inc. ("ISF"), a Maryland corporation, was
incorporated on April 12, 1994 as a diversified, open-end management
investment company. ISF consists of four separate funds, European
Small Company Fund, Latin American Growth Fund, (collectively, the
"Funds"), Worldwide Capital Goods Fund and Worldwide Communications
Fund. On August 1, 1994, operations commenced for the Worldwide
Capital Goods Fund and Worldwide Communications Fund. The European
Small Company and Latin American Growth Funds have been inactive
since ISF's incorporation except for matters relating to their
organization and registration as investment companies under the
Investment Company Act of 1940 (the "Act") and the Securities Act of
1933. Financial statements of the Worldwide Capital Goods and
Worldwide Communications Funds are not included herein.
On February 8, 1995 INVESCO Funds Group, Inc. ("INVESCO"), the
Fund's investment advisor and underwriter, purchased 1 share each of
European Small Company Fund and Latin American Growth Fund at a net
asset value of $10.00 per share. Organization costs of each Fund are
insignifiant and were voluntarily absorbed by INVESCO.
Note 2 - Investment Advisory and Other Agreements
INVESCO serves as the Fund's investment advisor. As compensation for
its services to the Fund, INVESCO receives an investment advisory
fee which is accrued daily at the applicable rate and paid monthly.
The fee for each Fund is based on the annual rate of 0.75% on the
first $500 million of average net assets and at a lower rate for
average net assets in excess of $500 million.
In accordance with a Sub-Advisory Agreement between INVESCO and
INVESCO MIM International Limited ("MIL"), investment decisions for
European Small Company and Latin American Growth Funds are made by
MIL. Fees for such sub-advisory services are paid by INVESCO.
In accordance with an Administrative Agreement, each Fund pays
INVESCO 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
calculated daily and paid monthly.
INVESCO receives a transfer agent fee of $14.00 per shareholder
account per year or may, for omnibus accounts of sub-transfer agents
or for tax-qualified retirement plans, receive $14.00 per
participant account per year. This fee is paid monthly at
one-twelfth of the annual fee and based upon the actual number of
accounts in existence during the month.
A 2% redemption fee is retained by the Latin American Growth Fund to
offset transaction costs and other expenses associated with
short-term redemptions and exchanges. The fee is imposed only on
redemptions or exchanges of shares held less than twelve months.
A plan of distribution pursuant to Rule 12b-1 of the Act provides
for reimbursement of marketing and advertising expenditures to
INVESCO (the "Distributor") to a maiximum of 0.25% of average annual
net assets. Amounts accrued by the Funds are available to reimburse
the
<PAGE>
Distributor for actual expenditures incurred within a rolling
twelve-month period.
Certain of the Fund's officers and directors are also officers and
directors of INVESCO or MIL.
