INVESCO Specialty Funds, Inc.
Supplement to Statement of Additional Information
dated September 11, 1995
The following unaudited financial statements of the INVESCO Asian Growth
Fund supplements the Company's 1995 Annual Report to Shareholders which is
incorporated by reference into the Company's Statement of Additional
Information.
INVESCO Specialty Funds, Inc. - Asian Growth Fund
Statement of Investment Securities
July 31,1996
UNAUDITED
<TABLE>
<CAPTION>
Shares or
Industry Principal
Description Code Amount Value
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS & WARRANTS 89.61%
HONG KONG 27.68%
Cheung Kong Holdings Ltd RE 37,000 $252,383
China Light & Power Ltd UT 79,000 326,898
CITIC Pacific Ltd DV 123,000 507,378
HKR International Ltd RE 200,000 223,708
Hang Seng Bank Ltd BK 27,000 267,965
HongKong Telecommunications Ltd TC 144,000 237,415
Hutchison Whampoa Ltd DV 52,000 310,657
Hysan Development Ltd RE 73,000 201,538
Jardine Matheson Holdings Ltd DV 16,800 101,640
New World Development Ltd RE 66,000 300,415
New World Infrastructure Ltd* EG 140,000 304,139
Sun Hung Kai Properties Ltd RE 38,000 358,709
Swire Pacitic Ltd Class A Shrs DV 66,000 565,412
------------
3,958,257
------------
INDIA 3.93%
BSES Ltd Regulation S GDR^* UT 5,000 87,500
Crompton Greaves Ltd Regulation S GDRA* EE 20,000 147,600
Gujarat Ambuja Cement Ltd GDR BC 10,000 95,000
Mahindra & Mahindra Ltd GDR* AM 11,000 121,000
RelianceIndustriesLtdGDR CH 10.000 ll0,000
------------
561,100
------------
<PAGE>
INDONESIA 5.04%
PT Bank Danamon Indonesia
Foreign Shrs BK 175,000 132,016
PT Bank Internasional Indonesia
Foreign Shrs BK 47,778 106,604
PT Indosat Foreign Shrs TC 85,000 261,906
PT Semen Gresik Foreign Shrs BC 63,000 142,577
PT Telekomunikasi Indonesia
Foreign Shrs TC 57,000 78,126
------------
721,229
------------
MALAYSIA 19.16%
Arab-Malaysian Berhad DV 54,000 195,832
Bandar Raya Developments Berhad RE 160,000 233,380
Edaran Otomobil National Berhad AM 14,000 135,203
Innovest Berhad* BC 40,000 133,841
Malaysian Resources Berhad RE 112,000 280,505
Perusahaan Otomobil Nasional
Berhad-Proton AM 28,000 139,130
Public Bank Berhad Foreign Shrs BK 136,000 250,691
RJ Reynolds Berhad TO 48,000 139,451
Road Builder Holdings Berhad BC 48,000 200,040
Tanjong PLC RR 90,000 292,126
Technology Resources Industries
Berhad* TC 108,000 331,076
Time Engineering Berhad DV 102,000 208,455
Time Engineering Berhad Warrants
(Exp 2002)* DV 51,000 18,393
United Engineers Berhad Ltd EG 27,000 181,767
------------
2,739,890
------------
PHILIPPINES 5.07%
C&P Homes BC 125,000 94,210
Fortune Cement* BC 300,000 157,414
Philippine National Bank* BK 17,000 265,982
Pilipino Telephone* TC 70,000 92,159
William Gothong & Aboitiz* TR 500,000 114,483
------------
724,248
------------
SINGAPORE 8.57%
Development Bank Ltd Foreign Shrs BK 31,000 351,001
Fraser & Neave Ltd FD 16,000 160,781
Keppel Corp Ltd DV 14,000 106,008
Overseas Union Bank Ltd Foreign Shrs BK 32,000 190,220
Straits Steamship Land Ltd DV 84,000 263,930
United Industrial Ltd DV 120,000 105,300
Wing Tai Holdings Ltd RE 24,000 48,064
------------
1,225,304
------------
SOUTH KOREA 2.48%
<PAGE>
Cho Hung Bank Ltd BK 19,500 200,275
Daewoo Heavy Industries MY 13,500 101,456
Korea Electric Power UT 1,700 52,693
------------
354,424
------------
THAILAND 14.91%
Bank of Ayudhya PLC Foreign Shrs BK 27,500 119,778
Dhana Siam Finance & Securities
PLC Foreign Shrs IB 34,000 169,629
Electricity Generating PLC
Foreign Shrs UT 45,000 141,655
LFCT Finance & Securities PLC IB 60,000 112,255
Industrial Finance of Thailand
Warrants (Exp 1997)* FR l00,000 182,142
Krung Thai Bank PLC Foreign Shrs BK 70,000 271.629
National Finance & Securities
Ltd Foreign Shrs IB 20,000 59,394
Nithipat Capital PLC FR 50,000 130,667
Siam City Cement PLC BC 15,000 136,606
Siam Commercial Bank Ltd Foreign Shrs BK 22,000 277,014
Thai Airways International PLC TR 125,000 241,288
Thai Farmers Bank PLC Foreign Shrs BK 15,000 147,297
Total Access Communications PLC TC 20,000 143,000
------------
2,132,354
------------
UNITED KINGDOM 2.77%
HSBC Holdings PLC BK 24,800 396,054
------------
TOTAL COMMON STOCKS & WARRANTS
(Cost $14,460,600) 12,812,860
------------
SHORT-TERM INVESTMENTS -
REPURCHASE AGREEMENTS 10.39%
UNITED STATES 10.39%
Repurchase Agreement with State Street
Bank & Trust Co dated 7/31/1996 due
8/1/1996 at 4.750%, repurchased at
$1,485,196 (Collateralized by US Treasury
Notes due 3/31/1998 at 6.125%,
value $1,547,676) (Cost $1,485,000) RA 1,485,000 1,485,000
------------
TOTAL INVESTMENT
SECURITIES AT VALUE 100.00%
(Cost $15,945,600#) 14,297,860
============
<FN>
* Security is non-income producing.
# Also represents cost for income tax purposes.
</FN>
</TABLE>
The following are restricted securities at July 31,1996:
<PAGE>
<TABLE>
<CAPTION>
Value as
Acquisition Acquisition % of
Description Date Cost Net Assets
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BSES Ltd
Regulation S GDR 5/13/96 $88,750 0.61%
Crompton Greaves
Ltd Regulation S GDR 7/2/96 151,200 1.03
------------
1.64%
============
</TABLE>
<PAGE>
Summary of Investments by Industry
<TABLE>
<CAPTION>
% of
Industry Investment
Industry Code Securities Value
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Automobile Related AM 2.76% $395,333
Banking BK 20.82% 2,976,526
Building & Construction Related BC 6.71% 959,688
Chemicals CH 0.77% 110,000
Diversified DV 16.67% 2,383,005
Electrical Equipment EE 1.03% 147,600
Engineering EG 3.40% 485,906
Finance Related FR 2.19% 312,809
Food Products & Beverages FD 1.12% 160,781
Investment Brokers IB 2.39% 341,278
Machinery MY 0.71% 101,456
Real Estate Related RE 13.28% 1,898,702
Recreation Related RR 2.04% 292,126
Repurchase Agreements RA 10.39% 1,485,000
Telecommunications TC 8.00% 1,143,682
Tobacco TO 0.97% 139,451
Transportation TR 2.49% 355,771
Utilities UT 4.26% 608,746
-------------------------
100.00% $14,297,860
=========================
See Notes to Financial Statements
</TABLE>
<PAGE>
INVESCO Specialty Funds, Inc. - Asian Growth Fund
Statement of Assets and Liabilities
July 31, 1996
UNAUDITED
ASSETS
Investment Securities:
At Cost~ $15,945,600
---------------
At Value~ $14,297,860
Cash 66,444
Receivables:
Investment Securities Sold 133,770
Fund Shares Sold 41,820
Dividends and Interest 8,406
Prepaid Expenses and Other Assets 12,026
---------------
TOTAL ASSETS 14,560,326
---------------
LIABILITIES
Payables:
Distributions to Shareholders 242
Investment Securities Purchased 209,985
Fund Shares Repurchased 15,401
Depreciation on Forward Foreign Currency Contracts 208
Accrued Distribution Expenses 3,241
Accrued Expenses and Other Payables 16,545
---------------
TOTAL LIABILITIES 245,622
---------------
Net Assets at Value $14,314,704
===============
NET ASSETS
Paid-in Capital* $15,998,958
Accumulated Undistributed Net Investment Income 2,941
Accumulated Undistributed Net Realized Loss on
Investment Securities and Foreign Currency Transactions (39,425)
Net Depreciation of Investment Securities and
Foreign Currency Transactions (1,647,770)
---------------
Net Assets at Value $14,314,704
===============
Shares Outstanding 1,599,695
Net Asset Value, Offering and Redemption
Price per Share $8.95
===============
<PAGE>
~ Investment securities at cost and value at July 31,1996 include a repurchase
agreement of $1,485,000.
* The Fund has 500 million authorized shares of common stock, par value of $0.01
per share. Of such shares, 1()0 million have been allocated to each individual
Fund.
See Notes to Financial Statements
<PAGE>
INVESCO Specialty Funds, Inc. - Asian Growth Fund
Statement of Operations
Period Ended July 31, 1996 (Note 1)
UNAUDITED
INVESTMENT INCOME
INCOME
Dividends $63,165
Interest 49,161
Foreign Taxes Withheld (8,236)
---------------
TOTAL INCOME 104,090
---------------
EXPENSES
Investment Advisory Fees 26,564
Distribution Expenses 8,854
Transfer Agent Fees 16,399
Administrative Fees 3,031
Custodian Fees and Expenses 19,099
Directors' Fees and Expenses 719
Professional Fees and Expenses 23,478
Registration Fees and Expenses 396
Reports to Shareholders 70
Other Expenses 434
---------------
TOTAL EXPENSES 99,044
Fees and Expenses Absorbed Investment Adviser (21,339)
Fees and Expenses Paid Indirectly (6,854)
---------------
NET EXPENSES 70,851
---------------
NET INVESTMENT INCOME 33,239
---------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES
Net Realized Loss on Investment Securities and
Foreign Currency Transactions (39,425)
Change in Net Depreciation of Investment Securities
and Foreign Currency Transactions (1,647,770)
---------------
NET LOSS ON INVESTMENT SECURITIES (1,687,195)
---------------
Net Decrease in Net Assets from Operations $(1,653,956)
---------------
See Notes to Financial Statements
<PAGE>
INVESCO Specialty Funds, Inc. - Asian Growth Fund
Statement of Changes in Net Assets
Period Ended July 31, 1996 (Note l)
UNAUDITED
OPERATIONS
Net Investment Income $33,239
Net Realized Loss on Investment Securities
and Foreign Currency Transactions (39,425)
Change in Net Depreciation of Investment
Securities and Foreign Currency Transactions (1,647,770)
---------------
NET DECREASE IN NET ASSETS
FROM OPERATIONS (1,653,956)
---------------
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income (30,298)
Net Realized Gain on Investment Securities 0
---------------
TOTAL DISTRIBUTIONS (30,298)
---------------
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 18,102,250
Reinvestment of Distributions 30,018
---------------
18,132,268
Amounts Paid for Repurchases of Shares (2,133,310)
---------------
NET INCREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS 15,998,958
---------------
Total Increase in Net Assets 14,314,704
NET ASSETS
Beginning of Period 0
---------------
End of Period $14,314,704
===============
Accumulated Undistributed Net Investment
Income Included in Net Assets at End of Period $2,941
FUND SHARE TRANSACTIONS
Shares Sold 1,818,644
Shares Issued from Reinvestment of Distributions 3,354
---------------
1,821,998
Shares Repurchased (222,303)
---------------
Net Increase in Fund Shares 1,599,695
===============
See Notes to Financial Statements
<PAGE>
INVESCO Specialty Funds, Inc. - Asian Growth Fund
Notes to Financial Statements
UNAUDITED
NOTE 1-ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICES. INVESCO Specialty Funds,
Inc. (the "Fund"), was incorporated in Maryland on April 12, 1994 and presently
consists of five separate Funds: Asian Growth Fund, which commenced investment
operations on March 1, 1996, European Small Company Fund, Latin American Growth
Fund, Worldwide Capital Goods Fund and Worldwide Communications Fund. European
Small Company, Latin Amencan Growth, Worldwide Capital Goods and Worldwide
Communications Funds are not presented herein. The investment objective of the
Asian Growth Fund is to achieve capital appreciation by investing primarily in
equity securities of companies domiciled or with primary operations in Asia and
the Pacific Rim. The Fund is registered under the Investment Company Act of 1940
(the "Act") as a diversified, open-end management investment company.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.
A. SECURITY VALUATION-Equity securities traded on national securities
exchanges or in the over-the-counter market are valued at the last sales
price in the market where such securities are primarily traded. If last
sales prices are not available, securities are valued at the highest
closing bid price obtained from one or more dealers making a market for
such securities or by a pricing service approved by the Fund's board of
directors.
Foreign securities are valued at the closing price on the principal stock
exchange on which they are traded. In the event that closing prices are
not available for foreign securities, prices will be obtained from the
principal stock exchange at or prior to the close of the New York Stock
Exchange. Foreign currency exchange rates are determined daily prior to
the close of the New York Stock Exchange.
If market quotations or pricing service valuations are not readily
available, securities are valued at fair value as determined in good faith
by the Fund's board of directors. Restricted securities are valued in
accordance with procedures established by the Fund's board of directors.
Short-term securities are stated at amortized cost (which approximates
market value) if maturity is 60 days or less at the time of purchase, or
market value if maturity is greater than 60 days.
<PAGE>
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 dividend if such
information is obtained subsequent to the ex dividend date. Interest
income, which may be comprised of stated coupon rate, market discount and
original issue discount is recorded on the accrual basis. Cost is
determined on the specific identification basis.
The Fund may have elements of risk due to concentrated investments in
foreign issuers located in a specific country. Such concentrations may
subject the Fund to additional risks resulting from future political or
economic conditions and/or possible impositions of adverse foreign
governmental laws or currency exchange restrictions. Net realized and
unrealized gain or loss from investments includes fluctuations from
currency exchange rates and fluctuations in market value.
The Fund may invest in certain restricted securities that are not
registered for sale to the general public. 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 and continues to comply with
the provisions of the Internal Revenue Code applicable to regulated
investment companies and, accordingly, has made or intends to make
sufficient distributions of net investment income and net realized capital
gains, if any, to relieve it from all federal and state income taxes and
federal excise taxes.
To the extent future capital gains are offset by capital loss carryovers
and deferred post-October 31 losses, such gains will not be distributed to
shareholders.
Dividends paid by the Fund from net investment income and distributions of
net realized short-term capital gains are, for federal income tax
purposes, taxable as ordinary income to shareholders.
Investment income received from foreign sources may be subject to foreign
withholding taxes. Dividend and interest income is shown gross of foreign
withholding taxes in the accompanying financial statements.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS-Dividends and distributions to
shareholders are recorded by the Fund on the ex dividend/distribution
<PAGE>
date. The Fund distributes net realized capital gains, if any, to its
shareholders at least annually, if not offset by capital loss carryovers.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally
accepted accounting principles. These differences are primarily due to
differing treatments for foreign currency transactions, nontaxable
dividends, net operating losses and expired capital loss carryforwards.
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.
Under an agreement between each Fund and the Fund's Custodian, agreed upon
Custodian Fees and Expenses are reduced by credits granted by the
Custodian from any temporarily uninvested cash. Such credits are included
in Fees and Expenses Paid Indirectly in the Statement of Operations.
For the period ended July 31, 1996, Fees and Expenses Paid Indirectly
consisted of the following:
Custodian Fees
Fund and Expenses
-----------------------------------------------------------------------------
Asian Growth Fund $6,854
NOTE 2 - INVESTMENT ADVISORY AND OTHER AGREEMENTS. INVESCO Funds Group, Inc.
("IFG") serves as the Fund;s investment adviser. As compensation for its
services to the Fund, IFG receives an investment advisory fee which is accrued
daily at the applicable rate and paid monthly. The fee is based on the annual
rate of each Fund's average net assets as follows:
$0 to $500 Million Over
$500 to $1 $1
Fund Million Billion
Billion
- --------------------------------------------------------------------------------
Asian Growth Fund 0.75% 0.65% 0.55%
In accordance with a Sub-Advisory Agreement between IFG and INVESCO Asia Limited
("INVESCO Asia"), a wholly owned subsidiary of IFG, investment decisions of
Asian Growth Fund are made by INVESCO Asia. 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 received a transfer agent fee at an annual rate of $14.00 per shareholder
account, or per participant in an omnibus account through April 30, 1996. IFG
may pay such fee for participants in omnibus accounts to affiliates or third
parties. The fee is paid monthly at one-twelfth of the annual fee and is based
upon the actual number of accounts in existence, during each month. As of May 1,
1996, the transfer agent fee became $20.00 per shareholder account or, where
<PAGE>
applicable, per participant in an omnibus account, per year, computed in a
manner similar to the previous fee.
A plan of distribution pursuant to Rule 12b-1 of the Act provides for
reimbursement of marketing and advertising expenditures to IFG (the
"Distributor") to a maximum of 0.25% of average annual net assets. Amounts
accrued by the Fund are available to reimburse the Distributor for actual
expenditures incurred within a rolling twenty-four-month period ending April 30,
1998 for Asian Growth Fund, and for a rolling twelve-month period thereafter.
For the period ended July 31, 1996, the Fund paid the Distributor $5,613
for reimbursement of expenses incurred.
IFG and INVESCO Asia have voluntarily agreed, in some instances, to absorb
certain fees and expenses incurred by Asian Growth Fund.
A 1% redemption fee is retained by the Asian Growth Fund to offset transaction
costs and other expenses associated with short-term redemptions and exchanges.
The fee is imposed on redemptions or exchanges of shares held less than three
months. The redemption fee is accounted for as an addition to Paid-in Capital.
Total redemption fees received by the Asian Growth Fund for the period ended
July 31, 1996 were $10,648.
NOTE 3 - PURCHASES AND SALES OF INVESTMENT SECURITIES. For the period ended July
31, 1996, 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
- --------------------------------------------------------------------------------
Asian Growth Fund $14,679,509 $179,484
There were no purchases or sales of U.S. Government securities.
NOTE 4 - APPRECIATION AND DEPRECIATION. At July 31, 1996, 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 over value
and the resulting net appreciation (depreciation) by Fund were as follows:
Net
Gross Gross Appreciation
Fund Appreciation Depreciation (Depreciation)
- --------------------------------------------------------------------------------
Asian Growth Fund $113,185 $1,760,925 $(1,647,740)
<PAGE>
NOTE 5 - TRANSACTIONS WITH AFFILIATES. Certain of the Fund's officers and
directors are also officers and directors of IFG or INVESCO Asia.
The Fund has adopted an unfunded noncontributory defined benefit pension plan
covering all independent directors of the Fund who will have served as an
independent director for at least five years at the time of retirement. Benefits
under this plan are based on an annual rate equal to 25% of the retainer fee at
the time of retirement. As of July 1, 1996, benefits will be based on an annual
rate of 40% of the retainer fee at the time of retirement.
Pension expenses for the period ended July 31, 1996, included in Directors' Fees
and Expenses in the Statement of Operations and unfunded accrued pension costs
and pension liability included in a Prepaid Expenses and Accrued Expenses,
respectively, in the Statement of Assets and Liabilities were insignificant for
the Asian Growth Fund.
NOTE 6 - LINE OF CREDIT. The Fund has available a Redemption Line of Credit
Facility ("LOC"), from a consortium of national banks, to be used for temporary
or emergency purposes to fund redemptions of investor shares. The LOC permits
borrowings to a maximum of 10% of the Net Assets at Value of each respective
Fund. Each Fund agrees to pay annual fees and interest on the unpaid principal
balance based on prevailing market rates as defined in the agreement. For the
period ended July 31, 1996, there were no such borrowings.
The date of this supplement is September 1, 1996.
