INVESCO SPECIALTY FUNDS INC, 485BPOS, 1999-11-12

INVESCO SPECIALTY FUNDS INC
485BPOS, 1999-11-12

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As filed on November 12, 1999 File No. 033-79290

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X

Pre-Effective Amendment No. __ _

Post-Effective Amendment No. 17 X
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 18 X

INVESCO SPECIALTY FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
7800 E. Union Avenue, Denver, Colorado 80237
(Address of Principal Executive Offices)
P.O. Box 173706, Denver, Colorado 80217-3706
(Mailing Address)
Registrant's Telephone Number, including Area Code: (303) 930-6300
Glen A. Payne, Esq.
7800 E. Union Avenue
Denver, Colorado 80237
(Name and Address of Agent for Service)
------------
Copies to:
Ronald M. Feiman, Esq.
Mayer, Brown & Platt
1675 Broadway
New York, New York 10019-5820
------------
Approximate Date of Proposed Public Offering: As soon as practicable after this
post-effective amendment becomes effective.
It is proposed that this filing will become effective (check appropriate box)

X immediately upon filing pursuant to paragraph (b)
__ on _____________, pursuant to paragraph (b)
__ 60 days after filing pursuant to paragraph (a)(1)

__ on _____________, pursuant to paragraph (a)(1)
__ 75 days after filing pursuant to paragraph (a)(2)
__ on __________, pursuant to paragraph (a)(2) of rule 485

If appropriate, check the following box:
X this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

<PAGE>

Prospectus | November 15, 1999
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YOU SHOULD KNOW WHAT INVESCO KNOWS (TM)
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INVESCO
SPECIALTY FUNDS,
INC.

INVESCO REALTY FUND

A NO-LOAD MUTUAL FUND DESIGNED FOR INVESTORS SEEKING LONG-TERM CAPITAL GROWTH
AND CURRENT INCOME.

TABLE OF CONTENTS

Investment Goals, Strategies And Risks..................3

Fund Performance........................................4
Fees And Expenses.......................................5
Investment Risks........................................6
Risks Associated With Particular Investments............7
Temporary Defensive Positions..........................10
Portfolio Turnover.....................................10
Fund Management........................................10
Portfolio Managers.....................................11
Potential Rewards......................................11
Share Price............................................12
How To Buy Shares......................................12
Your Account Services..................................15
How To Sell Shares.....................................16
Taxes..................................................17
Dividends And Capital Gain Distributions...............18
Financial Highlights...................................20

[INVESCO ICON]
INVESCO

The Securities and Exchange Commission has not approved or disapproved the
shares of this Fund. Likewise, the Commission has not determined if this
Prospectus is truthful or complete. Anyone who tells you otherwise is committing
a federal crime.

<PAGE>

This Prospectus will tell you more about:

[KEY ICON] Investment Objectives & Strategies

[ARROW ICON] Potential Investment Risks

[GRAPH ICON] Past Performance

[INVESCO ICON] Working With INVESCO
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[KEY ICON] [ARROW ICON] INVESTMENT GOALS, STRATEGIES AND RISKS

INVESCO Funds Group, Inc. ("INVESCO") is the investment adviser for the
Fund. Together with our affiliated companies, we at INVESCO direct all aspects
of the management and sale of the Fund.

FOR MORE DETAILS ABOUT THE FUND'S CURRENT INVESTMENTS AND MARKET OUTLOOK, PLEASE
SEE THE MOST RECENT ANNUAL OR SEMI-ANNUAL REPORT.

The Fund attempts to make your investment grow. The Fund is aggressively
managed. Although the Fund can invest in debt securities, it invests primarily
in equity securities that INVESCO believes will rise in price faster than other
securities, as well as in options and other investments whose value is based
upon the values of equity securities.

The Fund tries to buy securities that will increase in value over the long
term. Current income is an additional consideration.

The Fund invests primarily in the equity securities of companies doing
business in the real estate industry. These companies may include real estate
investment trusts, real estate brokers, home builders or real estate developers,
companies with substantial real estate holdings, and companies with significant
involvement in the real estate industry. The remainder of the Fund's assets is
invested in other income-producing securities. A portion of the Fund's assets is
not required to be invested in the sector. To determine whether a potential
investment is truly doing business in this sector, a company must meet at least
one of the following tests: o At least 50% of its gross income or its net sales
must come from activities in the sector; o At least 50% of its assets must be
devoted to producing revenues from the sector; or o Based on other available
information, we determine that its primary business is within the sector.

INVESCO uses a bottom-up investment approach to create the Fund's
investment portfolio, focusing on company fundamentals and growth prospects when
selecting securities. In general, the Fund emphasizes strongly managed companies
that INVESCO believes will generate above-average growth rates for the next
three to five years. We prefer markets and industries where leadership is in a
few hands, and we tend to avoid slower-growing markets or industries.

[ARROW ICON] The real estate industry is highly cyclical, and the value of
securities issued by companies doing business in that sector may fluctuate
widely. The real estate industry-- and, therefore, the performance of the Fund--
is highly sensitive to national, regional and local economic conditions,
interest rates, property taxes, overbuilding, decline in value of real estate
and changes in rental income.

<PAGE>

The Fund's investments are diversified across the realty sector. However,
because those investments are limited to a comparatively narrow segment of the
economy, the Fund's investments are not as diversified as the investments of
most mutual funds, and far less diversified than the broad securities markets.
This means that the Fund tends to be more volatile than other mutual funds, and
the values of its portfolio investments tend to go up and down more rapidly. As
a result, the value of your investment in the Fund may rise or fall rapidly.

Other principal risks involved in investing in the Fund are market, credit,
foreign securities, interest rate, duration, liquidity, derivatives,
counterparty and lack of timely information risks. These risks are described and
discussed later in this Prospectus under the headings "Investment Risks" and
"Risks Associated With Particular Investments." An investment in the Fund is not
a deposit of any bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation ("FDIC") or any other government agency. As with any other
mutual fund, there is always a risk that you can lose money on your investment
in the Fund.

[GRAPH ICON] FUND PERFORMANCE

The bar chart below shows the Fund's actual yearly performance for the
years ended December 31 (commonly known as its "total return") since inception.
The table below shows average annual total returns for various periods ended
December 31 for the Fund compared to the S&P 500 Index and the NAREIT Index. The
information in the chart and table illustrates the variability of the Fund's
return and how its performance compared to a broad measure of market
performance. Remember, past performance does not indicate how the Fund will
perform in the future.

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REALTY FUND
ACTUAL ANNUAL TOTAL RETURN(1),(2),(3)
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1997 1998

21.50% (23.48%)

Best Calendar Qtr. 9/97 14.19%
Worst Calendar Qtr. 9/98 (20.46%)
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<PAGE>

Realty Fund (23.48%) (3.58%)
S&P 500 Index(4) 28.60% 30.95%
NAREIT Index(4) (17.51%) (0.38%)
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(1) Total return figures include reinvested dividends and capital gain
distributions, and include the effect of the Fund's expenses.

(2) Year-to-date return for the Fund was (5.81%) as of the calendar quarter
ended September 30, 1999.

(3) The Fund commenced operations on January 2, 1997.

(4) The S&P 500 Index is an unmanaged index of common stocks considered
representative of the broad U.S. stock market. The NAREIT Index is an unmanaged
index indicative of the U.S. real estate investment trust market. Please keep in
mind that the Indexes do not pay brokerage, management, administrative or
distribution expenses, all of which are paid by the Fund and are reflected in
its annual return.

FEES AND EXPENSES

SHAREHOLDER FEES PAID DIRECTLY FROM YOUR ACCOUNT

You pay no fees to purchase Fund shares, to exchange to another INVESCO
fund, or to sell your shares. Accordingly, no fees are paid directly from your
shareholder account. The only Fund costs you pay are annual Fund operating
expenses that are deducted from Fund assets.

ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS

REALTY FUND
Management Fees 0.75%
Distribution and Service (12b-1) Fees(1) 0.25%
Other Expenses (2)(3)(4) 1.78%
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Total Annual Fund Operating Expenses(2)(3)(4) 2.78%
=====

(1) Because the Fund pays 12b-1 distribution fees which are based upon the
Fund's assets, if you own shares of the Fund for a long period of time, you
may pay more than the economic equivalent of the maximum front-end sales
charge permitted for mutual funds by the National Association of Securities
Dealers, Inc.

(2) The Fund's actual Total Annual Fund Operating Expenses were lower than the
figures shown, because its custodian fees were reduced under an expense
offset arrangement.

(3) The expense information presented in the table has been restated to
reflect a change in the administrative services fee.

(4) Certain expenses of the Fund were absorbed voluntarily by INVESCO
pursuant to a commitment to the Fund. After absorption, the Fund's Other
Expenses and Total Annual Fund Operating Expenses were 0.37% and 1.37%,
respectively. This commitment may be changed at any time following
consultation with the board of directors.

EXAMPLE

This Example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds.

<PAGE>

year, and assumes that the Fund's expenses remained the same. Although the
Fund's actual costs and performance may be higher or lower, based on these
assumptions your costs would have been:

1 year 3 years 5 years 10 years

$281 $862 $1,468 $3,107

[ARROW ICON] INVESTMENT RISKS

You should determine the level of risk with which you are comfortable
before you invest. The principal risks of investing in any mutual fund,
including this Fund, are:

BEFORE INVESTING IN THE FUND, YOU SHOULD DETERMINE THE LEVEL OF RISK WITH
WHICH YOU ARE COMFORTABLE. TAKE INTO ACCOUNT FACTORS LIKE YOUR AGE, CAREER,
INCOME LEVEL, AND TIME HORIZON.

NOT INSURED. Mutual funds are not insured by the FDIC or any other agency,
unlike bank deposits such as CDs or savings accounts.

NO GUARANTEE. No mutual fund can guarantee that it will meet its investment
objectives.

POSSIBLE LOSS OF INVESTMENT. A mutual fund cannot guarantee its
performance, nor assure you that the market value of your investment will
increase. You may lose the money you invest, and the Fund will not reimburse you
for any of these losses.

VOLATILITY. The price of your mutual fund shares will increase or decrease
with changes in the value of the Fund's underlying investments and changes in
the equity markets as a whole.

NOT A COMPLETE INVESTMENT PLAN. An investment in any mutual fund does not
constitute a complete investment plan. The Fund is designed to be only a part of
your personal investment plan.

YEAR 2000. Many computer systems in use today may not be able to recognize
any date after December 31, 1999. If these systems are not fixed by that date,
it is possible that they could generate erroneous information or fail
altogether. INVESCO has committed substantial resources in an effort to make
sure that its own major computer systems will continue to function on and after
January 1, 2000. Of course, INVESCO cannot fix systems that are beyond its
control. If INVESCO's own systems, or the systems of third parties upon which it
relies, do not perform properly after December 31, 1999, the Fund could be
adversely affected.

In addition, the markets for, or values of, securities in which the Fund
invests may possibly be hurt by computer failures affecting portfolio
investments or trading of securities beginning January 1, 2000. For example,
improperly functioning computer systems could result in securities trade
settlement problems and liquidity issues, production issues for individual
companies and overall economic uncertainties. Individual issuers may incur
increased costs in making their own systems Year 2000 compliant. The combination
of market uncertainty and increased costs means that there is a possibility that
Year 2000 computer issues may adversely affect the Fund's investments. At this
time, it is generally believed that foreign issuers, particularly those in
emerging and other markets, may be more vulnerable to Year 2000 problems than
issuers in the U.S.

<PAGE>

[ARROW ICON] RISKS ASSOCIATED WITH PARTICULAR INVESTMENTS

You should consider the special factors associated with the policies
discussed below in determining the appropriateness of investing in the Fund. See
the Statement of Additional Information for a discussion of additional risk
factors.

MARKET RISK

Equity stock prices vary and may fall, thus reducing the value of the
Fund's investments. Certain stocks selected for the Fund's portfolio may decline
in value more than the overall stock market.

CREDIT RISK

The Fund may invest in debt instruments, such as notes, bonds and
commercial paper. There is a possibility that the issuers of these instruments
will be unable to meet interest payments or repay principal. Changes in the
financial strength of an issuer may reduce the credit rating of its debt
instruments and may affect their value.

FOREIGN SECURITIES RISKS

Investments in foreign and emerging markets carry special risks, including
currency, political, regulatory and diplomatic risks. The Fund may invest up to
25% of its assets in securities of non-U.S. issuers.

CURRENCY RISK. A change in the exchange rate between U.S. dollars and a
foreign currency may reduce the value of the Fund's investment in a
security valued in the foreign currency, or based on that currency value.

POLITICAL RISK. Political actions, events or instability may result in
unfavorable changes in the value of a security.

REGULATORY RISK. Government regulations may affect the value of a security.
In foreign countries, securities markets that are less regulated than those
in the U.S. may permit trading practices that are not allowed in the U.S.

DIPLOMATIC RISK. A change in diplomatic relations between the U.S. and a
foreign country could affect the value or liquidity of investments.

EUROPEAN ECONOMIC AND MONETARY UNION. Austria, Belgium, Finland,
France, Germany, Ireland, Italy, Luxembourg, The Netherlands, Portugal
and Spain are presently members of the European Economic and Monetary
Union (the "EMU") which as of January 1, 1999, adopted the euro as a
common currency. The national currencies will be sub-currencies of the
euro until July 1, 2002, at which time these currencies will disappear
entirely. Other European countries may adopt the euro in the future.

The introduction of the euro presents some uncertainties and possible
risks, which could adversely affect the value of securities held by the
Fund.

EMU countries, as a single market, may affect future investment
decisions of the Fund. As the euro is implemented, there may be changes
in the relative strength and value of the U.S. dollar and other major
currencies, as well as possible adverse tax consequences. The euro
transition by EMU countries - present and future - may affect the
fiscal and monetary levels of those participating countries. There may
be increased levels of price competition among business firms within
EMU countries and between businesses in EMU and non-EMU countries. The
outcome of these uncertainties could have unpredictable effects on

<PAGE>

trade and commerce and result in increased volatility for all financial
markets.

INTEREST RATE RISK

Changes in interest rates will affect the resale value of debt securities
held in the Fund's portfolio. In general, as interest rates rise, the resale
value of debt securities decreases; as interest rates decline, the resale value
of debt securities generally increases. Debt securities with longer maturities
usually are more sensitive to interest rate movements. Interest rate changes
also have a direct impact on the value of equity securities of companies
involved in the real estate industry.

DURATION RISK

Duration is a measure of a debt security's sensitivity to interest rate
changes. Duration is usually expressed in terms of years, with longer durations
usually more sensitive to interest rate fluctuations.

LIQUIDITY RISK

The Fund's portfolio is liquid if the Fund is able to sell the securities
it owns at a fair price within a reasonable time. Liquidity is generally related
to the market trading volume for a particular security. Investments in smaller
companies or in foreign companies or companies in emerging markets are subject
to a variety of risks, including potential lack of liquidity.

DERIVATIVES RISK

A derivative is a financial instrument whose value is "derived," in some
manner, from the price of another security, index, asset or rate. Derivatives
include options and futures contracts, among a wide range of other instruments.
The principal risk of investments in derivatives is that the fluctuations in
their values may not correlate perfectly with the overall securities markets.
Some derivatives are more sensitive to interest rate changes and market price
fluctuations than others. Also, derivatives are subject to counterparty risk,
described below.

COUNTERPARTY RISK

This is a risk associated primarily with repurchase agreements and some
derivatives transactions. It is the risk that the other party in the transaction
will not fulfill its contractual obligation to complete the transaction with the
Fund.

LACK OF TIMELY INFORMATION RISK

Timely information about a security or its issuer may be unavailable,
incomplete or inaccurate. This risk is more common to securities issued by
foreign companies and companies in emerging markets than it is to the securities
of U.S.-based companies.

---------------------------------------------------

The Fund generally invests in equity securities of companies in the
economic sector described by its name. However, in an effort to diversify its
holdings and provide some protection against the risk of other investments, the
Fund also may invest in other types of securities and other financial
instruments, as indicated in the chart below. These investments, which at any
given time may constitute a significant portion of the Fund's portfolio, have
their own risks.

<PAGE>

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INVESTMENT RISKS
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AMERICAN DEPOSITORY RECEIPTS (ADRS) Market, Information
These are securities issued by U.S. banks that Political, Regulatory,
represent shares of foreign corporations held Diplomatic,
by those banks. Although traded in U.S. Liquidity and
securities markets and valued in U.S. dollars, Currency Risks
ADRs carry most of the risks of investing
directly in foreign securities.
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DEBT SECURITIES Market, Credit, Inter-
Securities issued by private companies or est Rate and Duration
governments representing an obligation to pay Risks
interest and to repay principal when the secu-
rity matures.
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DELAYED DELIVERY OR WHEN-ISSUED SECURITIES Market and Interest Rate
Ordinarily, the Fund purchases securities and Risks
pays for them in cash at the normal trade
settlement time. When the Fund purchases a
delayed delivery or when-issued security,
it promises to pay in the future for
example, when the security is actually
available for delivery to the Fund. The
Fund's obligation to pay and the interest
rate it receives, in the case of debt
securities, usually are fixed when the
Fund promises to pay. Between the date
the Fund promises to pay and the date the
securities are actually received, the
Fund receives no interest on its investment,
and bears the risk that the market
value of the when-issued security may decline.
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FORWARD FOREIGN CURRENCY CONTRACTS Currency, Political,
A contract to exchange an amount of currency Diplomatic, Counter-
on a date in the future at an agreed-upon party and Regulatory
exchange rate might be used by the Fund to Risks
hedge against changes in foreign currency
exchange rates when the Fund invests in
foreign securities. Does not reduce price
fluctuations in foreign securities, or
prevent losses if the prices of those
securities decline.
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MORTGAGE-BACKED SECURITIES Interest Rate Risk
Securities issued or guaranteed by the U.S.
government or federal agencies, representing
interests in pools of mortgages purchased from
lending institutions. Interest and principal
payments are "passed through" to holders of
the security. When interest rates drop and
homeowners refinance mortgages at lower rates,
the value of mortgage-backed securities tends
to drop.
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REAL ESTATE INVESTMENT TRUSTS (REITS) Interest Rate
Trusts that invest in real estate or interests and Market Risks
in real estate. Shares of REITs are publicly
traded and are subject to the same risks as
any other security, as well as risks specific
to the real estate industry, including decline
in value of real estate, general and local
economic conditions, and interest rate
fluctuations.
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REPURCHASE AGREEMENTS Credit and Counter-
A contract under which the seller of a party Risks
security agrees to buy it back at an
agreed-upon price and time in the future.
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<PAGE>

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INVESTMENT RISKS
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RULE 144A SECURITIES Liquidity Risk
Securities that are not registered,
but which are bought and sold solely
by institutional investors. The Fund
considers many Rule 144A securities to
be "liquid," although the market for
such securities typically is less
active than the public securities
markets.
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[ARROW ICON] TEMPORARY DEFENSIVE POSITIONS

When securities markets or economic conditions are unfavorable or
unsettled, we might try to protect the assets of the Fund by investing in
securities that are highly liquid, such as high quality money market instruments
like short-term U.S. government obligations, commercial paper or repurchase
agreements, even though that is not the normal investment strategy of the Fund.
We have the right to invest up to 100% of the Fund's assets in these securities,
although we are unlikely to do so. Even though the securities purchased for
defensive purposes often are considered the equivalent of cash, they also have
their own risks. Investments that are highly liquid or comparatively safe tend
to offer lower returns. Therefore, the Fund's performance could be comparatively
lower if it concentrates in defensive holdings.

[ARROW ICON] PORTFOLIO TURNOVER

We actively manage and trade the Fund's portfolio. Therefore, the Fund may
have a higher portfolio turnover rate compared to many other mutual funds. The
Fund's portfolio turnover rate for the year ended July 31, 1999 was 697%.

A portfolio turnover rate of 200%, for example, is equivalent to the Fund
buying and selling all of the securities in its portfolio two times in the
course of a year. A comparatively high turn- over rate may result in higher
brokerage commissions and taxable capital gain distributions to the Fund's
shareholders.

[INVESCO ICON] FUND MANAGEMENT

INVESTMENT ADVISER

INVESCO IS A SUBSIDIARY OF AMVESCAP PLC, AN INTERNATIONAL INVESTMENT
MANAGEMENT COMPANY THAT MANAGES MORE THAN $291 BILLION IN ASSETS WORLDWIDE.
AMVESCAP IS BASED IN LONDON, WITH MONEY MANAGERS LOCATED IN EUROPE, NORTH AND
SOUTH AMERICA, AND THE FAR EAST.

INVESCO, located at 7800 East Union Avenue, Denver, Colorado, is the investment
adviser of the Fund. INVESCO was founded in 1932 and manages over $26.1 billion
for more than 938,000 shareholders of 44 INVESCO mutual funds. INVESCO performs
a wide variety of other services for the Fund, including administrative and
transfer agency functions (the processing of purchases, sales and exchanges of
Fund shares).

INVESCO Realty Advisors, Inc. ("IRAI") is the sub-adviser to the Fund.

A wholly owned subsidiary of INVESCO, INVESCO Distributors, Inc. ("IDI"), is the
Fund's distributor and is responsible for the sale of the Fund's shares.

INVESCO, IRAI and IDI are subsidiaries of AMVESCAP PLC.

<PAGE>

The following table shows the fee the Fund paid to INVESCO for its advisory
services in the fiscal year ended July 31, 1999:

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ADVISORY FEE AS A PERCENTAGE OF
FUND AVERAGE ANNUAL NET ASSETS UNDER MANAGEMENT
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INVESCO Realty Fund 0.75%

[INVESCO ICON] PORTFOLIO MANAGERS

The Fund is managed on a day-to-day basis by IRAI, which serves as
sub-adviser to the Fund. IRAI uses a team management approach which means that a
group of portfolio managers makes collective investment decisions for the Fund.

[INVESCO ICON] POTENTIAL REWARDS

NO SINGLE FUND SHOULD REPRESENT YOUR COMPLETE INVESTMENT PROGRAM NOR SHOULD
YOU ATTEMPT TO USE THE FUND FOR SHORT-TERM TRADING PURPOSES.

The Fund offers shareholders the potential to increase the value of their
capital over time and also offers the opportunity for quarterly income. Like
most mutual funds, the Fund seeks to provide higher returns than the market or
its competitors, but cannot guarantee that performance. While the Fund invests
in a single targeted market sector, it seeks to minimize risk by investing in
many different companies.

SUITABILITY FOR INVESTORS

Only you can determine if an investment in the Fund is right for you based
upon your own economic situation, the risk level with which you are comfortable
and other factors. In general, the Fund is most suitable for investors who:
o are willing to grow their capital over the long-term (at least five years).
o can accept the additional risks associated with sector investing.
o understand that shares of the Fund can, and likely will, have daily price
fluctuations.
o are investing in tax-deferred retirement accounts, such as Traditional and
Roth Individual Retirement Accounts ("IRAs"), as well as employer-sponsored
qualified retirement plans, including 401(k)s and 403(b)s, all of which
have longer investment horizons.

You probably do not want to invest in the Fund if you are:
o primarily seeking current dividend income (although the Fund does seek to
provide income in addition to capital appreciation).
o unwilling to accept potentially daily changes in the price of Fund
shares.
o speculating on short-term fluctuations in the stock markets.

<PAGE>

[INVESCO ICON] SHARE PRICE

CURRENT MARKET VALUE OF FUND
ASSETS + ACCRUED INTEREST AND
DIVIDENDS - FUND DEBTS,
INCLUDING ACCRUED EXPENSES
- -------------------------------
/ NUMBER OF SHARES
= YOUR SHARE PRICE (NAV).

The value of your Fund shares is likely to change daily. This value is known as
the Net Asset Value per share, or NAV. INVESCO determines the market value of
each investment in the Fund's portfolio each day that the New York Stock
Exchange ("NYSE") is open, at the close of trading on that exchange (normally
4:00 p.m. Eastern time). Therefore, shares of the Fund are not priced on days
when the NYSE is closed, which generally is on weekends and national holidays in
the U.S.

NAV is calculated by adding together the current market price of all of the
Fund's investments and other assets, including accrued interest and dividends;
subtracting the Fund's debts, including accrued expenses; and dividing that
dollar amount by the total number of the Fund's outstanding shares.

All purchases, sales and exchanges of Fund shares are made by INVESCO at
the NAV next calculated after INVESCO receives proper instructions from you to
purchase, redeem or exchange shares of the Fund. Your instructions must be
received by INVESCO no later than the close of the NYSE to effect transactions
at that day's NAV. If INVESCO hears from you after that time, your instructions
will be processed at the NAV calculated at the end of the next day that the NYSE
is open.

Foreign securities exchanges, which set the prices for foreign securities
held by the Fund, are not always open the same days as the NYSE, and may be open
for business on days the NYSE is not. For example, Thanksgiving Day is a holiday
observed by the NYSE and not by overseas exchanges. In this situation, the Fund
would not calculate NAV on Thanksgiving Day (and INVESCO would not buy, sell or
exchange shares for you on that day), even though activity on foreign exchanges
could result in changes in the value of investments held by the Fund on that
day.

[INVESCO ICON] HOW TO BUY SHARES

TO BUY SHARES AT THAT DAY'S CLOSING PRICE, YOU MUST CONTACT US BEFORE THE
CLOSE OF THE NYSE, NORMALLY, 4:00 P.M. EASTERN TIME.

The following chart shows several convenient ways to invest in the Fund.
There is no charge to invest, exchange or redeem shares when you make
transactions directly through INVESCO. However, if you invest in the Fund
through a securities broker, you may be charged a commission or transaction fee
for either purchases or sales of Fund shares. For all new accounts, please send
a completed application form, and specify the fund or funds you wish to
purchase.

INVESCO reserves the right to increase, reduce or waive the Fund's minimum
investment requirements in its sole discretion, if it determines this action is
in the best interests of the Fund's shareholders. INVESCO also reserves the
right in its sole discretion to reject any order to buy Fund shares, including
purchases by exchange.

MINIMUM INITIAL INVESTMENT. $1,000, which is waived for regular investment
plans, including EasiVest and Direct Payroll Purchase, and certain retirement
plans, including IRAs.

MINIMUM SUBSEQUENT INVESTMENT. $50 (Minimums are lower for certain
retirement plans.)

EXCHANGE POLICY. You may exchange your shares in the Fund for those in
another INVESCO mutual fund on the basis of their respective NAVs at the time of
the exchange.

<PAGE>

FUND EXCHANGES CAN BE A CONVENIENT WAY FOR YOU TO DIVERSIFY YOUR INVESTMENTS, OR
TO REALLOCATE YOUR INVESTMENTS WHEN YOUR OBJECTIVES CHANGE.

Before making any exchange, be sure to review the prospectuses of the funds
involved and consider the differences between the funds. Also, be certain that
you qualify to purchase certain classes of shares in the new fund. An exchange
is the sale of shares from one fund immediately followed by the purchase of
shares in another. Therefore, any gain or loss realized on the exchange is
recognizable for federal income tax purposes (unless, of course, you or your
account qualifies as tax-deferred under the Internal Revenue Code). If the
shares of the fund you are selling have gone up in value since you bought them,
the sale portion of an exchange may result in taxable income to you.

We have the following policies governing exchanges:

o Both fund accounts involved in the exchange must be registered in exactly
the same name(s) and Social Security or federal tax I.D. number(s).
o You may make up to four exchanges out of the Fund per 12-month period.
o The Fund reserves the right to reject any exchange request, or to modify or
terminate the exchange policy, if it is in the best interests of the Fund
and its shareholders. Notice of all such modifications or termination that
affect all shareholders of the Fund will be given at least 60 days prior to
the effective date of the change, except in unusual instances, including a
suspension of redemption of the exchanged security under Section 22(e) of
the Investment Company Act of 1940.

In addition, the ability to exchange may be temporarily suspended at any
time that sales of the fund into which you wish to exchange are temporarily
stopped.

Please remember that if you pay by check or wire and your funds do not
clear, you will be responsible for any related loss to the Fund or INVESCO. If
you are already an INVESCO funds shareholder, the Fund may seek reimbursement
for any loss from your existing account(s).

INTERNET TRANSACTIONS. Investors may open new accounts and exchange and
redeem shares of any INVESCO Fund through the INVESCO Web site. To utilize this
service, you will need a web browser (presently Netscape version 4.0 or higher,
Internet Explorer version 4.0 or higher, or AOL version 5.0 or higher) and the
ability to utilize the INVESCO Web site. INVESCO will accept Internet purchase
instructions only for exchanges or if the purchase price is paid to INVESCO
through debiting your bank account, and any Internet cash redemptions will be
paid only to the same bank account from which the payment to INVESCO originated.
INVESCO imposes a limit of $25,000 on Internet purchase and redemption
transactions. You may also download an application to open an account from the
Web site, complete it by hand, and mail it to INVESCO, along with a check.

INVESCO employs reasonable procedures to confirm that transactions entered
into over the Internet are genuine. These procedures include the use of
alphanumeric passwords, secure socket layering, encryption and other precautions
reasonably designed to protect the integrity, confidentiality and security of
shareholder information. In order to enter into a transaction on the INVESCO Web
site, you will need an account number, your Social Security Number and an
alphanumeric password. If INVESCO follows these procedures, neither INVESCO, its
affiliates nor any Fund will be liable for any loss, liability, cost or expense
for following instructions communicated via the Internet that are reasonably
believed to be genuine or that follow INVESCO's security procedures. By entering
into the user's agreement with INVESCO to open an account through our Web site,
you lose certain rights if someone gives fraudulent or unauthorized instructions
to INVESCO that result in a loss to you.

<PAGE>

METHOD INVESTMENT MINIMUM PLEASE REMEMBER
- --------------------------------------------------------------------------------
BY CHECK $1,000 for regular
Mail to: accounts;
INVESCO Funds Group, $250 for an IRA;
Inc., $50 minimum for
P.O. Box 173706, each subsequent
Denver, CO 80217-3706. investment.
You may send your check
by overnight courier to:
7800 E. Union Ave.
Denver, CO 80237.
- --------------------------------------------------------------------------------

BY WIRE $1,000
You may send your
payment by
bank wire(call
INVESCO for
instructions).

- --------------------------------------------------------------------------------
BY TELEPHONE WITH ACH $50 You must forward your
Call 1-800-525-8085 to bank account
request your pur chase. information to INVESCO
INVESCO will move money prior to using this
from your designated option.
bank/credit union
checking or savings
account in order to
purchase shares, upon
your telephone
instructions, whenever
you wish.
- --------------------------------------------------------------------------------

BY INTERNET $1,000 for regular You will need a web
Go to the INVESCO Web accounts; $250 for browser to utilize
site at www.invesco.com an IRA; $50 this service. Internet
minimum for each purchase transactions
subsequent are limited to $25,000.
investment

- --------------------------------------------------------------------------------
REGULAR INVESTING WITH $50 per month for Like all regular
EASIVEST EasiVest; $50 investment plans, nei-
OR DIRECT PAYROLL per pay period for ther EasiVest nor
PURCHASE Direct Pay roll Direct Payroll Pur-
You may enroll on your Purchase. You may chase ensures a profit
fund start or stop your or protects against
application, or call us regular investment loss in a falling
for a separate plan at any time, market. Because you'll
form and more details. with two weeks' invest continually,
Investing notice to INVESCO. regardless of varying
the same amount on a price levels, con-
monthly basis sider your financial
allows you to buy more ability to keep buying
shares when prices are through low price
low and fewer shares levels. And remember
when prices are high. that you will lose
This "dollar cost averag- money if you redeem
ing" may help offset your shares when the
market fluctuations. market value of all
Over a period of time, your shares is less
your average cost per than their cost.
share may be less than
the actual average value
per share.
- --------------------------------------------------------------------------------

BY PAL(R) $1,000 (The Be sure to write down
Your "Personal Account exchange minimum the confirmation
Line" is available for is $250 for number provided by
subsequent purchases subsequent pur- PAL(R). You must forward
and exchanges 24 hours chases requested your bank acount
a day. by telephone.) information to INVESCO
Simply call prior to using this
1-800-424-8085. option.

<PAGE>

METHOD INVESTMENT MINIMUM PLEASE REMEMBER
- --------------------------------------------------------------------------------
BY EXCHANGE $1,000 to open a See "Exchange Policy."
Between two INVESCO new account; $50
funds. Call for written
1-800-525-8085 for requests to pur
prospectuses of chase additional
other INVESCO funds. shares for an
Exchanges existing account.
may be made by phone or (The exchange
at our minimum is $250
Web site at for exchanges
www.invesco.com. You requested by
may also establish an telephone.)
automatic
monthly exchange service
between
two INVESCO funds; call
us for further details
and the correct form.

DISTRIBUTION EXPENSES. We have adopted a Plan and Agreement of Distribution
(commonly known as a "12b-1 Plan") for the Fund. The 12b-1 fees paid by the Fund
are used to defray all or part of the cost of preparing and distributing
prospectuses and promotional materials, as well as to pay for certain
distribution-related and other services. These services include compensation to
third party brokers, financial advisers and financial services companies that
sell Fund shares and/or service shareholder accounts.

Under the Plan, the Fund's payments are limited to an amount computed at an
annual rate of 0.25% of the Fund's average net assets. If distribution expenses
for the Fund exceed these computed amounts, INVESCO pays the difference.

[INVESCO ICON] YOUR ACCOUNT SERVICES

INVESCO PROVIDES YOU WITH SERVICES DESIGNED TO MAKE IT SIMPLE FOR YOU TO BUY,
SELL OR EXCHANGE YOUR SHARES OF ANY INVESCO MUTUAL FUND.

SHAREHOLDER ACCOUNTS. INVESCO maintains your share account, which contains
your current Fund holdings. The Fund does not issue share certificates.

QUARTERLY INVESTMENT SUMMARIES. Each calendar quarter, you receive a
written statement which consolidates and summarizes account activity and value
at the beginning and end of the period for each of your INVESCO funds.

TRANSACTION CONFIRMATIONS. You receive detailed confirmations of individual
purchases, exchanges and sales. If you choose certain recurring transaction
plans (for instance, EasiVest), your transactions are confirmed on your
quarterly Investment Summaries.

TELEPHONE TRANSACTIONS. You may buy, exchange and sell Fund shares by
telephone, unless you specifically decline these privileges when you fill out
the INVESCO new account application.

YOU CAN CONDUCT MOST TRANSACTIONS AND CHECK ON YOUR ACCOUNT THROUGH OUR
TOLL-FREE TELEPHONE NUMBER. YOU MAY ALSO ACCESS PERSONAL ACCOUNT INFORMATION AT
OUR WEB SITE, WWW.INVESCO.COM.

Unless you decline the telephone transaction privileges, when you fill out
and sign the new account Application, a Telephone Transaction Authorization
Form, or use your telephone transaction privileges, you lose certain rights if
someone gives fraudulent or unauthorized instructions to INVESCO that result in
a loss to you. In general, if INVESCO has followed reasonable procedures, such
as recording telephone instructions and sending written transaction
confirmations, INVESCO is not liable for following telephone instructions that
it believes to be genuine. Therefore, you have the risk of loss due to
unauthorized or fraudulent instructions.

<PAGE>

IRAS AND OTHER RETIREMENT PLANS. Shares of any INVESCO mutual fund may be
purchased for IRAs and many other types of tax-deferred retirement plans. Please
call INVESCO for information and forms to establish or transfer your existing
retirement plan or account.

[INVESCO ICON] HOW TO SELL SHARES

The following chart shows several convenient ways to sell your Fund shares.
Shares of the Fund may be sold at any time at the next NAV calculated after your
request to sell in proper form is received by INVESCO. Depending on Fund
performance, the NAV at the time you sell your shares may be more or less than
the price you paid to purchase your shares.

TO SELL SHARES AT THAT DAY'S CLOSING PRICE, YOU MUST CONTACT US BEFORE 4:00
P.M. EASTERN TIME.

If you own shares in more than one INVESCO fund, please specify the fund whose
shares you wish to sell. Remember that any sale or exchange of shares in a
non-retirement account will likely result in a taxable gain or loss.

While INVESCO attempts to process telephone redemptions promptly, there may
be times particularly in periods of severe economic or market disruption - when
you may experience delays in redeeming shares by phone.

INVESCO usually mails you the proceeds from the sale of Fund shares within
seven days after we receive your request to sell in proper form. However,
payment may be postponed under unusual circumstances -- for instance, if normal
trading is not taking place on the NYSE, or during an emergency as defined by
the Securities and Exchange Commission. If your INVESCO fund shares were
purchased by a check which has not yet cleared, payment will be made promptly
when your purchase check does clear; that can take up to 15 days.

If you participate in EasiVest, the Fund's automatic monthly investment
program, and sell all of the shares in your account, we will not make any
additional EasiVest purchases unless you give us other instructions.

Because of the Fund's expense structure, it costs as much to handle a small
account as it does to handle a large one. If the value of your account in the
Fund falls below $250 as a result of your actions (for example, sale of your
Fund shares), the Fund reserves the right to sell all of your shares, send the
proceeds of the sale to you and close your account. Before this is done, you
will be notified and given 60 days to increase the value of your account to $250
or more.

METHOD REDEMPTION MINIMUM PLEASE REMEMBER
- --------------------------------------------------------------------------------
BY TELEPHONE $250 (or, if less, INVESCO's telephone
Call us toll-free at: full liquidation of redemption privileges
1-800-525-8085. the account) for a may be modified or
redemption check; terminated in the
$1,000 for a wire to future at INVESCO's
your bank of record. discretion.
The maximum amount
which may be redeemed
by telephone is
generally $25,000.

<PAGE>

METHOD REDEMPTION MINIMUM PLEASE REMEMBER
- --------------------------------------------------------------------------------
IN WRITING Any amount. The redemption
Mail your request to request must be
INVESCO Funds Group, signed by all
Inc., P.O. Box registered account
173706, Denver, CO owners. Payment will
80217-3706. You may be mailed to your
also send your address as it appears
request by overnight on INVESCO's records,
courier to 7800 E. or to a bank
Union Ave., designated by you in
Denver, CO 80237. writing.
- --------------------------------------------------------------------------------
BY TELEPHONE WITH ACH $50 You must forward your
Call 1-800-525-8085 bank account
to request your information to
redemption. INVESCO INVESCO prior to
will automatically using this option.
pay the proceeds into
your designated bank
account.
- --------------------------------------------------------------------------------

BY INTERNET None. IRA redemptions You will need a web
Go to the INVESCO Web are not permitted. browser to utilize
site at this service.
www.invesco.com Internet redemption
transactions are
limited to $25,000.

- --------------------------------------------------------------------------------
BY EXCHANGE $250 for exchanges See "Exchange Policy."
Between two INVESCO requested by When opening a new
funds. Call telephone. account, investment
1-800-525-8085 for minimums apply.
prospectuses of other
INVESCO funds.
Exchanges may be
made by phone or at
our Web site at
www.invesco.com. You
may also establish an
automatic monthly
exchange service
between two INVESCO
funds; call us for
further details and
the correct form.
- --------------------------------------------------------------------------------
PERIODIC WITHDRAWAL $100 per payment on a You must have at
PLAN monthly or quarterly least $10,000 total
You may call us to basis. The redemption invested with the
request the check may be made INVESCO funds with at
appropriate form and payable to any party least $5,000 of that
more informa tion at you designate. total invested in the
1-800-525-8085. fund from which
withdrawals will be
made.
- --------------------------------------------------------------------------------
PAYMENT TO THIRD Any amount. All registered
PARTY account owners must
Mail your request to sign the request,
INVESCO with signature
Funds Group, Inc., guarantees from an
P.O. Box 173706, eligible guarantor
Denver, CO 80217-3706. financial institution,
such as a commercial
bank or a recognized
national or regional
securities firm.

[GRAPH ICON] TAXES

Everyone's tax status is unique. We encourage you to consult your own tax
adviser on the tax impact to you of investing in the Fund.

TO AVOID BACKUP WITHHOLDING, BE SURE WE HAVE YOUR CORRECT SOCIAL SECURITY OR
TAXPAYER IDENTIFICATION NUMBER.

<PAGE>

distributions are required under federal tax laws governing mutual funds. It is
the policy of the Fund to distribute all investment company taxable income and
net capital gains. As a result of this policy and the Fund's qualification as a
regulated investment company, it is anticipated that the Fund will not pay any
federal income or excise taxes. Instead, the Fund will be accorded conduit or
"pass through" treatment for federal income tax purposes.

However, unless you are (or your account is) exempt from income taxes, you
must include all dividends and capital gain distributions paid to you by the
Fund in your taxable income for federal, state and local income tax purposes.
You also may realize capital gains or losses when you sell shares of the Fund at
more or less than the price you originally paid. An exchange is treated as a
sale, and is a taxable event. Dividends and other distributions usually are
taxable whether you receive them in cash or automatically reinvest them in
shares of the Fund or other INVESCO funds.

If you have not provided INVESCO with complete, correct tax information,
the Fund is required by law to withhold 31% of your distributions and any money
that you receive from the sale of shares of the Fund as a backup withholding
tax.

We will provide you with detailed information every year about your
dividends and capital gain distributions. Depending on the activity in your
individual account, we may also be able to assist with cost basis figures for
shares you sell.

[GRAPH ICON] DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS

The Fund earns ordinary or investment income from dividends and interest on
its investments. The Fund expects to distribute substantially all of this
investment income, less Fund expenses, to shareholders quarterly, or at such
other times as the Fund may elect.

NET INVESTMENT INCOME AND NET REALIZED CAPITAL GAINS ARE DISTRIBUTED TO
SHAREHOLDERS AT LEAST ANNUALLY. DISTRIBUTIONS ARE TAXABLE WHETHER REINVESTED IN
ADDITIONAL SHARES OR PAID TO YOU IN CASH (EXCEPT FOR TAX-EXEMPT ACCOUNTS).
TAX-EXEMPT ACCOUNTS).

The Fund also realizes capital gains and losses when it sells securities in its
portfolio for more or less than it had paid for them. If total gains on sales
exceed total losses (including losses carried forward from previous years), the
Fund has a net realized capital gain. Net realized capital gains, if any, are
distributed to shareholders at least annually, usually in December.

Under present federal income tax laws, capital gains may be taxable at
different rates, depending on how long the Fund has held the underlying
investment. Short-term capital gains which are derived from the sale of assets
held one year or less are taxed as ordinary income. Long-term capital gains
which are derived from the sale of assets held for more than one year are taxed
at the maximum capital gains rate, currently 20% for individuals.

Dividends and capital gain distributions are paid to you if you hold shares
on the record date of the distribution regardless of how long you have held your
shares. The Fund's NAV will drop by the amount of the distribution on the day
the distribution is declared. If you buy shares of the Fund just before a
distribution is declared, you may wind up "buying a distribution." This means
that if the Fund declares a dividend or capital gain distribution shortly after
you buy, you will receive some of your investment back as a taxable
distribution. Most shareholders want to avoid this. And, if you sell your shares
at a loss for tax purposes and purchase a substantially identical investment
within 30 days before or after that sale, the transaction is usually considered
a "wash sale" and you will not be able to claim a tax loss.

<PAGE>

Dividends and capital gain distributions paid by the Fund are automatically
reinvested in additional Fund shares at the NAV on the ex-distribution date,
unless you choose to have them automatically reinvested in another INVESCO fund
or paid to you by check or electronic funds transfer. If you choose to be paid
by check, the minimum amount of the check must be at least $10; amounts less
than that will be automatically reinvested. Dividends and other distributions,
whether received in cash or reinvested in additional Fund shares, may be subject
to federal income tax.

<PAGE>

Financial Highlights

The financial highlights table is intended to help you understand a Fund's
financial performance for the past five years (or, if shorter, the period of the
Fund's operations). Certain information reflects financial results for a single
Fund share. The total returns in the table represent the rate that an investor
would have earned (or lost) on an investment in the Fund (assuming reinvestment
of all dividends and distributions). This information has been audited by
PricewaterhouseCoopers LLP, independent accountants, whose report, along with
the financial statements, is included in the INVESCO Specialty Funds, Inc.'s
1999 Annual Report to Shareholders, which is incorporated by reference into the
Statement of Additional Information. This Report is available without charge by
contacting IDI at the address or telephone number on the back cover of this
Prospectus.

YEAR ENDED PERIOD ENDED
JULY 31 JULY 31
- --------------------------------------------------------------------------------
REALTY FUND 1999 1998 1997(a)
PER SHARE DATA
Net Asset Value-Beginning of Period $9.15 $10.99 $10.00
- --------------------------------------------------------------------------------
Income From Investment Operations
Net Investment Income 0.33 0.38 0.22
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (1.56) (0.96) 0.99
- --------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS (1.23) (0.58) 1.21
- --------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from Net Investment
Income 0.34 0.39 0.22
Distributions from Capital Gains 0.00 0.87 0.00
In Excess of Capital 0.68 0.00 0.00
- --------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS 1.02 1.26 0.22
- --------------------------------------------------------------------------------
Net Asset Value -- End of Period $6.90 $9.15 $10.99
================================================================================
TOTAL RETURN (13.29%) (6.49%) 12.24%(b)

RATIOS
Net Assets-End of Period
($000 Omitted) $17,406 $23,548 $36,658
Ratio of Expenses to
Average Net Assets(c)(d) 1.34% 1.22% 1.20%(e)
Ratio of Net Investment Income to
Average Net Assets(c) 4.23% 3.53% 4.08%(e)
Portfolio Turnover Rate 697%(f) 258% 70%(b)

(a) From January 1, 1997, commencement of investment operations, to July 31,
1997.
(b) Based on operations for the period shown and, accordingly, is not
representative of a full year.
(c) Various expenses of the Fund were voluntarily absorbed by INVESCO for the
years ended July 31, 1999 and 1998 and the period ended July 31, 1997. If
such expenses had not been voluntarily absorbed, ratio of expenses to
average net assets would have been 2.76%, 1.97% and 1.83% (annualized),
respectively, and ratio of net investment income to average net assets would
have been 2.81%, 2.78% and 3.45% (annualized), respectively.
(d) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
INVESCO, which is before any expense offset arrangements.
(e) Annualized.
(f) Portfolio turnover was greater than expected during the year due to active
trading undertaken in response to market conditions.

<PAGE>

November 15, 1999

INVESCO SPECIALTY FUNDS, Inc.
INVESCO REALTY FUND

You may obtain additional information about the Fund from several sources:

FINANCIAL REPORTS. Although this Prospectus describes the Fund's
anticipated investments and operations, the Fund also prepares annual and
semiannual reports that detail the Fund's actual investments at the report date.
These reports include discussion of the Fund's recent performance, as well as
market and general economic trends affecting the Fund's performance. The annual
report also includes the report of the Fund's independent accountants.

STATEMENT OF ADDITIONAL INFORMATION. The SAI, dated November 15, 1999, is a
supplement to this Prospectus and has detailed information about the Fund and
its investment policies and practices. A current SAI for the Fund is on file
with the Securities and Exchange Commission and is incorporated into this
Prospectus by reference; in other words, the SAI is legally a part of this
Prospectus, and you are considered to be aware of the contents of the SAI.

INTERNET. The current Prospectus of the Fund may be accessed through the
INVESCO Web site at www.invesco.com. In addition, the Prospectus, SAI, annual
report and semiannual report of the Fund are available on the SEC Web site at
www.sec.gov.

To obtain a free copy of the current Prospectus, SAI, annual report or
semiannual report, write to INVESCO Distributors, Inc., P.O. Box 173706, Denver,
Colorado 80217-3706; or call 1-800-525-8085. Copies of these materials are also
available (with a copying charge) from the SEC's Public Reference Section at 450
Fifth Street, N.W., Washington, D.C. Information on the Public Reference Section
can be obtained by calling 1-800-SEC-0330. The SEC file numbers for the Fund are
811-8528 and 033-79290.

811-8528

<PAGE>

INVESCO
SPECIALTY FUNDS,
INC.

INVESCO TELECOMMUNICATIONS FUND (FORMERLY, INVESCO WORLDWIDE COMMUNICATIONS
FUND)

A no-load mutual fund investing globally in the telecommunications sector.

TABLE OF CONTENTS

Investment Goals, Strategies And Risks.............23

Fund Performance...................................24
Fees And Expenses..................................25
Investment Risks...................................26
Risks Associated With Particular Investments.......27
Temporary Defensive Positions......................30
Fund Management....................................30
Portfolio Manager..................................31
Potential Rewards..................................31
Share Price........................................32
How To Buy Shares..................................32
Your Account Services..............................35
How To Sell Shares.................................36
Taxes..............................................38
Dividends And Capital Gain Distributions...........38
Financial Highlights...............................40

[INVESCO ICON]
INVESCO

<PAGE>

This Prospectus will tell you more about:

[KEY ICON] Investment Objectives & Strategies

[ARROW ICON] Potential Investment Risks

[GRAPH ICON] Past Performance

[INVESCO ICON] Working With INVESCO
- --------------------------------------------------------------------------------
[KEY ICON][ARROW ICON] INVESTMENT GOALS, STRATEGIES AND RISKS

INVESCO Funds Group, Inc. ("INVESCO") is the investment adviser for the
Fund. Together with our affiliated companies, we at INVESCO direct all aspects
of the management and sale of the Fund.

FOR MORE DETAILS ABOUT THE FUND'S CURRENT INVESTMENTS AND MARKET OUTLOOK, PLEASE
SEE THE MOST RECENT ANNUAL OR SEMI-ANNUAL REPORT.

The Fund attempts to make your investment grow. The Fund is aggressively
managed. It invests primarily in equity securities that INVESCO believes will
rise in price - and increase in value--faster than other securities, as well as
in options and other investments whose value is based upon the values of equity
securities. It can also invest in debt securities. Current income is an
additional consideration in the Fund's investments.

The Fund invests primarily in equity securities of companies primarily
engaged in the design, development, manufacture, distribution, or sale of
communications services and equipment, and companies that are involved in
developing, constructing or operating infrastructure projects throughout the
world, or in supplying equipment or services to such companies.

The telecommunications sector includes companies that offer telephone
services, wireless com-munications, satellite communications, television and
movie programming, broadcasting, Internet access. A portion of the Fund's assets
is not required to be invested in the sector. To determine whether a potential
investment is doing business in this sector, a company must meet at least one of
the following tests:

o At least 50% of its gross income or its net sales must come from
activities in the telecommunications sector;

o At least 50% of its assets must be devoted to producing revenues from the
telecommunications sector; or

o Based on other available information, we determine that its primary
business is within the telecommunications sector.

INVESCO uses a bottom-up investment approach to create the Fund's
investment portfolio, focusing on company fundamentals and growth prospects when
selecting securities. We select stocks based on projected total return for
individual companies, while also analyzing country-specific factors that might
affect stock performance or influence company valuation. Normally, the Fund will
invest primarily in companies located in at least three different countries,
although U.S. issuers will often dominate the portfolio.

<PAGE>

We prefer markets and industries where leadership is in a few hands, and we
tend to avoid slower-growing markets or industries. The Fund's portfolio
emphasizes strongly managed market leaders, with a lesser weighting on smaller,
faster-growing companies which offer new products or services and/or are
increasing their market shares.

[ARROW ICON] The Fund's investments are diversified across the
telecommunications sector. However, because the Fund's investments are limited
to a comparatively narrow segment of the economy, the portfolio is not as
diversified as most mutual funds, and far less diversified than the broad
securities markets. This means that the Fund tends to be more volatile than
other mutual funds, and the value of its portfolio investments may tend to go up
and down more rapidly. As a result, the value of your investment in the Fund may
rise or fall rapidly. The telecommunications sector is highly regulated, and
changes in government regulation can play a significant role in the prospects of
the sector or specific markets within the telecommunications sector.

Other principal risks involved in investing in the Fund are market, credit,
debt securities, foreign securities, interest rate, duration, liquidity,
derivatives, counterparty and lack of timely information risks. These risks are
described and discussed later in this Prospectus under the headings "Investment
Risks" and "Risks Associated With Particular Investments." An investment in the
Fund is not a deposit of any bank and is not insured or guaranteed by the
Federal Deposit Insurance Corporation ("FDIC") or any other government agency.
As with any other mutual fund, there is always a risk that you can lose money on
your investment in the Fund.

[GRAPH ICON] FUND PERFORMANCE

The bar chart below shows the Fund's actual yearly performance for the
years ended December 31 (commonly known as its "total return") since inception.
The table below shows average annual total returns for various periods ended
December 31 for the Fund compared to the S&P 500 Index. The information in the
chart and table illustrates the variability of the Fund's return and how its
performance compared to a broad measure of market performance. Remember, past
performance does not indicate how the Fund will perform in the future.

- --------------------------------------------------------------------------------
TELECOMMUNICATIONS FUND
ACTUAL ANNUAL TOTAL RETURN(1),(2),(3)
- --------------------------------------------------------------------------------
1995 1996 1997 1998

27.37% 16.81% 30.29% 40.99%

Best Calendar Qtr. 12/98 40.53%
Worst Calendar Qtr. 9/98 (21.72%)
- --------------------------------------------------------------------------------

<PAGE>

- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN(1),(2)
AS OF 12/31/98
- --------------------------------------------------------------------------------
1 YEAR SINCE INCEPTION(3)
- --------------------------------------------------------------------------------
Telecommunications Fund 40.99% 26.94%
S&P 500 Index(4) 28.60% 27.67%
- --------------------------------------------------------------------------------

(1) Total return figures include reinvested dividends and capital gain
distributions, and include the effect of the Fund's expenses.
(2) Year-to-date return for the Fund was 50.59% as of the calendar quarter
ended September 30, 1999.
(3) The Fund commenced operations on August 1, 1994.
(4) The S&P 500 Index is an unmanaged index of common stocks considered
representative of the broad U.S. stock market. Please keep in mind that the
Index does not pay brokerage, management, administrative or distribution
expenses, all of which are paid by the Fund and are reflected in its annual
return.

FEES AND EXPENSES

SHAREHOLDER FEES PAID DIRECTLY FROM YOUR ACCOUNT

ANNUAL FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS

TELECOMMUNICATIONS FUND
Management Fees 0.62%
Distribution and Service (12b-1) Fees(1) 0.25%
Other Expenses (2)(3) 0.39%
-----
Total Annual Fund Operating Expenses(2)(3) 1.26%
=====

(1) Because the Fund pays 12b-1 distribution fees which are based upon the
Fund's assets, if you own shares of the Fund for a long period of time,
you may pay more than the economic equivalent of the maximum front-end
sales charge permitted for mutual funds by the National Association of
Securities Dealers, Inc.

(2) The Fund's actual Total Annual Fund Operating Expenses were lower than
the figures shown, because its custodian fees were reduced under an
expense offset arrangement.

(3) The expense information presented in the table has been restated to
reflect a change in the administrative services fee.

EXAMPLE

This Example is intended to help you compare the cost of investing in the
Fund to the cost of investing in other mutual funds.

The Example assumes that you invested $10,000 in the Fund for the time
periods indicated and redeemed all of your shares at the end of each period. The
Example also assumes that your investment had a hypothetical 5% return each
year, and assumes that the Fund's expenses remained the same. Although the
Fund's actual costs and performance may be higher or lower, based on these
assumptions your costs would have been:

<PAGE>

1 year 3 years 5 years 10 years

$128 $399 $690 $1,518

[ARROW ICON] INVESTMENT RISKS

You should determine the level of risk with which you are comfortable
before you invest. The principal risks of investing in any mutual fund,
including this Fund, are:

BEFORE INVESTING IN THE FUND, YOU SHOULD DETERMINE THE LEVEL OF RISK WITH
WHICH YOU ARE COMFORTABLE. TAKE INTO ACCOUNT FACTORS LIKE YOUR AGE, CAREER,
INCOME LEVEL, AND TIME HORIZON.

NOT INSURED. Mutual funds are not insured by the FDIC or any other agency,
unlike bank deposits such as CDs or savings accounts. No Guarantee. No mutual
fund can guarantee that it will meet its investment objectives.

VOLATILITY. The price of your mutual fund shares will increase or decrease
with changes in the value of the Fund's underlying investments and changes in
the equity markets as a whole.

NOT A COMPLETE INVESTMENT PLAN. An investment in any mutual fund does not
constitute a complete investment plan. The Fund is designed to be only a part of
your personal investment plan.

<PAGE>

[ARROW ICON] RISKS ASSOCIATED WITH PARTICULAR INVESTMENTS

MARKET RISK

Equity stock prices vary and may fall, thus reducing the value of the
Fund's investments. Certain stocks selected for the Fund's portfolio may decline
in value more than the overall stock market.

CREDIT RISK

DEBT SECURITIES RISK

Debt securities include bonds, notes and other securities that give the
holder the right to receive fixed amounts of principal, interest, or both, on a
date in the future or on demand. Debt securities also are often referred to as
fixed-income securities, even if the rate of interest varies over the life of
the security.

Debt securities are generally subject to credit risk and market risk.
Credit risk is the risk that the issuer of the security may be unable to meet
interest or principal payments, or both, as they come due. Market risk is the
risk that the market value of the security may decline for a variety of reasons,
including interest rate risk.

Moody's Investor Services, Inc. ("Moody's") and Standard & Poor's ("S&P")
ratings provide a useful but not certain guide to the credit risk of many debt
securities. The lower the rating of a debt security, the greater the credit risk
the rating service assigns to the security. To compensate investors for
accepting that greater risk, lower-rated securities tend to offer higher
interest rates. Lower-rated debt securities are often referred to as "junk
bonds." A debt security is considered lower grade if it is rated Ba or less by
Moody's or BB or less by S&P and is usually considered to be speculative.

In addition to poor individual company performance in the marketplace or in
its internal management, a significant economic downturn or increase in interest
rates may cause issuers of debt securities to experience increased financial
problems which could hurt their ability to pay principal and interest
obligations, to meet projected business goals, and to obtain additional
financing. These conditions more severely affect issuers of lower-rated debt
securities. The market for lower-rated straight debt securities may not be as
liquid as the market for higher-rated straight debt securities. Therefore,
INVESCO attempts to limit purchases of lower-rated securities to securities
having an established secondary market.

Debt securities rated Caa by Moody's may be in default or may present risks
of non-payment of principal or interest. Lower-rated securities by S&P
(categories BB, B and CCC) include those which are predominantly speculative
because of the issuer's perceived capacity to pay interest and repay principal
in accordance with their terms; BB indicates the lowest degree of speculation
and CCC a high degree of speculation. While such bonds will likely have some

<PAGE>

quality and protective characteristics, these are usually outweighed by large
uncertainties or major risk exposures to adverse conditions.

FOREIGN SECURITIES RISKS

Investments in foreign and emerging markets carry special risks, including
currency, political, regulatory and diplomatic risks.

POLITICAL RISK. Political actions, events or instability may result in
unfavorable changes in the value of a security.

DIPLOMATIC RISK. A change in diplomatic relations between the U.S. and a
foreign country could affect the value or liquidity of investments.

The introduction of the euro presents some uncertainties and possible
risks, which could adversely affect the value of securities held by the
Fund.

EMU countries, as a single market, may affect future investment
decisions of the Fund. As the euro is implemented, there may be changes
in the relative strength and value of the U.S. dollar and other major
currencies, as well as possible adverse tax consequences. The euro
transition by EMU countries present and future - may affect the fiscal
and monetary levels of those participating countries. There may be
increased levels of price competition among business firms within EMU
countries and between businesses in EMU and non-EMU countries. The
outcome of these uncertainties could have unpredictable effects on
trade and commerce and result in increased volatility for all financial
markets.

INTEREST RATE RISK

DURATION RISK

LIQUIDITY RISK

<PAGE>

DERIVATIVES RISK

COUNTERPARTY RISK

LACK OF TIMELY INFORMATION RISK

-----------------------------------------------------------

The Fund generally invests in equity securities of companies that are
related to telecommunications. However, in an effort to diversify its holdings
and provide some protection against the risk of other investments, the Fund also
may invest in other types of securities and other financial instruments, as
indicated in the chart below. These investments, which at any given time may
constitute a significant portion of the Fund's portfolio, have their own risks.

<PAGE>

INVESTMENT RISKS
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS Credit and Counter-
A contract under which the seller of a party Risks
security agrees to buy it back at an
agreed-upon price and time in the future.
- --------------------------------------------------------------------------------
RULE 144A SECURITIES Liquidity Risk
Securities that are not registered, but
which are bought and sold solely by
institutional investors. The Fund
considers many Rule 144A securities
to be "liquid," although the market
for such securities typically is less
active than the public securities markets.
- --------------------------------------------------------------------------------

[ARROW ICON] TEMPORARY DEFENSIVE POSITIONS

[INVESCO ICON] FUND MANAGEMENT

INVESTMENT ADVISER

A wholly owned subsidiary of INVESCO, INVESCO Distributors, Inc. ("IDI"),
is the Fund's distributor and is responsible for the sale of the Fund's shares.

INVESCO and IDI are subsidiaries of AMVESCAP PLC.

The following table shows the fee the Fund paid to INVESCO for its advisory
services in the fiscal year ended July 31, 1999:

<PAGE>

[INVESCO ICON] PORTFOLIO MANAGER

The following individual is responsible for the day-to-day management of
the Fund's portfolio holdings:

BRIAN B. HAYWARD, a Chartered Financial Analyst, has been the portfolio
manager of the Fund since 1997. Brian also manages INVESCO
VIF-Telecommunications Fund, INVESCO Utilities Fund and INVESCO VIF - Utilities
Fund. A vice president of INVESCO, Brian began his investment career in 1985,
and before joining INVESCO was a senior equity analyst with Mississippi Valley
Advisors. He received an M.A. in Economics and a B.A. in Mathematics from the
University of Missouri.

Brian Hayward is a member of the INVESCO Sector Team, which is co-led by
William R. Keithler and John R. Schroer.

[INVESCO ICON] POTENTIAL REWARDS

NO SINGLE FUND SHOULD REPRESENT YOUR COMPLETE INVESTMENT PROGRAM NOR SHOULD YOU
ATTEMPT TO USE THE FUND FOR SHORT-TERM TRADING PURPOSES.

The Fund offers shareholders the potential to increase the value of their
capital over time and also offers the opportunity for current income. Like most
mutual funds, the Fund seeks to provide higher returns than the market or its
competitors, but cannot guarantee that performance. While the Fund invests in
the telecommunications sector, it seeks to minimize risk by investing in many
different companies.

SUITABILITY FOR INVESTORS

<PAGE>

[INVESCO ICON] SHARE PRICE

CURRENT MARKET VALUE OF FUND
ASSETS + ACCRUED INTEREST AND
DIVIDENDS - FUND DEBTS,
INCLUDING ACCRUED EXPENSES
- -------------------------------
/ NUMBER OF SHARES
= YOUR SHARE PRICE (NAV).

Foreign securities exchanges, which set the prices for foreign
securities held by the Fund, are not always open the same days as the NYSE, and
may be open for business on days the NYSE is not. For example, Thanksgiving Day
is a holiday observed by the NYSE and not by overseas exchanges. In this
situation, the Fund would not calculate NAV on Thanksgiving Day (and INVESCO
would not buy, sell or exchange shares for you on that day), even though
activity on foreign exchanges could result in changes in the value of
investments held by the Fund on that day.

[INVESCO ICON] HOW TO BUY SHARES

TO BUY SHARES AT THAT DAY'S CLOSING PRICE, YOU MUST CONTACT US BEFORE THE
CLOSE OF THE NYSE, NORMALLY, 4:00 P.M. EASTERN TIME.

MINIMUM INITIAL INVESTMENT. $1,000, which is waived for regular investment
plans, including EasiVest and Direct Payroll Purchase, and certain retirement
plans, including IRAs.

MINIMUM SUBSEQUENT INVESTMENT. $50 (Minimums are lower for certain
retirement plans.)

EXCHANGE POLICY. You may exchange your shares in the Fund for those in
another INVESCO mutual fund on the basis of their respective NAVs at the time of
the exchange.

<PAGE>

FUND EXCHANGES CAN BE A CONVENIENT WAY FOR YOU TO DIVERSIFY YOUR
INVESTMENTS, OR TO REALLOCATE YOUR INVESTMENTS WHEN YOUR OBJECTIVES CHANGE.

We have the following policies governing exchanges:

o Both fund accounts involved in the exchange must be registered in
exactly the same name(s) and Social Security or federal tax I.D.
number(s).
o You may make up to four exchanges out of the Fund per 12-month period.
o The Fund reserves the right to reject any exchange request, or to modify or
terminate the exchange policy, if it is in the best interests of the Fund
and its shareholders. Notice of all such modifications or termination that
affect all shareholders of the Fund will be given at least 60 days prior to
the effective date of the change, except in unusual instances, including a
suspension of redemption of the exchanged security under Section 22(e) of
the Investment Company Act of 1940.

In addition, the ability to exchange may be temporarily suspended at any
time that sales of the fund into which you wish to exchange are temporarily
stopped.

INTERNET TRANSACTIONS. Investors may open new accounts and exchange and
redeem shares of any INVESCO Fund through the INVESCO Web site. To utilize this
service, you will need a web browser (presently Netscape version 4.0 or higher,
Internet Explorer version 4.0 or higher or AOL version 5.0 or higher) and the
ability to utilize the INVESCO Web site. INVESCO will accept Internet purchase
instructions only for exchanges or if the purchase price is paid to INVESCO
through debiting your bank account, and any Internet cash redemptions will be
paid only to the same bank account from which the payment to INVESCO originated.
INVESCO imposes a limit of $25,000 on Internet purchase and redemption
transactions. You may also download an application to open an account from the
Web site, complete it by hand, and mail it to INVESCO, along with a check.

<PAGE>

BY WIRE $1,000
You may send your
payment by
bank wire (call
INVESCO for
instructions).

BY PAL(R) $1,000 (The Be sure to write down
Your "Personal Account exchange minimum the confirmation
Line" is available for is $250 for number provided by
subsequent purchases subsequent PAL(R). You must forward
and exchanges 24 hours purchases your bank account
a day. requested by tele- information to INVESCO
Simply call phone.) prior to using this
1-800-424-8085. option.

<PAGE>

METHOD INVESTMENT MINIMUM PLEASE REMEMBER
- --------------------------------------------------------------------------------
BY EXCHANGE $1,000 to open a See "Exchange Policy."
Between two INVESCO new account; $50
funds. Call for written
1-800-525-8085 for requests to pur-
prospectuses of chase additional
other INVESCO funds. shares for an
Exchanges existing account.
may be made by phone or (The exchange
at our minimum is $250
Web site at for exchanges
www.invesco.com. You requested by
may also establish an telephone.)
automatic
monthly exchange service
between
two INVESCO funds; call
us for further details
and the correct form.

[INVESCO ICON] YOUR ACCOUNT SERVICES

INVESCO PROVIDES YOU WITH SERVICES DESIGNED TO MAKE IT SIMPLE FOR YOU TO BUY,
SELL OR EXCHANGE YOUR SHARES OF ANY INVESCO MUTUAL FUND.

SHAREHOLDER ACCOUNTS. INVESCO maintains your share account, which contains
your current Fund holdings. The Fund does not issue share certificates.

TELEPHONE TRANSACTIONS. You may buy, exchange and sell Fund shares by
telephone, unless you specifically decline these privileges when you fill out
the INVESCO new account application.

YOU CAN CONDUCT MOST TRANSACTIONS AND CHECK ON YOUR ACCOUNT THROUGH OUR
TOLL-FREE TELEPHONE NUMBER. YOU MAY ALSO ACCESS PERSONAL ACCOUNT INFORMATION AT
OUR WEB SITE, WWW.INVESCO.COM.

<PAGE>

[INVESCO ICON] HOW TO SELL SHARES

TO SELL SHARES AT THAT DAY'S CLOSING PRICE, YOU MUST CONTACT US BEFORE 4:00
P.M. EASTERN TIME.

While INVESCO attempts to process telephone redemptions promptly, there may
be times - particularly in periods of severe economic or market disruption -
when you may experience delays in redeeming shares by phone.

<PAGE>

- --------------------------------------------------------------------------------
IN WRITING Any amount. The redemption
Mail your request to request must be
INVESCO Funds Group, signed by all
Inc., P.O. Box registered account
173706, Denver, CO owners. Payment will
80217-3706. You may be mailed to your
also send your address as it appears
request by overnight on INVESCO's records,
courier to 7800 E. or to a bank
Union Ave., designated by you in
Denver, CO 80237. writing.
- --------------------------------------------------------------------------------
BY TELEPHONE WITH ACH $50 You must forward your
Call 1-800-525-8085 bank account
to request your information to
redemption. INVESCO INVESCO prior to
will automatically using this option.
pay the proceeds into
your designated bank
account.
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
BY EXCHANGE $250 for exchanges See "Exchange Policy."
Between two INVESCO requested by When opening a new
funds. Call telephone. account, investment
1-800-525-8085 for minimums apply.
prospectuses of other
INVESCO funds.
Exchanges may be
made by phone or at
our Web site at
www.invesco.com.
You may also establish
an automatic monthly
exchange service
between two INVESCO
funds; call us for
further details and
the correct form.
- --------------------------------------------------------------------------------
PERIODIC WITHDRAWAL $100 per payment on a You must have at
PLAN monthly or quarterly least $10,000 total
You may call us to basis. The redemption invested with the
request the check may be made INVESCO funds with at
appropriate form and payable to any party least $5,000 of that
more information at you designate. total invested in the
1-800-525-8085. fund from which
withdrawals will be
made.
- --------------------------------------------------------------------------------
PAYMENT TO THIRD Any amount. All registered
PARTY account owners must
Mail your request to sign the request,
INVESCO with signature
Funds Group, Inc., guarantees from an
P.O. Box 173706, eligible guarantor
Denver, CO 80217-3706. financial
institution, such as
a commercial bank or a
recognized national or
regional securities
firm.

<PAGE>

[GRAPH ICON] TAXES

Everyone's tax status is unique. We encourage you to consult your own tax
adviser on the tax impact to you of investing in the Fund.

TO AVOID BACKUP WITHHOLDING, BE SURE WE HAVE YOUR CORRECT SOCIAL SECURITY OR
TAXPAYER IDENTIFICATION NUMBER.

The Fund customarily distributes to its shareholders substantially all of
its net investment income, net capital gains and net gains from foreign currency
transactions, if any. You receive a proportionate part of these distributions,
depending on the percentage of the Fund's shares that you own. These
distributions are required under federal tax laws governing mutual funds. It is
the policy of the Fund to distribute all investment company taxable income and
net capital gains. As a result of this policy and the Fund's qualification as a
regulated investment company, it is anticipated that the Fund will not pay any
federal income or excise taxes. Instead, the Fund will be accorded conduit or
"pass through" treatment for federal income tax purposes.

[GRAPH ICON] DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS

The Fund earns ordinary or investment income from dividends and interest on
its investments. The Fund expects to distribute substantially all of this
investment income, less Fund expenses, to shareholders annually, or at such
other times as the Fund may elect.

<PAGE>

held one year or less are taxed as ordinary income. Long-term capital gains
which are derived from the sale of assets held for more than one year are taxed
at the maximum capital gains rate, currently 20% for individuals.

Dividends and capital gain distributions are paid to you if you hold shares
on the record date of the distribution regardless of how long you have held your
shares. A Fund's NAV will drop by the amount of the distribution on the day the
distribution is declared. If you buy shares of the Fund just before a
distribution is declared, you may wind up "buying a distribution." This means
that if the Fund declares a dividend or capital gain distribution shortly after
you buy, you will receive some of your investment back as a taxable
distribution. Most shareholders want to avoid this. And, if you sell your shares
at a loss for tax purposes and purchase a substantially identical investment
within 30 days before or after that sale, the transaction is usually considered
a "wash sale" and you will not be able to claim a tax loss.

<PAGE>

Financial Highlights

The financial highlights table is intended to help you understand the
Fund's financial performance for the past five years (or, if shorter, the period
of the Fund's operations). Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned (or lost) on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP, independent accountants, whose report,
along with the financial statements, is included in the INVESCO Specialty Funds,
Inc.'s 1999 Annual Report to Shareholders, which is incorporated by reference
into the Statement of Additional Information. This Report is available without
charge by contacting IDI at the address or telephone number on the back cover of
this Prospectus.

YEAR ENDED JULY 31
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS 1999 1998 1997 1996 1995(a)
FUND
PER SHARE DATA
Net Asset Value-Beginning
of Period $19.60 $15.31 $12.43 $12.30 $10.00
- --------------------------------------------------------------------------------
Income From Investment
Operations
Net Investment Income
(Loss)(b) (0.00) 0.01 0.06 0.22 0.11
Net Gains on Securities
(Both Realized and
Unrealized) 12.57 5.32 3.90 1.38 2.35
- --------------------------------------------------------------------------------
TOTAL FROM INVESTMENT
OPERATIONS 12.57 5.33 3.96 1.60 2.46
- --------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from Net
Investment Income 0.00 0.00 0.06 0.22 0.11
Distributions from
Capital Gains 0.37 1.04 1.02 1.25 0.05
- --------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS 0.37 1.04 1.08 1.47 0.16
- --------------------------------------------------------------------------------
Net Asset Value -- End
of Period $31.80 $19.60 $15.31 $12.43 $12.30
================================================================================
TOTAL RETURN 65.52% 36.79% 33.93% 13.67% 24.83%

RATIOS
Net Assets-End of
Period ($000 Omitted) $1,029,256 $276,577 $72,458 $50,516 $27,254
Ratio of Expenses to
Average Net Assets 1.24%(c) 1.32%(c) 1.69%(c) 1.66%(c) 1.95%
Ratio of Net Investment
Income (Loss) to
Average Net Assets (0.49%) (0.16%) 0.56% 1.78% 1.43%
Portfolio Turnover Rate 62% 55% 96% 157% 215%

(a) Commencement of investment operations was August 1, 1994.
(b) Net Investment Income (Loss) aggregated less than $0.01 on a per share
basis for the year ended July 31, 1999.
(c) Ratio is based on Total Expenses of the Fund which is before any expense
offset arrangements.

<PAGE>

November 15, 1999

INVESCO SPECIALTY FUNDS, Inc.
INVESCO TELECOMMUNICATIONS FUND

You may obtain additional information about the Fund from several sources:

811-8528

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

INVESCO SPECIALTY FUNDS, INC.

INVESCO Realty Fund
INVESCO Telecommunications Fund

Address: Mailing Address:

7800 E. Union Ave., Denver, CO 80237 P.O. Box 173706, Denver, CO 80217-3706

Telephone:

In continental U.S., 1-800-525-8085

November 15, 1999

- ------------------------------------------------------------------------------

Separate Prospectuses for INVESCO Realty and INVESCO Telecommunications Funds
dated November 15, 1999 provide the basic information you should know before
investing in either Fund. This Statement of Additional Information ("SAI") is
incorporated by reference into the Funds' Prospectuses; in other words, this SAI
is legally part of the Funds' Prospectuses. Although this SAI is not a
prospectus, it contains information in addition to that set forth in the
Prospectuses. It is intended to provide additional information regarding the
activities and operations of the Funds and should be read in conjunction with
the Prospectuses.

You may obtain, without charge, copies of the current Prospectuses of the Funds,
SAI and current annual and semiannual reports by writing to INVESCO
Distributors, Inc., P.O. Box 173706, Denver, CO 80217-3706 , or by calling
1-800-525-8085. The current Prospectuses for Realty and Telecommunications Funds
are also available through the INVESCO Web site at www.invesco.com.

<PAGE>

TABLE OF CONTENTS

The Company. . . . . . . . . . . . . . . . . . . . . . . . . .44

Investments, Policies and Risks . . . . . . . . . . . . . . .44

Investment Restrictions . . . . . . . . . . . . . . . . . . .62

Management of the Funds . . . . . . . . . . . . . . . . . . .65

Other Service Providers . . . . . . . . . . . . . . . . . . .87

Brokerage Allocation and Other Practices . . . . . . . . . . .88

Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . 90

Tax Consequences of Owning Shares of a Fund . . . . . . . . . 90

Performance . . . . . . . . . . . . . . . . . . . . . . . . .93

Financial Statements. . . . . . . . . . . . . . . . . . . . . 96

Appendix A. . . . . . . . . . . . . . . . . . . . . . . . . . 97

<PAGE>

THE COMPANY

The Company was incorporated under the laws of Maryland on April 12, 1994.

The Company is an open-end, diversified, no-load management investment company
currently consisting of two portfolios of investments: INVESCO Realty Fund and
INVESCO Telecommunications Fund (formerly, INVESCO Worldwide Communications
Fund) (the "Funds"). Additional funds may be offered in the future.

"Open-end" means that each Fund issues an indefinite number of shares which it
continuously offers to redeem at net asset value per share ("NAV"). A
"management" investment company actively buys and sells securities for the
portfolio of each Fund at the direction of a professional manager. Open-end
management investment companies (or one or more series of such companies, such
as the Funds) are commonly referred to as mutual funds. The Funds do not charge
sales fees to purchase their shares. However, the Funds do pay a 12b-1
distribution fee which is computed and paid monthly at an annual rate of 0.25%
of each Fund's average net assets.

INVESTMENTS, POLICIES AND RISKS

The principal investments and policies of the Funds are discussed in the
Prospectuses of the Funds. The Funds also may invest in the following securities
and engage in the following practices.

ADRs -- American Depository Receipts, or ADRs, are securities issued by American
banks. ADRs are receipts for the shares of foreign corporations that are held by
the bank issuing the receipt. An ADR entitles its holder to all dividends and
capital gains on the underlying foreign securities, less any fees paid to the
bank. Purchasing ADRs gives a Fund the ability to purchase the functional
equivalent of foreign securities without going to the foreign securities markets
to do so. ADRs are bought and sold in U.S. dollars, not foreign currencies. An
ADR that is "sponsored" means that the foreign corporation whose shares are
represented by the ADR is actively involved in the issuance of the ADR, and
generally provides material information about the corporation to the U.S.
market. An "unsponsored" ADR program means that the foreign corporation whose
shares are held by the bank is not obligated to disclose material information in
the United States, and, therefore, the market value of the ADR may not reflect
important facts known only to the foreign company.

Since they mirror their underlying foreign securities, ADRs generally have the
same risks as investing directly in the underlying foreign securities.

CERTIFICATES OF DEPOSIT IN FOREIGN BANKS AND U.S. BRANCHES OF FOREIGN BANKS --
The Funds may maintain time deposits in and invest in U.S. dollar denominated
CDs issued by foreign banks and U.S. branches of foreign banks. The Funds limit
investments in foreign bank obligations to U.S. dollar denominated obligations
of foreign banks which have more than $10 billion in assets, have branches or
agencies in the U.S., and meet other criteria established by the board of
directors. Investments in foreign securities involve special considerations.
There is generally less publicly available information about foreign issuers
since many foreign countries do not have the same disclosure and reporting

<PAGE>

requirements as are imposed by the U.S. securities laws. Moreover, foreign
issuers are generally not bound by uniform accounting and auditing and financial
reporting requirements and standards of practice comparable to those applicable
to domestic issuers. Such investments may also entail the risks of possible
imposition of dividend withholding or confiscatory taxes, possible currency
blockage or transfer restrictions, expropriation, nationalization or other
adverse political or economic developments, and the difficulty of enforcing
obligations in other countries.

The Funds may also invest in bankers' acceptances, time deposits and
certificates of deposit of U.S. branches of foreign banks and foreign branches
of U.S. banks. Investments in instruments of U.S. branches of foreign banks will
be made only with branches that are subject to the same regulations as U.S.
banks. Investments in instruments issued by a foreign branch of a U.S. bank will
be made only if the investment risk associated with such investment is the same
as that involving an investment in instruments issued by the U.S. parent, with
the U.S. parent unconditionally liable in the event that the foreign branch
fails to pay on the investment for any reason.

COMMERCIAL PAPER -- Commercial paper is the term for short-term promissory notes
issued by domestic corporations to meet current working capital needs.
Commercial paper may be unsecured by the corporation's assets but may be backed
by a letter of credit from a bank or other financial institution. The letter of
credit enhances the paper's creditworthiness. The issuer is directly responsible
for payment but the bank "guarantees" that if the note is not paid at maturity
by the issuer, the bank will pay the principal and interest to the buyer.
INVESCO Funds Group, Inc. ("INVESCO"), the Funds' adviser, will consider the
creditworthiness of the institution issuing the letter of credit, as well as the
creditworthiness of the issuer of the commercial paper, when purchasing paper
enhanced by a letter of credit. Commercial paper is sold either as
interest-bearing or on a discounted basis, with maturities not exceeding 270
days.

DEBT SECURITIES -- Debt securities include bonds, notes and other securities
that give the holder the right to receive fixed amounts of principal, interest,
or both on a date in the future or on demand. Debt securities also are often
referred to as fixed income securities, even if the rate of interest varies over
the life of the security.

Debt securities are generally subject to credit risk and market risk. Credit
risk is the risk that the issuer of the security may be unable to meet interest
or principal payments or both as they come due. Market risk is the risk that the
market value of the security may decline for a variety of reasons, including
changes in interest rates. An increase in interest rates tends to reduce the
market values of debt securities in which a Fund has invested. A decline in
interest rates tends to increase the market values of debt securities in which a
Fund has invested.

Moody's Investor Services, Inc. ("Moody's") and Standard & Poor's ("S&P")
ratings provide a useful guide to the credit risk of many debt securities. The
lower the rating of a debt security, the greater the credit risk the rating
service assigns to the security. To compensate investors for accepting that
greater risk, lower-rated debt securities tend to offer higher interest rates.
Realty and Telecommunications Funds may invest up to 15% of their respective
portfolios in lower-rated securities commonly known as junk bonds. Increasing
the amount of Fund assets invested in unrated or lower-grade straight debt
securities may increase the yield produced by the Fund's debt securities but

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will also increase the credit risk of those securities. A debt security is
considered lower grade if it is rated Ba or less by Moody's or BB or less by
S&P. Lower-rated and non-rated debt securities of comparable quality are subject
to wider fluctuations in yields and market values than higher-rated debt
securities and may be considered speculative.

A significant economic downturn or increase in interest rates may cause
issuers of debt securities to experience increased financial problems which
could adversely affect their ability to pay principal and interest obligations,
to meet projected business goals, and to obtain additional financing. These
conditions more severely impact issuers of lower-rated debt securities. The
market for lower-rated straight debt securities may not be as liquid as the
market for higher-rated straight debt securities. Therefore, INVESCO attempts to
limit purchases of lower-rated securities to securities having an established
secondary market.

Lower-rated securities by S&P (categories BB and B) include those which are
predominantly speculative because of the issuer's perceived capacity to pay
interest and repay principal in accordance with their terms; BB indicates the
lowest degree of speculation and B a higher degree of speculation. While such
bonds will likely have some quality and protective characteristics, these are
usually outweighed by large uncertainties or major risk exposures to adverse
conditions.

Although bonds in the lowest investment grade debt category (those rated BBB by
S&P, Baa by Moody's or the equivalent) are regarded as having adequate
capability to pay principal and interest, they have speculative characteristics.
Adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to make principal and interest payments than is the case for
higher-rated bonds. Lower-rated bonds by Moody's (categories Ba, B and Caa) are
of poorer quality and also have speculative characteristics. Bonds having
equivalent ratings from other ratings services will have characteristics similar
to those of the corresponding S&P and Moody's ratings. For a specific
description of S&P and Moody's corporate bond rating categories, please refer to
Appendix A.

The Funds may invest in zero coupon bonds and step-up bonds. Zero coupon bonds
do not make regular interest payments. Zero coupon bonds are sold at a discount
from face value. Principal and accrued discount (representing interest earned
but not paid) are paid at maturity in the amount of the face value. Step-up
bonds initially make no (or low) cash interest payments but begin paying
interest (or a higher rate of interest) at a fixed time after issuance of the
bond. The market values of zero coupon and step-up bonds generally fluctuate
more in response to changes in interest rates than interest-paying securities of
comparable term and quality. A Fund may be required to distribute income
recognized on these bonds, even though no cash may be paid to the Fund until the
maturity or call date of a bond, in order for the Fund to maintain its
qualification as a regulated investment company. These required distributions
could reduce the amount of cash available for investment by a Fund.

DOMESTIC BANK OBLIGATIONS -- U.S. banks (including their foreign branches) issue
certificates of deposit (CDs) and bankers' acceptances which may be purchased by
the Funds if an issuing bank has total assets in excess of $5 billion and the
bank otherwise meets the Funds' credit 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

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(usually London) of a U.S. domestic bank, and, as such, the credit is deemed to
be that of the domestic bank. 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"). Bankers' acceptances 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. Both types of securities are subject
to the ability of the issuing bank to meet its obligations, and are subject to
risks common to all debt securities. In addition, banker's acceptances may be
subject to foreign currency risk and certain other risks of investment in
foreign securities.

EQUITY SECURITIES -- The Funds may invest in common, preferred and convertible
preferred stocks, and securities whose values are tied to the price of stocks,
such as rights, warrants and convertible debt securities. Common stocks and
preferred stocks represent equity ownership in a corporation. Owners of stock,
such as the Funds, share in a corporation's earnings through dividends which may
be declared by the corporation, although the receipt of dividends is not the
principal benefit that the Funds seek when they invest in stocks and similar
instruments.

Instead, the Funds seek to invest in stocks that will increase in market value
and may be sold for more than a Fund paid to buy them. Market value is based
upon constantly changing investor perceptions of what the company is worth
compared to other companies. Although dividends are a factor in the changing
market value of stocks, many companies do not pay dividends, or pay
comparatively small dividends. The principal risk of investing in equity
securities is that their market values fluctuate constantly, often due to
factors entirely outside the control of the Funds or the company issuing the
stock. At any given time, the market value of an equity security may be
significantly higher or lower than the amount paid by a Fund to acquire it.

Owners of preferred stocks are entitled to dividends payable from the
corporation's earnings, which in some cases may be "cumulative" if prior
dividends on the preferred stock have not been paid. Dividends payable on
preferred stock have priority over distributions to holders of common stock, and
preferred stocks generally have a priority 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 holders of a company's debt securities generally
are entitled to be paid by the company before it pays anything to its
stockholders.

Rights and warrants are securities which entitle the holder to purchase the
securities of a company (usually, its common stock) at a specified price during
a specified time period. The value of a right or warrant is affected by many of
the same factors that determine the prices of common stocks. Rights and warrants
may be purchased directly or acquired in connection with a corporate
reorganization or exchange offer.

The Funds also may purchase convertible securities including 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 owner of convertible securities usually receives the
interest paid on a convertible bond or the dividend preference of a preferred
stock.

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A convertible security has an "investment value" which is a theoretical value
determined by the yield it provides in comparison with similar securities
without the conversion feature. Investment value changes are based upon
prevailing interest rates and other factors. It also has a "conversion value,"
which is the market value the convertible security would have if it were
exchanged for the underlying equity security. Convertible securities may be
purchased at varying price levels above or below their investment values or
conversion values.

Conversion value is a simple mathematical calculation that fluctuates directly
with the price of the underlying security. However, if the conversion value is
substantially below investment value, the market value of the convertible
security is governed principally by its investment value. If the conversion
value is near or above investment value, the market value of the convertible
security generally will rise above investment value. In such cases, the market
value of the convertible security may be higher than its 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. 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.

EUROBONDS AND YANKEE BONDS -- Bonds issued by foreign branches of U.S.
banks ("Eurobonds") and bonds issued by a U.S. branch of a foreign bank and sold
in the United States ("Yankee bonds"). These bonds are bought and sold in U.S.
dollars, but generally carry with them the same risks as investing in foreign
securities.

FOREIGN SECURITIES -- Investments in the securities of foreign companies,
or companies that have their principal business activities outside the United
States, involve certain risks not associated with investments in U.S. companies.
Non-U.S. companies generally are not subject to the same uniform accounting,
auditing and financial reporting standards that apply to U.S. companies.
Therefore, financial information about foreign companies may be incomplete, or
may not be comparable to the information available on U.S. companies. There may
also be less publicly available information about a foreign company.

Although the volume of trading in foreign securities markets is growing,
securities of many non-U.S. companies may be less liquid and have greater swings
in price than securities of comparable U.S. companies. The costs of buying and
selling securities on foreign securities exchanges is generally significantly
higher than similar costs in the United States. There is generally less
government supervision and regulation of exchanges, brokers and issuers in
foreign countries than there is in the United States. Investments in non-U.S.
securities may also be subject to other risks different from those affecting
U.S. investments, including local political or economic developments,
expropriation or nationalization of assets, confiscatory taxation, and
imposition of withholding taxes on dividends or interest payments. If it becomes
necessary, it may be more difficult for a Fund to obtain or to enforce a
judgment against a foreign issuer than against a domestic issuer.

Securities traded on foreign markets are usually bought and sold in local
currencies, not in U.S. dollars. Therefore, the market value of foreign
securities acquired by a Fund can be affected -- favorably or unfavorably -- by
changes in currency rates and exchange control regulations. Costs are incurred
in converting money from one currency to another. Foreign currency exchange

<PAGE>

rates are determined by supply and demand on the foreign exchange markets.
Foreign exchange markets are affected by the international balance of payments
and other economic and financial conditions, government intervention,
speculation and other factors, all of which are outside the control of each
Fund. Generally, the Funds' foreign currency exchange transactions will be
conducted on a cash or "spot" basis at the spot rate for purchasing or selling
currency in the foreign currency exchange markets.

FUTURES, OPTIONS AND OTHER FINANCIAL INSTRUMENTS

GENERAL. As discussed in the Prospectuses, the adviser and/or sub-adviser may
use various types of financial instruments, some of which are derivatives, to
attempt to manage the risk of the Funds' investments or, in certain
circumstances, for investment (e.g., as a substitute for investing in
securities). These financial instruments include options, futures contracts
(sometimes referred to as "futures"), forward contracts, swaps, caps, floors and
collars (collectively, "Financial Instruments"). The policies in this section do
not apply to other types of instruments sometimes referred to as derivatives,
such as indexed securities, mortgage-backed and other asset-backed securities,
and stripped interest and principal of debt.

Hedging strategies can be broadly categorized as "short" hedges and "long" or
"anticipatory" hedges. A short hedge involves the use of a Financial Instrument
in order to partially or fully offset potential variations in the value of one
or more investments held in a Fund's portfolio. A long or anticipatory hedge
involves the use of a Financial Instrument in order to partially or fully offset
potential increases in the acquisition cost of one or more investments that the
Fund intends to acquire. In an anticipatory hedge transaction, the Fund does not
already own a corresponding security. Rather, it relates to a security or type
of security that the Fund intends to acquire. If the Fund does not eliminate the
hedge by purchasing the security as anticipated, the effect on the Fund's
portfolio is the same as if a long position were entered into. Financial
Instruments may also be used, in certain circumstances, for investment (e.g., as
a substitute for investing in securities).

Financial Instruments on individual securities generally are used to attempt to
hedge against price movements in one or more particular securities positions
that a Fund already owns or intends to acquire. Financial Instruments on
indexes, in contrast, generally are used to attempt to hedge all or a portion of
a portfolio against price movements of the securities within a market sector in
which the Fund has invested or expects to invest.

The use of Financial Instruments is subject to applicable regulations of the
Securities and Exchange Commission ("SEC"), the several exchanges upon which
they are traded, and the Commodity Futures Trading Commission ("CFTC"). In
addition, the Funds' ability to use Financial Instruments will be limited by tax
considerations. See "Tax Consequences of Owning Shares of the Funds."

In addition to the instruments and strategies described below, the adviser
and/or sub-adviser may use other similar or related techniques to the extent
that they are consistent with a Fund's investment objective and permitted by its
investment limitations and applicable regulatory authorities. The Funds'
Prospectuses or Statement of Additional Information ("SAI") will be supplemented

<PAGE>

to the extent that new products or techniques become employed involving
materially different risks than those described below or in the Prospectuses.

Special Risks. Financial Instruments and their use involve special
considerations and risks, certain of which are described below.

(1) Financial Instruments may increase the volatility of the Funds. If the
adviser and/or sub-adviser employs a Financial Instrument that correlates
imperfectly with a Fund's investments, a loss could result, regardless of
whether or not the intent was to manage risk. In addition, these techniques
could result in a loss if there is not a liquid market to close out a position
that a Fund has entered.

(2) There might be imperfect correlation between price movements of a Financial
Instrument and price movement of the investment(s) being hedged. For example, if
the value of a Financial Instrument used in a short hedge increased by less than
the decline in value of the hedged investment(s), the hedge would not be fully
successful. This might be caused by certain kinds of trading activity that
distorts the normal price relationship between the security being hedged and the
Financial Instrument. Similarly, the effectiveness of hedges using Financial
Instruments on indexes will depend on the degree of correlation between price
movements in the index and price movements in the securities being hedged.

The Funds are authorized to use options and futures contracts related to
securities with issuers, maturities or other characteristics different from the
securities in which it typically invests. This involves a risk that the options
or futures position will not track the performance of a Fund's portfolio
investments.

The direction of options and futures price movements can also diverge from the
direction of the movements of the prices of their underlying instruments, even
if the underlying instruments match a Fund's investments well. Options and
futures prices are affected by such factors as current and anticipated
short-term interest rates, changes in volatility of the underlying instrument,
and the time remaining until expiration of the contract, which may not affect
security prices the same way. Imperfect correlation may also result from
differing levels of demand in the options and futures markets and the securities
markets, from structural differences in how options and futures and securities
are traded, or from imposition of daily price fluctuation limits or trading
halts. The Funds may take positions in options and futures contracts with a
greater or lesser face value than the securities it wishes to hedge or intends
to purchase in order to attempt to compensate for differences in volatility
between the contract and the securities, although this may not be successful in
all cases.

(3) If successful, the above-discussed hedging strategies can reduce risk of
loss by wholly or partially offsetting the negative effect of unfavorable price
movements of portfolio securities. However, such strategies can also reduce
opportunity for gain by offsetting the positive effect of favorable price
movements. For example, if a Fund entered into a short hedge because the adviser
and/or sub-adviser projected a decline in the price of a security in the Fund's
portfolio, and the price of that security increased instead, the gain from that
increase would likely be wholly or partially offset by a decline in the value of
the short position in the Financial Instrument. Moreover, if the price of the

<PAGE>

Financial Instrument declined by more than the increase in the price of the
security, the Fund could suffer a loss.

(4) A Fund's ability to close out a position in a Financial Instrument prior to
expiration or maturity depends on the degree of liquidity of the market or, in
the absence of such a market, the ability and willingness of the other party to
the transaction (the "counterparty") to enter into a transaction closing out the
position. Therefore, there is no assurance that any position can be closed out
at a time and price that is favorable to a Fund.

(5) As described below, the Funds are required to maintain assets as "cover,"
maintain segregated accounts or make margin payments when they take positions in
Financial Instruments involving obligations to third parties (i.e., Financial
Instruments other than purchased options). If a Fund is unable to close out its
positions in such Financial Instruments, it might be required to continue to
maintain such assets or segregated accounts or make such payments until the
position expired. These requirements might impair a Fund's ability to sell a
portfolio security or make an investment at a time when it would otherwise be
favorable to do so, or require that the Fund sell a portfolio security at a
disadvantageous time.

Cover. Positions in Financial Instruments, other than purchased options, expose
the Funds to an obligation to another party. A Fund will not enter into any such
transaction unless it owns (1) an offsetting ("covered") position in securities,
currencies or other options, futures contracts or forward contracts, or (2) cash
and liquid assets with a value, marked-to-market daily, sufficient to cover its
obligations to the extent not covered as provided in (1) above. The Funds will
comply with SEC guidelines regarding cover for these instruments and will, if
the guidelines so require, designate cash or liquid assets as segregated in the
prescribed amount as determined daily.

Assets used as cover or held as segregated cannot be sold while the position in
the corresponding Financial Instrument is open unless they are replaced with
other appropriate assets. As a result, the commitment of a large portion of a
Fund's assets to cover or to hold as segregated could impede portfolio
management or the Fund's ability to meet redemption requests or other current
obligations.

Options. Each Fund may engage in certain strategies involving options to attempt
to manage the risk of its investments or, in certain circumstances, for
investment (e.g., as a substitute for investing in securities). A call option
gives the purchaser the right to buy, and obligates the writer to sell the
underlying investment at the agreed-upon exercise price during the option
period. A put option gives the purchaser the right to sell, and obligates the
writer to buy the underlying investment at the agreed-upon exercise price during
the option period. Purchasers of options pay an amount, known as a premium, to
the option writer in exchange for the right under the option contract. See
"Options on Indexes" below with regard to cash settlement of option contracts on
index values.

The purchase of call options can serve as a hedge against a price rise of the
underlier and the purchase of put options can serve as a hedge against a price
decline of the underlier. Writing call options can serve as a limited short
hedge because declines in the value of the hedged investment would be offset to
the extent of the premium received for writing the option. However, if the

<PAGE>

security or currency appreciates to a price higher than the exercise price of
the call option, it can be expected that the option will be exercised and a Fund
will be obligated to sell the security or currency at less than its market
value.

Writing put options can serve as a limited long or anticipatory hedge because
increases in the value of the hedged investment would be offset to the extent of
the premium received for writing the option. However, if the security or
currency depreciates to a price lower than the exercise price of the put option,
it can be expected that the put option will be exercised and a Fund will be
obligated to purchase the security or currency at more than its market value.

The value of an option position will reflect, among other things, the current
market value of the underlying investment, the time remaining until expiration,
the relationship of the exercise price to the market price of the underlying
investment, the price volatility of the underlying investment and general market
and interest rate conditions. Options that expire unexercised have no value.

A Fund may effectively terminate its right or obligation under an option by
entering into a closing transaction. For example, the Fund may terminate its
obligation under a call or put option that it had written by purchasing an
identical call or put option; which is known as a closing purchase transaction.
Conversely, the Fund may terminate a position in a put or call option it had
purchased by writing an identical put or call option, which is known as a
closing sale transaction. Closing transactions permit a Fund to realize profits
or limit losses on an option position prior to its exercise or expiration.

Risks of Options on Securities. Options embody the possibility of large amounts
of exposure, which will result in a Fund's net asset value being more sensitive
to changes in the value of the related investment. A Fund may purchase or write
both exchange-traded and OTC options. Exchange-traded options in the United
States are issued by a clearing organization affiliated with the exchange on
which the option is listed that, in effect, guarantees completion of every
exchange-traded option transaction. In contrast, OTC options are contracts
between a Fund and its counterparty (usually a securities dealer or a bank) with
no clearing organization guarantee. Thus, when a Fund purchases an OTC option,
it relies on the counterparty from whom it purchased the option to make or take
delivery of the underlying investment upon exercise of the option. Failure by
the counterparty to do so would result in the loss of any premium paid by a Fund
as well as the loss of any expected benefit of the transaction.

The Funds' ability to establish and close out positions in options depends on
the existence of a liquid market. However, there can be no assurance that such a
market will exist at any particular time. Closing transactions can be made for
OTC options only by negotiating directly with the counterparty, or by a
transaction in the secondary market if any such market exists. There can be no
assurance that a Fund will in fact be able to close out an OTC option position
at a favorable price prior to expiration. In the event of insolvency of the
counterparty, a Fund might be unable to close out an OTC option position at any
time prior to the option's expiration. If a Fund is not able to enter into an
offsetting closing transaction on an option it has written, it will be required
to maintain the securities subject to the call or the liquid assets underlying
the put until a closing purchase transaction can be entered into or the option
expires. However, there can be no assurance that such a market will exist at any
particular time.

<PAGE>

If a Fund were unable to effect a closing transaction for an option it had
purchased, it would have to exercise the option to realize any profit. The
inability to enter into a closing purchase transaction for a covered call option
written by a Fund could cause material losses because the Fund would be unable
to sell the investment used as cover for the written option until the option
expires or is exercised.

Options on Indexes. Puts and calls on indexes are similar to puts and calls on
securities or futures contracts except that all settlements are in cash and
changes in value depend on changes in the index in question. When a Fund writes
a call on an index, it receives a premium and agrees that, prior to the
expiration date, upon exercise of the call, the purchaser will receive from the
Fund an amount of cash equal to the positive difference between the closing
price of the index and the exercise price of the call times a specified multiple
("multiplier"), which determines the total dollar value for each point of such
difference. When a Fund buys a call on an index, it pays a premium and has the
same rights as to such call as are indicated above. When a Fund buys a put on an
index, it pays a premium and has the right, prior to the expiration date, to
require the seller of the put to deliver to the Fund an amount of cash equal to
the positive difference between the exercise price of the put and the closing
price of the index times the multiplier. When a Fund writes a put on an index,
it receives a premium and the purchaser of the put has the right, prior to the
expiration date, to require the Fund to deliver to it an amount of cash equal to
the positive difference between the exercise price of the put and the closing
level of the index times the multiplier.

The risks of purchasing and selling options on indexes may be greater than
options on securities. Because index options are settled in cash, when a Fund
writes a call on an index it cannot fulfill its potential settlement obligations
by delivering the underlying securities. A Fund can offset some of the risk of
writing a call index option by holding a diversified portfolio of securities
similar to those on which the underlying index is based. However, a Fund cannot,
as a practical matter, acquire and hold a portfolio containing exactly the same
securities as underlie the index and, as a result, bears a risk that the value
of the securities held will vary from the value of the index.

Even if a Fund could assemble a portfolio that exactly reproduced the
composition of the underlying index, it still would not be fully covered from a
risk standpoint because of the "timing risk" inherent in writing index options.
When an index option is exercised, the amount of cash that the holder is
entitled to receive is determined by the difference between the exercise price
and the closing index level. As with other kinds of options, a Fund as the call
writer will not learn what it has been assigned until the next business day. The
time lag between exercise and notice of assignment poses no risk for the writer
of a covered call on a specific underlying security, such as common stock,
because in that case the writer's obligation is to deliver the underlying
security, not to pay its value as of a moment in the past. In contrast, the
writer of an index call will be required to pay cash in an amount based on the
difference between the closing index value on the exercise date and the exercise
price. By the time a Fund learns what it has been assigned, the index may have
declined. This "timing risk" is an inherent limitation on the ability of index
call writers to cover their risk exposure.

If a Fund has purchased an index option and exercises it before the closing
index value for that day is available, it runs the risk that the level of the
underlying index may subsequently change. If such a change causes the exercised
option to fall out-of-the-money, the Fund nevertheless will be required to pay

<PAGE>

the difference between the closing index value and the exercise price of the
option (times the applicable multiplier) to the assigned writer.

OTC Options. Unlike exchange-traded options, which are standardized with respect
to the underlying instrument, expiration date, contract size, and strike price,
the terms of OTC options (options not traded on exchanges) generally are
established through negotiation with the other party to the option contract.
While this type of arrangement allows a Fund great flexibility to tailor the
option to its needs, OTC options generally involve greater risk than
exchange-traded options, which are guaranteed by the clearing organization of
the exchange where they are traded.

Generally, OTC foreign currency options used by a Fund are European-style
options. This means that the option is only exercisable immediately prior to its
expiration. This is in contrast to American-style options, which are exercisable
at any time prior to the expiration date of the option.

Futures Contracts and Options on Futures Contracts. When a Fund purchases or
sells a futures contract, it incurs an obligation respectively to take or make
delivery of a specified amount of the obligation underlying the contract at a
specified time and price. When a Fund writes an option on a futures contract, it
becomes obligated to assume a position in the futures contract at a specified
exercise price at any time during the term of the option. If a Fund writes a
call, on exercise it assumes a short futures position. If it writes a put, on
exercise it assumes a long futures position.

The purchase of futures or call options on futures can serve as a long or an
anticipatory hedge, and the sale of futures or the purchase of put options on
futures can serve as a short hedge. Writing call options on futures contracts
can serve as a limited short hedge, using a strategy similar to that used for
writing call options on securities or indexes. Similarly, writing put options on
futures contracts can serve as a limited long or anticipatory hedge.

In addition, futures strategies can be used to manage the "duration" (a measure
of anticipated sensitivity to changes in interest rates, which is sometimes
related to the weighted average maturity of a portfolio) and associated interest
rate risk of a Fund's fixed-income portfolio. If the adviser and/or sub-adviser
wishes to shorten the duration of a Fund's fixed-income portfolio (i.e., reduce
anticipated sensitivity), the Fund may sell an appropriate debt futures contract
or a call option thereon, or purchase a put option on that futures contract. If
the adviser and/or sub-adviser wishes to lengthen the duration of a Fund's
fixed-income portfolio (i.e., increase anticipated sensitivity), the Fund may
buy an appropriate debt futures contract or a call option thereon, or sell a put
option thereon.

At the inception of a futures contract, a Fund is required to deposit "initial
margin" in an amount generally equal to 10% or less of the contract value.
Initial margin must also be deposited when writing a call or put option on a
futures contract, in accordance with applicable exchange rules. Subsequent
"variation margin" payments are made to and from the futures broker daily as the
value of the futures or written option position varies, a process known as
"marking-to-market." Unlike margin in securities transactions, initial margin on
futures contracts and written options on futures contracts does not represent a
borrowing on margin, but rather is in the nature of a performance bond or
good-faith deposit that is returned to the Fund at the termination of the
transaction if all contractual obligations have been satisfied. Under certain

<PAGE>

circumstances, such as periods of high volatility, a Fund may be required to
increase the level of initial margin deposits. If the Fund has insufficient cash
to meet daily variation margin requirements, it might need to sell securities in
order to do so at a time when such sales are disadvantageous.

Purchasers and sellers of futures contracts and options on futures can enter
into offsetting closing transactions, similar to closing transactions on
options, by selling or purchasing, respectively, an instrument identical to the
instrument purchased or sold. However, there can be no assurance that a liquid
market will exist for a particular contract at a particular time. In such event,
it may not be possible to close a futures contract or options position.

Under certain circumstances, futures exchanges may establish daily limits on the
amount that the price of a futures contract or an option on a futures contract
can vary from the previous day's settlement price; once that limit is reached,
no trades may be made that day at a price beyond the limit. Daily price limits
do not limit potential losses because prices could move to the daily limit for
several consecutive days with little or no trading, thereby preventing
liquidation of unfavorable positions.

If a Fund were unable to liquidate a futures contract or an option on a futures
contract position due to the absence of a liquid market or the imposition of
price limits, it could incur substantial losses. The Fund would continue to be
subject to market risk with respect to the position. In addition, except in the
case of purchased options, the Fund would continue to be required to make daily
variation margin payments and might be required to continue to maintain the
position being hedged by the futures contract or option or to continue to
maintain cash or securities in a segregated account.

To the extent that a Fund enters into futures contracts, options on futures
contracts and options on foreign currencies traded on a CFTC-regulated exchange,
in each case that is not for bona fide hedging purposes (as defined by the
CFTC), the aggregate initial margin and premiums required to establish these
positions (excluding the amount by which options are "in-the-money" at the time
of purchase) may not exceed 5% of the liquidation value of the Fund's portfolio,
after taking into account unrealized profits and unrealized losses on any
contracts the Fund has entered into. This policy does not limit to 5% the
percentage of the Fund's assets that are at risk in futures contracts, options
on futures contracts and currency options.

Risks of Futures Contracts and Options Thereon. The ordinary spreads at a given
time between prices in the cash and futures markets (including the options on
futures markets), due to differences in the natures of those markets, are
subject to the following factors. First, all participants in the futures market
are subject to margin deposit and maintenance requirements. Rather than meeting
additional margin deposit requirements, investors may close futures contracts
through offsetting transactions, which could distort the normal relationship
between the cash and futures markets. Second, the liquidity of the futures
market depends on participants entering into offsetting transactions rather than
making or taking delivery. To the extent participants decide to make or take
delivery, liquidity in the futures market could be reduced, thus producing
distortion. Due to the possibility of distortion, a hedge may not be successful.
Although stock index futures contracts do not require physical delivery, under
extraordinary market conditions, liquidity of such futures contracts also could
be reduced. Additionally, the adviser and/or sub-adviser may be incorrect in its

<PAGE>

expectations as to the extent of various interest rates, currency exchange rates
or stock market movements or the time span within which the movements take
place.

Index Futures. The risk of imperfect correlation between movements in the price
of index futures and movements in the price of the securities that are the
subject of a hedge increases as the composition of a Fund's portfolio diverges
from the index. The price of the index futures may move proportionately more
than or less than the price of the securities being hedged. If the price of the
index futures moves proportionately less than the price of the securities that
are the subject of the hedge, the hedge will not be fully effective. Assuming
the price of the securities being hedged has moved in an unfavorable direction,
as anticipated when the hedge was put into place, the Fund would be in a better
position than if it had not hedged at all, but not as good as if the price of
the index futures moved in full proportion to that of the hedged securities.
However, if the price of the securities being hedged has moved in a favorable
direction, this advantage will be partially offset by movement of the price of
the futures contract. If the price of the futures contract moves more than the
price of the securities, the Fund will experience either a loss or a gain on the
futures contract that will not be completely offset by movements in the price of
the securities that are the subject of the hedge.

Where index futures are purchased in an anticipatory hedge, it is possible that
the market may decline instead. If a Fund then decides not to invest in the
securities at that time because of concern as to possible further market decline
or for other reasons, it will realize a loss on the futures contract that is not
offset by a reduction in the price of the securities it had anticipated
purchasing.

Foreign Currency Hedging Strategies--Special Considerations. A Fund may use
options and futures contracts on foreign currencies, as mentioned previously,
and forward currency contracts, as described below, to attempt to hedge against
movements in the values of the foreign currencies in which the Fund's securities
are denominated or, in certain circumstances, for investment (e.g., as a
substitute for investing in securities denominated in foreign currency).
Currency hedges can protect against price movements in a security that a Fund
owns or intends to acquire that are attributable to changes in the value of the
currency in which it is denominated.

A Fund might seek to hedge against changes in the value of a particular currency
when no Financial Instruments on that currency are available or such Financial
Instruments are more expensive than certain other Financial Instruments. In such
cases, a Fund may seek to hedge against price movements in that currency by
entering into transactions using Financial Instruments on another currency or a
basket of currencies, the value of which the adviser and/or sub-adviser believes
will have a high degree of positive correlation to the value of the currency
being hedged. The risk that movements in the price of the Financial Instrument
will not correlate perfectly with movements in the price of the currency subject
to the hedging transaction may be increased when this strategy is used.

The value of Financial Instruments on foreign currencies depends on the value of
the underlying currency relative to the U.S. dollar. Because foreign currency
transactions occurring in the interbank market might involve substantially
larger amounts than those involved in the use of such Financial Instruments, a
Fund could be disadvantaged by having to deal in the odd-lot market (generally
consisting of transactions of less than $1 million) for the underlying foreign

<PAGE>

currencies at prices that are less favorable than for round lots.

There is no systematic reporting of last sale information for foreign currencies
or any regulatory requirement that quotations available through dealers or other
market sources be firm or revised on a timely basis. Quotation information
generally is representative of very large transactions in the interbank market
and thus might not reflect odd-lot transactions where rates might be less
favorable. The interbank market in foreign currencies is a global,
round-the-clock market. To the extent the U.S. options or futures markets are
closed while the markets for the underlying currencies remain open, significant
price and rate movements might take place in the underlying markets that cannot
be reflected in the markets for the Financial Instruments until they reopen.

Settlement of hedging transactions involving foreign currencies might be
required to take place within the country issuing the underlying currency. Thus,
a Fund might be required to accept or make delivery of the underlying foreign
currency in accordance with any U.S. or foreign regulations regarding the
maintenance of foreign banking arrangements by U.S. residents and might be
required to pay any fees, taxes and charges associated with such delivery
assessed in the issuing country.

Forward Currency Contracts and Foreign Currency Deposits. The Funds may enter
into forward currency contracts to purchase or sell foreign currencies for a
fixed amount of U.S. dollars or another foreign currency. A forward currency
contract involves an obligation to purchase or sell a specific currency at a
future date, which may be any fixed number of days (term) from the date of the
forward currency contract agreed upon by the parties, at a price set at the time
the forward currency contract is entered. Forward currency contracts are
negotiated directly between currency traders (usually large commercial banks)
and their customers.

Such transactions may serve as long or anticipatory hedges. For example, a Fund
may purchase a forward currency contract to lock in the U.S. dollar price of a
security denominated in a foreign currency that the Fund intends to acquire.
Forward currency contracts may also serve as short hedges. For example, a Fund
may sell a forward currency contract to lock in the U.S. dollar equivalent of
the proceeds from the anticipated sale of a security or a dividend or interest
payment denominated in a foreign currency.

The Funds may also use forward currency contracts to hedge against a decline in
the value of existing investments denominated in foreign currency. Such a hedge
would tend to offset both positive and negative currency fluctuations, but would
not offset changes in security values caused by other factors. A Fund could also
hedge the position by entering into a forward currency contract to sell another
currency expected to perform similarly to the currency in which the Fund's
existing investments are denominated. This type of hedge could offer advantages
in terms of cost, yield or efficiency, but may not hedge currency exposure as
effectively as a simple hedge against U.S. dollars. This type of hedge may
result in losses if the currency used to hedge does not perform similarly to the
currency in which the hedged securities are denominated.

The Funds may also use forward currency contracts in one currency or a basket of
currencies to attempt to hedge against fluctuations in the value of securities
denominated in a different currency if the adviser anticipates that there will
be a positive correlation between the two currencies.

<PAGE>

The cost to a Fund of engaging in forward currency contracts varies with factors
such as the currency involved, the length of the contract period and the market
conditions then prevailing. Because forward currency contracts are usually
entered into on a principal basis, no fees or commissions are involved. When a
Fund enters into a forward currency contract, it relies on the counterparty to
make or take delivery of the underlying currency at the maturity of the
contract. Failure by the counterparty to do so would result in the loss of some
or all of any expected benefit of the transaction.

As is the case with futures contracts, purchasers and sellers of forward
currency contracts can enter into offsetting closing transactions, similar to
closing transactions on futures contracts, by selling or purchasing,
respectively, an instrument identical to the instrument purchased or sold.
Secondary markets generally do not exist for forward currency contracts, with
the result that closing transactions generally can be made for forward currency
contracts only by negotiating directly with the counterparty. Thus, there can be
no assurance that a Fund will in fact be able to close out a forward currency
contract at a favorable price prior to maturity. In addition, in the event of
insolvency of the counterparty, the Fund might be unable to close out a forward
currency contract. In either event, the Fund would continue to be subject to
market risk with respect to the position, and would continue to be required to
maintain a position in securities denominated in the foreign currency or to
segregate cash or liquid assets.

The precise matching of forward currency contract amounts and the value of the
securities, dividends or interest payments involved generally will not be
possible because the value of such securities, dividends or interest payments,
measured in the foreign currency, will change after the forward currency
contract has been established. Thus, a Fund might need to purchase or sell
foreign currencies in the spot (cash) market to the extent such foreign
currencies are not covered by forward currency contracts. The projection of
short-term currency market movements is extremely difficult, and the successful
execution of a short-term hedging strategy is highly uncertain.

Forward currency contracts may substantially change a Fund's investment exposure
to changes in currency exchange rates and could result in losses to the Fund if
currencies do not perform as the adviser anticipates. There is no assurance that
the adviser's and/or sub-adviser's use of forward currency contracts will be
advantageous to a Fund or that it will hedge at an appropriate time.

The Funds may also purchase and sell foreign currency and invest in foreign
currency deposits. Currency conversion involves dealer spreads and other costs,
although commissions usually are not charged.

Combined Positions. A Fund may purchase and write options or futures in
combination with each other, or in combination with futures or forward currency
contracts, to manage the risk and return characteristics of its overall
position. For example, a Fund may purchase a put option and write a call option
on the same underlying instrument, in order to construct a combined position
whose risk and return characteristics are similar to selling a futures contract.
Another possible combined position would involve writing a call option at one
strike price and buying a call option at a lower price, in order to reduce the
risk of the written call option in the event of a substantial price increase.
Because combined options positions involve multiple trades, they result in
higher transaction costs.

<PAGE>

Turnover. The Funds' options and futures activities may affect their turnover
rates and brokerage commission payments. The exercise of calls or puts written
by a Fund, and the sale or purchase of futures contracts, may cause it to sell
or purchase related investments, thus increasing its turnover rate. Once a Fund
has received an exercise notice on an option it has written, it cannot effect a
closing transaction in order to terminate its obligation under the option and
must deliver or receive the underlying securities at the exercise price. The
exercise of puts purchased by a Fund may also cause the sale of related
investments, increasing turnover. Although such exercise is within the Fund's
control, holding a protective put might cause it to sell the related investments
for reasons that would not exist in the absence of the put. A Fund will pay a
brokerage commission each time it buys or sells a put or call or purchases or
sells a futures contract. Such commissions may be higher than those that would
apply to direct purchases or sales.

Swaps, Caps, Floors and Collars. The Funds are authorized to enter into swaps,
caps, floors and collars. Swaps involve the exchange by one party with another
party of their respective commitments to pay or receive cash flows, e.g., an
exchange of floating rate payments for fixed rate payments. The purchase of a
cap or a floor entitles the purchaser, to the extent that a specified index
exceeds in the case of a cap, or falls below in the case of a floor, a
predetermined value, to receive payments on a notional principal amount from the
party selling such instrument. A collar combines elements of buying a cap and
selling a floor.

ILLIQUID SECURITIES -- Securities which do not trade on stock exchanges or in
the over the counter market, or have restrictions on when and how they may be
sold, are generally considered to be "illiquid." An illiquid security is one
that a Fund may have difficulty -- or may even be legally precluded from --
selling at any particular time. The Funds may invest in illiquid securities,
including restricted securities and other investments which are not readily
marketable. A Fund will not purchase any such security if the purchase would
cause the Fund to invest more than 15% of its net assets, measured at the time
of purchase, in illiquid securities. Repurchase agreements maturing in more than
seven days are considered illiquid for purposes of this restriction.

The principal risk of investing in illiquid securities is that a Fund may be
unable to dispose of them at the time desired or at a reasonable price. In
addition, in order to resell a restricted security, a Fund might have to bear
the expense and incur the delays associated with registering the securities with
the SEC, and otherwise obtaining listing on a securities exchange or in the over
the counter market.

INVESTMENT COMPANY SECURITIES -- To manage their daily cash positions, the Funds
may invest in securities issued by other investment companies that invest in
short-term debt securities and seek to maintain a net asset value of $1.00 per
share ("money market funds"). The Funds also may invest in Standard & Poor's
Depository Receipts ("SPDRs") and shares of other investment companies. SPDRs
are investment companies whose portfolios mirror the compositions of specific
S&P indices, such as the S&P 500 and the S&P 400. SPDRs are traded on the
American Stock Exchange. SPDR holders such as a Fund are paid a "Dividend
Equivalent Amount" that corresponds to the amount of cash dividends accruing to
the securities held by the SPDR Trust, net of certain fees and expenses. The
Investment Company Act of 1940 limits investments in securities of other

<PAGE>

investment companies, such as the SPDR Trust. These limitations include, among
others, that, subject to certain exceptions, no more than 10% of a Fund's total
assets may be invested in securities of other investment companies and no more
than 5% of its total assets may be invested in the securities of any one
investment company. As a shareholder of another investment company, a Fund would
bear its pro rata portion of the other investment company's expenses, including
advisory fees, in addition to the expenses the Fund bears directly in connection
with its own operations.

REPURCHASE AGREEMENTS -- A Fund may enter into repurchase agreements, or REPOs,
on debt securities that the Fund is allowed to hold in its portfolio. This is a
way to invest money for short periods. A REPO is an agreement under which the
Fund acquires a debt security and then resells it to the seller at an agreed
upon price and date (normally, the next business day). The repurchase price
represents an interest rate effective for the short period the debt security is
held by the Fund, and is unrelated to the interest rate on the underlying debt
security. A repurchase agreement is often considered as a loan collateralized by
securities. The collateral securities acquired by the Fund (including accrued
interest earned thereon) must have a total value in excess of the value of the
repurchase agreement. The collateral securities are held by the Fund's custodian
bank until the repurchase agreement is completed.

The Funds may enter into repurchase agreements with commercial banks, registered
broker-dealers or registered government securities dealers that are creditworthy
under standards established by the Company's board of directors. The Company's
board of directors has established standards that the investment adviser and
sub-adviser must use to review the creditworthiness of any bank, broker or
dealer that is party to a REPO. REPOs maturing in more than seven days are
considered illiquid securities. A Fund will not enter into repurchase agreements
maturing in more than seven days if as a result more than 15% of the Fund's net
assets would be invested in these repurchase agreements and other illiquid
securities.

As noted above, the Funds use REPOs as a means of investing cash for short
periods of time. Although REPOs are considered to be highly liquid and
comparatively low-risk, the use of REPOs does involve some risks. For example,
if the other party to the agreement defaults on its obligation to repurchase the
underlying security at a time when the value of the security has declined, the
Fund may incur a loss on the sale of the collateral security. If the other party
to the agreement becomes insolvent and subject to liquidation or reorganization
under the Bankruptcy Code or other laws, a court may determine that the
underlying security is collateral for a loan by the Fund not within the control
of the Fund and therefore the realization by the Fund on such collateral may
automatically be stayed. Finally, it is possible that the Fund may not be able
to substantiate its interest in the underlying security and may be deemed an
unsecured creditor of the other party to the agreement.

RULE 144A SECURITIES -- The Funds also may invest in securities that can be
resold to institutional investors pursuant to Rule 144A under the Securities Act
of 1933, as amended (the "1933 Act"). In recent years, a large institutional
market has developed for many Rule 144A Securities. Institutional investors
generally cannot sell these securities to the general public but instead will
often depend on an efficient institutional market in which Rule 144A Securities
can readily be resold to other institutional investors, or on an issuer's
ability to honor a demand for repayment. Therefore, the fact that there are

<PAGE>

contractual or legal restrictions on resale to the general public or certain
institutions does not necessarily mean that a Rule 144A Security is illiquid.
Institutional markets for Rule 144A Securities may provide both reliable market
values for Rule 144A Securities and enable a Fund to sell a Rule 144A investment
when appropriate. For this reason, the Company's board of directors has
concluded that if a sufficient institutional trading market exists for a given
Rule 144A security, it may be considered "liquid," and not subject to a Fund's
limitations on investment in restricted securities. The Company's board of
directors has given INVESCO the day-to-day authority to determine the liquidity
of Rule 144A Securities, according to guidelines approved by the board. The
principal risk of investing in Rule 144A Securities is that there may be an
insufficient number of qualified institutional buyers interested in purchasing a
Rule 144A Security held by a Fund, and the Fund might be unable to dispose of
such security promptly or at reasonable prices.

SECURITIES LENDING -- Each Fund may lend its portfolio securities. The advantage
of lending portfolio securities is that a Fund continues to have the benefits
(and risks) of ownership of the loaned securities, while at the same time
receiving interest from the borrower of the securities. The primary risk in
lending portfolio securities is that a borrower may fail to return a portfolio
security.

REITS -- Real Estate Investment Trusts are investment trusts that invest
primarily in real estate and securities of businesses connected to the real
estate industry.

U.S. GOVERNMENT SECURITIES -- Each Fund may, from time to time, purchase debt
securities issued by the U.S. government. These securities include Treasury
bills, notes, and bonds. Treasury bills have a maturity of one year or less,
Treasury notes generally have a maturity of one to ten years, and Treasury bonds
generally have maturities of more than ten years.

U.S. government debt securities also include securities issued or guaranteed by
agencies or instrumentalities of the U.S. government. Some obligations of U.S.
government agencies, which are established under the authority of an act of
Congress, such as Government National Mortgage Association ("GNMA")
participation certificates, are supported by the full faith and credit of the
U.S. Treasury. GNMA Certificates are mortgage-backed securities representing
part ownership of a pool of mortgage loans. These loans -- issued by lenders
such as mortgage bankers, commercial banks and savings and loan associations --
are either insured by the Federal Housing Administration or guaranteed by the
Veterans Administration. A "pool" or group of such mortgages is assembled and,
after being approved by GNMA, is offered to investors through securities
dealers. Once approved by GNMA, the timely payment of interest and principal on
each mortgage is guaranteed by GNMA and backed by the full faith and credit of
the U.S. government. The market value of GNMA Certificates is not guaranteed.
GNMA Certificates are different from bonds because principal is paid back
monthly by the borrower over the term of the loan rather than returned in a lump
sum at maturity, as is the case with a bond. GNMA Certificates are called
"pass-through" securities because both interest and principal payments
(including prepayments) are passed through to the holder of the GNMA
Certificate.

Other United States government debt securities, such as securities of the
Federal Home Loan Banks, are supported by the right of the issuer to borrow from
the Treasury. Others, such as bonds issued by Fannie Mae, a federally chartered

<PAGE>

private corporation, are supported only by the credit of the corporation. In the
case of securities not backed by the full faith and credit of the United States,
a Fund must look principally to the agency issuing or guaranteeing the
obligation in the event the agency or instrumentality does not meet its
commitments. A Fund will invest in securities of such instrumentalities only
when its investment adviser and sub-advisers are satisfied that the credit risk
with respect to any such instrumentality is comparatively minimal.

WHEN-ISSUED/DELAYED DELIVERY -- Ordinarily, the Funds buy and sell securities on
an ordinary settlement basis. That means that the buy or sell order is sent, and
a Fund actually takes delivery or gives up physical possession of the security
on the "settlement date," which is three business days later. However, the Funds
also may purchase and sell securities on a when-issued or delayed delivery
basis.

When-issued or delayed delivery transactions occur when securities are purchased
or sold by a Fund and payment and delivery take place at an agreed-upon time in
the future. The Funds may engage in this practice in an effort to secure an
advantageous price and yield. However, the yield on a comparable security
available when delivery actually takes place may vary from the yield on the
security at the time the when-issued or delayed delivery transaction was entered
into. When a Fund engages in when-issued and delayed delivery transactions, it
relies on the seller or buyer to consummate the sale at the future date. If the
seller or buyer fails to act as promised, that failure may result in the Fund
missing the opportunity of obtaining a price or yield considered to be
advantageous. No payment or delivery is made by a Fund until it receives
delivery or payment from the other party to the transaction. However,
fluctuation in the value of the security from the time of commitment until
delivery could adversely affect a Fund.

INVESTMENT RESTRICTIONS. The Funds operate under certain investment
restrictions. For purposes of the following restrictions, 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.

The following restrictions are fundamental and may not be changed without
prior approval of a majority of the outstanding voting securities of a Fund, as
defined in the Investment Company Act of 1940, as amended (the "1940 Act"). Each
Fund may not:

1. with respect to 75% of the Fund's total assets, purchase the securities
of any issuer (other than securities issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities, or securities of
other investment companies) if, as a result, (i) more than 5% of a Fund's
total assets would be invested in the securities of that issuer, or (ii) a
Fund would hold more than 10% of the outstanding voting securities of that
issuer;

2. underwrite securities of other issuers, except insofar as it may be
deemed to be an underwriter under the 1933 Act, as amended, in connection
with the disposition of the Fund's portfolio securities;

3. borrow money, except that the Fund may borrow money in an amount not

<PAGE>
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings);

4. issue senior securities, except as permitted under the 1940 Act;

5. lend any security or make any 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 the purchase of debt securities or to repurchase agreements;

6. purchase or sell physical commodities; however, this policy shall not
prevent the Fund from purchasing and selling foreign currency, futures
contracts, options, forward contracts, swaps, caps, floors, collars and
other financial instruments; or

7. purchase or sell real estate unless acquired as a result of ownership of
securities or other instruments (but this shall not prevent the Fund
from investing in securities or other instruments backed by real estate or
securities of companies engaged in the real estate business).

8. Each Fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single
open-end management investment company managed by INVESCO or an affiliate
or a successor thereof, with substantially the same fundamental investment
objective, policies and limitations as the Fund.

In addition, each Fund has the following non-fundamental policies, which may be
changed without shareholder approval:

A. The Fund may not sell securities short (unless it owns or has the right
to obtain securities equivalent in kind and amount to the securities sold
short) or purchase securities on margin, except that (i) this policy does
not prevent the Fund from entering into short positions in foreign
currency, futures contracts, options, forward contracts, swaps, caps,
floors, collars and other financial instruments, (ii) the Fund may obtain
such short-term credits as are necessary for the clearance of
transactions, and (iii) the Fund may make margin payments in connection
with futures contracts, options, forward contracts, swaps, caps, floors,
collars and other financial instruments.

B. The Fund may borrow money only from a bank or from an open-end
management investment company managed by INVESCO or an affiliate or a
successor thereof for temporary or emergency purposes (not for leveraging
or investing) or by engaging in reverse repurchase agreements with any
party (reverse repurchase agreements will be treated as borrowings for
purposes of fundamental limitation (4)).

C. The Fund does not currently intend to purchase any security if, as a
result, more than 15% of its net assets would be invested in securities
that are deemed to be illiquid because they are subject to legal or
contractual restrictions on resale or because they cannot be sold or
disposed of in the ordinary course of business at approximately the prices
at which they are valued.

<PAGE>

D. The Fund may invest in securities issued by other investment companies
to the extent that such investments are consistent with the Fund's
investment objective and policies and permissible under the 1940 Act.

In addition, with respect to a Fund that may invest in municipal obligations,
the following non-fundamental policy applies, which may be changed without
shareholder approval:

Each state (including the District of Columbia and Puerto Rico), territory
and possession of the United States, each political subdivision, agency,
instrumentality and authority thereof, and each multi-state agency of
which a state is a member is a separate "issuer." When the assets and
revenues of an agency, authority, instrumentality or other political
subdivision are separate from the government creating the subdivision and
the security is backed only by assets and revenues of the subdivision,
such subdivision would be deemed to be the sole issuer. Similarly, in the
case of an Industrial Development Bond or Private Activity bond, if that
bond is backed only by the assets and revenues of the non-governmental
user, then that non-governmental user would be deemed to be the sole
issuer. However, if the creating government or another entity guarantees a
security, then to the extent that the value of all securities issued or
guaranteed by that government or entity and owned by a Fund exceeds 10% of
the Fund's total assets, the guarantee would be considered a separate
security and would be treated as issued by that government or entity.

Following is a chart outlining some of the limitations pursuant to
non-fundamental investment policies set by the board of directors. These
non-fundamental policies may be changed by the board of directors without
shareholder approval:

- --------------------------------------------------------------------------------
INVESTMENT REALTY TELECOMMUNICATIONS
- --------------------------------------------------------------------------------
WITHIN SECTOR Normally, at least Normally, at
65% (at least 65% least 65%
in equity primarily in
securities -- equity secu-
including common rities (including
stock, pre ferred common stock,
stock, securities preferred stock,
convertible into securities
common stock and convertible into
warrants; no one common stock and
property type will warrants); debt
represent more securities to
than 50% of the include no more
Fund's total than 15% in junk
assets; up to 35% bonds; at least
in debt securi- 65% of all issuers
ties, of which no must be domiciled
more than 15% can in at least 3
be in junk bonds) countries, one of
which may be the
U.S.
- --------------------------------------------------------------------------------
OUTSIDE SECTOR Up to 35% Up to 35% in
infrastructure
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT REALTY TELECOMMUNICATIONS
- --------------------------------------------------------------------------------
Foreign Securities Up to 25% Unlimited; may be
(Percentages exclude ADRs and 65% or more
Canadian issuers.)
- ----------------------------------------------------------------------------

MANAGEMENT OF THE FUNDS

THE INVESTMENT ADVISER

INVESCO, a Delaware corporation ("INVESCO"), located at 7800 East Union
Avenue, Denver, Colorado, is the Company's investment adviser. INVESCO was
founded in 1932 and serves as an investment adviser to:

INVESCO Bond Funds, Inc. (formerly, INVESCO Income Funds, Inc.)
INVESCO Combination Stock & Bond Funds, Inc. (formerly, INVESCO Flexible
Funds, Inc.)
INVESCO International Funds, Inc.
INVESCO Money Market Funds, Inc.
INVESCO Sector Funds, Inc. (formerly, INVESCO Strategic Portfolios, Inc.)
INVESCO Specialty Funds, Inc.
INVESCO Stock Funds, Inc. (formerly, INVESCO Equity Funds, Inc.)
INVESCO Treasurer's Series Funds, Inc. (formerly, INVESCO Treasurer's
Series Trust)
INVESCO Variable Investment Funds, Inc.

As of October 31, 1999, INVESCO managed 44 mutual funds having combined assets
of $26.1 billion, on behalf of more than 938,000 shareholders.

INVESCO is an indirect wholly owned subsidiary of AMVESCAP PLC, a publicly
traded holding company. Through its subsidiaries, AMVESCAP PLC engages in the
business of investment management on an international basis. AMVESCAP PLC is one
of the largest independent investment management businesses in the world, with
approximately $291 billion in assets under management on September 30, 1999.

AMVESCAP PLC's North American subsidiaries include:

INVESCO Retirement and Benefit Services, Inc. ("IRBS"), Atlanta, Georgia,
develops and provides domestic and international defined contribution
retirement plan services to plan sponsors, institutional retirement plan
sponsors, institutional plan providers and foreign governments.

INVESCO Retirement Plan Services ("IRPS"), Atlanta, Georgia, a division of
IRBS, provides recordkeeping and investment selection services to defined

<PAGE>

contribution plan sponsors of plans with between $2 million and $200 million
in assets. Additionally, IRPS provides investment consulting services to
institutions seeking to provide retirement plan products and services.

Institutional Trust Company, doing business as INVESCO Trust Company
("ITC"), Denver, Colorado, a division of IRBS, provides retirement account
custodian and/or trust services for individual retirement accounts ("IRAs")
and other retirement plan accounts. This includes services such as
recordkeeping, tax reporting and compliance. ITC acts as trustee or
custodian to these plans. ITC accepts contributions and provides complete
transfer agency functions: correspondence, sub-accounting, telephone
communications and processing of distributions.

INVESCO Capital Management, Inc., Atlanta, Georgia, manages institutional
investment portfolios, consisting primarily of discretionary employee
benefit plans for corporations and state and local governments, and
endowment funds.

INVESCO Management & Research, Inc., Boston, Massachusetts, primarily
manages pension and endowment accounts.

PRIMCO Capital Management, Inc., Louisville, Kentucky, specializes in
managing stable return investments, principally on behalf of Section 401(k)
retirement plans.

INVESCO Realty Advisors, Inc., Dallas, Texas, is responsible for providing
advisory services in the U.S. real estate markets for AMVESCAP PLC's clients
worldwide. Clients include corporate pension plans and public pension funds
as well as endowment and foundation accounts.

INVESCO (NY), Inc., New York, is an investment adviser for separately
managed accounts, such as corporate and municipal pension plans,
Taft-Hartley Plans, insurance companies, charitable institutions and private
individuals. INVESCO NY further serves as investment adviser to several
closed-end investment companies, and as sub-adviser with respect to certain
commingled employee benefit trusts.

A I M Advisors, Inc., Houston, Texas, provides investment advisory and
administrative services for retail and institutional mutual funds.

A I M Capital Management, Inc., Houston, Texas, provides investment
advisory services to individuals, corporations, pension plans and other
private investment advisory accounts and also serves as a sub-adviser to
certain retail and institutional mutual funds, one Canadian mutual fund and
one portfolio of an open-end registered investment company that is offered
to separate accounts of variable insurance companies.

A I M Distributors, Inc. and Fund Management Company, Houston, Texas, are
registered broker-dealers that act as the principal underwriters for retail
and institutional mutual funds.

<PAGE>

The corporate headquarters of AMVESCAP PLC are located at 11 Devonshire Square,
London, EC2M4YR, England.

THE INVESTMENT ADVISORY AGREEMENT

INVESCO serves as investment adviser to the Funds under an investment advisory
agreement dated February 28, 1997 (the "Agreement") with the Company.

The Agreement requires that INVESCO manage the investment portfolio of each Fund
in a way that conforms with the Fund's investment policies. INVESCO may directly
manage a Fund itself, or may hire a sub-adviser, which may be an affiliate of
INVESCO, to do so. Specifically, INVESCO is responsible for:

o managing the investment and reinvestment of all the assets of the Funds,
and executing all purchases and sales of portfolio securities;

o 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 1940 Act, and in any prospectus and/or statement of
additional information of the Funds, as from time to time amended and in
use under the 1933 Act, and (ii) the Company's status as a regulated
investment company under the Internal Revenue Code of 1986, as amended;

o determining what securities are to be purchased or sold for the Funds,
unless otherwise directed by the directors of the Company, and executing
transactions accordingly;

o 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 a long-range investment policy now or hereafter generally
available to the investment advisory customers of the adviser or any
sub-adviser;

o determining what portion of each Fund's assets should be invested in the
various types of securities authorized for purchase by the Fund; and

o making recommendations as to the manner in which voting rights, rights to
consent to Fund action and any other rights pertaining to a Fund's
portfolio securities shall be exercised.

INVESCO also performs all of the following services for the Funds:

o administrative

o internal accounting (including computation of net asset value)

o clerical and statistical

o secretarial

<PAGE>

o all other services necessary or incidental to the administration of the
affairs of the Funds

o supplying the Company with officers, clerical staff and other employees

o furnishing office space, facilities, equipment, and supplies; providing
personnel and facilities required to respond to inquiries related to
shareholder accounts

o 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 or in conjunction with
independent attorneys and accountants (including the prospectus, statement
of additional information, proxy statements, shareholder reports, tax
returns, reports to the SEC, and other corporate documents of the Funds)

o supplying basic telephone service and other utilities

o preparing and maintaining certain of the books and records required to be
prepared and maintained by the Funds under the 1940 Act.

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 from each
Fund. The fee is calculated at the annual rate of:

Realty Fund

o 0.75% on the first $500 million of the Fund's average net assets;

o 0.65% on the next $500 million of the Fund's average net assets;

o 0.55% of the Fund's average net assets from $1 billion;

o 0.45% of the Fund's average net assets from $2 billion;

o 0.40% of the Fund's average net assets from $4 billion;

o 0.375% of the Fund's average net assets from $6 billion; and

o 0.35% of the Fund's average net assets from $8 billion.

Telecommunications Fund

o 0.65% on the first $500 million of the Fund's average net assets;

o 0.55% on the next $500 million of the Fund's average net assets;

o 0.45% of the Fund's average net assets from $1 billion;

<PAGE>

o 0.40% of the Fund's average net assets from $4 billion;

o 0.375% of the Fund's average net assets from $6 billion; and

o 0.35% of the Fund's average net assets from $8 billion.

During the fiscal years ended July 31, 1999, 1998 and 1997, the Funds paid
INVESCO advisory fees in the dollar amounts shown below. If applicable, the
advisory fees were offset by credits in the amounts shown below, so that
INVESCO's fees were not in excess of the expense limitations shown below, which
have been voluntarily agreed to by the Company and INVESCO.

<TABLE>
<CAPTION>
Advisory Total Expense Total Expense
Fee Dollars Reimbursements Limitations

<S> <C> <C> <C>
Realty Fund
July 31, 1999 $157,568 $296,226 1.30%(1)
July 31, 1998 $275,574 $275,415 1.20%
July 31, 1997 $112,846 $102,675 1.20%(2)

Telecommunications Fund
July 31, 1999 $3,079,599 N/A 2.00%
July 31, 1998 $ 917,111 N/A 2.00%
July 31, 1997 $ 358,300 N/A 2.00%
</TABLE>

(1) 1.20% prior to May 13, 1999.
(2) For the period January 2, 1997, commencement of operations, through
July 31, 1997.

THE SUB-ADVISORY AGREEMENT

INVESCO Realty Advisors, Inc. ("IRAI") serves as sub-adviser to Realty Fund
pursuant to a sub-advisory agreement (the "Sub-Agreement") dated February 28,
1997.

The Sub-Agreement provides that IRAI, subject to the supervision of INVESCO,
shall manage the investment portfolio of the Fund in conformity with the Fund's
investment policies. These management services include: (a) managing the
investment and reinvestment of all the assets, now or hereafter acquired, of the
Fund, and executing all purchases and sales of portfolio securities; (b)
maintaining a continuous investment program for the Fund, consistent with (i)
the 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 1940 Act, 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 1933 Act 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 the Fund, unless otherwise
directed by the directors of the Company or INVESCO, and executing transactions

<PAGE>

accordingly; (d) providing the Fund 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 IRAI; (e) determining what portion
of the Fund's assets should be invested in the various types of securities
authorized for purchase by the 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 the Fund shall be exercised.

The Sub-Agreement provides that, as compensation for its services, IRAI shall
receive from INVESCO, at the end of each month, a fee based upon the average
daily value of the Fund's net assets. The fee is calculated at the following
annual rates:

Realty Fund

o 0.30% on the first $500 million of the Fund's average net assets;

o 0.26% on the next $500 million of the Fund's average net assets;

o 0.22% of the Fund's average net assets from $1 billion;

o 0.18% of the Fund's average net assets from $2 billion;

o 0.16% of the Fund's average net assets from $4 billion;

o 0.15% of the Fund's average net assets from $6 billion; and

o 0.14% of the Fund's average net assets from $8 billion.

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.

The Administrative Services Agreement was for an initial term expiring in one
year and has been extended by action of the board of directors through May 15,
2000. The Administrative Services Agreement may be continued from year to year
as long as each such continuance is specifically approved by the board of
directors of the Company, including a majority of the Company's directors who
are not affiliated with INVESCO ("Independent Directors"). The Administrative
Services Agreement may be terminated at any time without penalty by INVESCO on
sixty (60) days' written notice, or by the Funds upon thirty (30) days' written
notice, and ends automatically in the event of an assignment unless the
Company's board of directors, including a majority of the Company's Independent
Directors, approves such assignment.

<PAGE>

The Administrative Services Agreement requires INVESCO to provide the following
services to the Funds:

o such sub-accounting and recordkeeping services and functions as are
reasonably necessary for the operation of the Funds; and

o 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 Services
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 each
Fund prior to May 13, 1999, and 0.045% per year of the average net assets of
each Fund effective May 13, 1999.

TRANSFER AGENCY AGREEMENT

INVESCO also performs transfer agent, dividend disbursing agent, and registrar
services for the Funds pursuant to a Transfer Agency Agreement.

The Transfer Agency Agreement provides that each Fund pay INVESCO an annual fee
of $20.00 per shareholder account, or, where applicable, per participant in an
omnibus account. This fee is paid monthly at the rate of 1/12 of the annual fee
and is based upon the actual number of shareholder accounts and omnibus account
participants in each Fund at any time during each month.

FEES PAID TO INVESCO

For the fiscal years ended July 31, 1999, 1998 and 1997, the Funds paid the
following fees to INVESCO (prior to the absorption of certain Fund expenses by
INVESCO):

Realty Fund

Type of Fee 1999 1998 1997(1)
- ----------- ---- ---- -------
Advisory $157,568 $275,574 $112,846
Administrative Services $ 14,814 15,511 7,257
Transfer Agency $219,575 215,561 74,155

Telecommunications Fund

Type of Fee 1999 1998 1997
- ----------- ---- ---- ----
Advisory $3,079,599 $917,111 $358,300
Administrative Services $ 145,056 31,164 18,269
Transfer Agency $1,211,700 405,886 261,010

<PAGE>

(1) For the period January 2, 1997, commencement of operations, through July 31,
1997.

DIRECTORS AND OFFICERS OF THE COMPANY

The overall direction and supervision of the Company come from the board of
directors. The board of directors is responsible for making sure that the Funds'
general investment policies and programs are carried out and that the Funds are
properly administered.

The board of directors has an audit committee comprised of four Independent
Directors. The committee meets quarterly 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 has a management liaison committee which meets quarterly with
various management personnel of INVESCO in order to facilitate better
understanding of management and operations of the Company, and to review legal
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.

The Company has a soft dollar brokerage committee. The committee meets
periodically to review soft dollar and other brokerage transactions by the
Funds, and to review policies and procedures of INVESCO with respect to
brokerage transactions. It reports on these matters to the Company's board of
directors.

The Company has a derivatives committee. The committee meets periodically to
review derivatives investments made by the Funds. It monitors derivatives usage
by the Funds and the procedures utilized by INVESCO to ensure that the use of
such instruments follows the policies on such instruments adopted by the
Company's board of directors. It reports on these matters to the Company's board
of directors.

The officers of the Company, all of whom are officers and employees of INVESCO,
are responsible for the day-to-day administration of the Company and the Funds.
The officers of the Company receive no direct compensation from the Company or
the Funds for their services as officers. INVESCO has the primary responsibility
for making investment decisions on behalf of the Funds. These investment
decisions are reviewed by the investment committee of INVESCO.

All of the officers and directors of the Company hold comparable positions with
the following funds, which, with the Company, are collectively referred to as
the "INVESCO Funds":

<PAGE>

INVESCO Specialty Funds, Inc.
INVESCO Stock Funds, Inc. (formerly, INVESCO Equity Funds, Inc.)
INVESCO Treasurer's Series Funds, Inc. (formerly, INVESCO Treasurer's
Series Trust)
INVESCO Variable Investment Funds, Inc.

The table below provides information about each of the Company's directors
and officers. Their affiliations represent their principal occupations.

Position(s) Held Principal Occupation(s)
Name, Address, and Age With Company During Past Five Years

Charles W. Brady *+ Director and Chairman of the Board
1315 Peachtree St., N.E. Chairman of the Board of INVESCO Global
Atlanta, Georgia Health Sciences Fund;
Age: 64 Chief Executive Officer
and Director of AMVESCAP
PLC, London, England and
various subsidiaries of
AMVESCAP PLC.

Fred A. Deering +# Director and Vice Trustee of INVESCO Glo-
Security Life Center Chairman of the Board bal Health Sciences
1290 Broadway Fund; formerly,
Denver, Colorado Chairman of the
Age: 71 Executive Committee and
Chairman of the Board of
Security Life of Denver
Insurance Company;
Director of ING American
Holdings Company and First
ING Life Insurance
Company of New York.

<PAGE>
Position(s) Held Principal Occupation(s)
Name, Address, and Age With Company During Past Five Years

Mark H. Williamson *+ President, Chief President, Chief Execu-
7800 E. Union Avenue Executive Officer tive Officer and
Denver, Colorado and Director Director of INVESCO
Age: 48 Funds Group, Inc.;
President, Chief Executive
Officer and Director of
INVESCO Distributors,
Inc.; President, Chief
Operating Officer and
Trustee of INVESCO Global
Health Sciences Fund;
formerly, Chairman and
Chief Executive Officer
of NationsBanc Advisors,
Inc.; formerly, Chairman
of NationsBanc
Investments, Inc.

Victor L. Andrews, Ph.D. Director Professor Emeritus,
**! Chairman Emeritus and
34 Seawatch Drive Chairman of the CFO
Savannah, Georgia Roundtable of the
Age: 69 Department of Finance of
Georgia State University;
President, Andrews Finan-
cial Associates, Inc.(con-
sulting firm); formerly,
member of the faculties of
the Harvard Business
School and the Sloan
School of Management of
MIT; Director of The
Sheffield Funds, Inc.
<PAGE>
Position(s) Held Principal Occupation(s)
Name, Address, and Age With Company During Past Five Years

Bob R. Baker +** Director President and Chief
AMC Cancer Research Center Executive Officer of
1600 Pierce Street AMC Cancer Research
Denver, Colorado Center, Denver,
Age: 63 Colorado, since January
1989; until mid-December
1988, Vice Chairman of the
Board of First Columbia
Financial Corporation,
Englewood, Colorado;
formerly, Chairman of the
Board and Chief Executive
Officer of First Columbia
Financial Corporation.

Lawrence H. Budner # @ Director Trust Consultant;
7608 Glen Albens Circle prior to June 30,
Dallas, Texas 1987, Senior Vice
Age: 69 President and Senior
Trust Officer of
InterFirst Bank,
Dallas, Texas.

<PAGE>

Position(s) Held Principal Occupation(s)
Name, Address, and Age With Company During Past Five Years

Wendy L. Gramm, Ph.D.**! Director Self-employed (since
4201 Yuma Street, N.W. 1993); Professor of
Washington, DC Economics and Public
Age: 54 Administration,
University of Texas at
Arlington; formerly,
Chairman, Commodity
Futures Trading
Commission; Administrator
for Information and
Regulatory Affairs at the
Office of Management and
Budget; Executive Direc-
tor of the Presidential
Task Force on Regulatory
Relief; and Director of
the Federal Trade Commis-
sion's Bureau of Econom-
ics; also, Director of
Chicago Mercantile
Exchange, Enron Corpora-
tion, IBP, Inc., State
Farm Insurance Company,
Independent Women's
Forum, International
Republic Institute, and
the Republican Women's
Federal Forum. Also,
Member of Board of
Visitors, College of
Business Administration,
University of Iowa, and
Member of Board of
Visitors, Center for Study
of Public Choice, George
Mason University.

<PAGE>

Position(s) Held Principal Occupation(s)
Name, Address, and Age With Company During Past Five Years

Kenneth T. King +#@ Director Retired. Formerly,
4080 North Circulo Chairman of the Board
Manzanillo of The Capitol Life
Tucson, Arizona Insurance Company,
Age: 74 Providence Washington
Insurance Company and
Director of numerous U.S.
subsidiaries thereof;
formerly, Chairman of the
Board of The Providence
Capitol Companies in the
United Kingdom and
Guernsey; Chairman of the
Board of the Symbion
Corporation until 1987.

John W. McIntyre + #@ 7 Director Retired. Formerly,
Piedmont Center Vice Chairman of the
Suite 100 Board of Directors of
Atlanta, Georgia the Citizens and
Age: 69 Southern Corporation and
Chairman of the Board and
Chief Executive Officer
of the Citizens and
Southern Georgia Corp. and
the Citizens and Southern
National Bank; Trustee of
INVESCO Global Health
Sciences Fund, Gables
Residential Trust,
Employee's Retirement
System of GA, Emory
University and J.M. Tull
Charitable Foundation;
Director of Kaiser Foun-
dation Health Plans of
Georgia, Inc.

<PAGE>

Position(s) Held Principal Occupation(s)
Name, Address, and Age With Company During Past Five Years

Larry Soll, Ph.D.!** Director Retired. Formerly,
345 Poorman Road Chairman of the Board
Boulder, Colorado (1987 to 1994), Chief
Age: 57 Executive Officer (1982 to
1989 and 1993 to 1994) and
President (1982 to 1989)
of Synergen Inc.; Director
of Synergen since
incorporation in 1982;
Director of Isis
Pharmaceuticals, Inc.;
Trustee of INVESCO Global
Health Sciences Fund.

Glen A. Payne Secretary Senior Vice President,
7800 E. Union Avenue General Counsel and
Denver, Colorado Secretary of INVESCO
Age: 52 Funds Group, Inc.; Senior
Vice President, Secretary
and General Counsel of
INVESCO Distributors,
Inc.; Secretary, INVESCO
Global Health Sciences
Fund; formerly, General
Counsel of INVESCO Trust
Company (1989 to 1998);
formerly, employee of a
U.S. regulatory agency,
Washington, D.C. (1973 to
1989).

<PAGE>

Position(s) Held Principal Occupation(s)
Name, Address, and Age With Company During Past Five Years

Ronald L. Grooms Chief Accounting Senior Vice
7800 E. Union Avenue Officer, Chief Finan- President, Treasurer
Denver, Colorado cial Officer and and Director of
Age: 53 Treasurer INVESCO Funds Group,
Inc.; Senior Vice
President, Treasurer
and Director of
INVESCO Distributors,
Inc.; Treasurer,
Principal Financial
and Accounting Officer
of INVESCO Global
Health Sciences Fund;
formerly, Senior Vice
President and
Treasurer of INVESCO
Trust Company (1988 to
1998).

William J. Galvin, Jr. Assistant Secretary Senior Vice President
7800 E. Union Avenue and Assistant
Denver, Colorado Secretary of INVESCO
Funds Group, Inc.;
Age: 43 Senior Vice President
and Assistant
Secretary of INVESCO
Distributors, Inc.;
formerly, Trust
Officer of INVESCO
Trust Company.

Pamela J. Piro Assistant Treasurer Vice President and
7800 E. Union Avenue Assistant Treasurer
Denver, Colorado of INVESCO Funds
Group, Inc.; Assistant
Age: 39 Treasurer of INVESCO
Distributors, Inc.;
formerly, Assistant
Vice President (1996
to 1997), Director -
Portfolio Accounting
(1994 to 1996),
Portfolio Accounting
Manager (1993 to 1994)
and Assistant
Accounting Manager
(1990 to 1993).

<PAGE>

Position(s) Held Principal Occupation(s)
Name, Address, and Age With Company During Past Five Years

Alan I. Watson Assistant Secretary Vice President of
7800 E. Union Avenue INVESCO Funds Group,
Denver, Colorado Inc.; formerly, Trust
Age: 58 Officer of INVESCO
Trust Company.

Judy P. Wiese Assistant Secretary Vice President and
7800 E. Union Avenue Assis tant Secretary
Denver, Colorado of INVESCO Funds
Age: 51 Group, Inc.; Assistant
Secretary of INVESCO
Distributors, Inc.;
formerly, Trust Officer of
INVESCO Trust Company.

# 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
1940 Act.

** Member of the management liaison committee of the Company.

@ Member of the soft dollar brokerage committee of the Company.

! Member of the derivatives committee of the Company.

The following table shows the compensation paid by the Company to its
Independent Directors for services rendered in their capacities as directors of
the Company; the benefits 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, all for the period ended July 31, 1999.

In addition, the table sets forth the total compensation paid by all of the
INVESCO Funds and INVESCO Global Health Sciences Fund (collectively, the
"INVESCO Complex") to these directors or trustees for services rendered in their

<PAGE>

capacities as directors or trustees during the year ended December 31, 1998. As
of December 31, 1998, there were 53 funds in the INVESCO Complex.

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Name of Person Aggregate Compen- Benefits Accrued As Estimated Annual Total Compensation
and Position sation From Company(1) Part of Company Benefits Upon From INVESCO Complex
Expenses(2) Retirement(3) Paid to Directors(6)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fred A. Deering, Vice $3,703 $743 $502 $103,700
Chairman of the Board
- -------------------------------------------------------------------------------------------------------------------
Victor L. Andrews 3,581 711 553 80,350
- -------------------------------------------------------------------------------------------------------------------
Bob R. Baker 3,602 635 742 84,000
- -------------------------------------------------------------------------------------------------------------------
Lawrence H. Budner 3,575 711 553 79,350
- -------------------------------------------------------------------------------------------------------------------

Daniel D. Chabris(4) 1,052 726 455 70,000

- -------------------------------------------------------------------------------------------------------------------
Wendy L. Gramm 3,551 0 0 79,000
- -------------------------------------------------------------------------------------------------------------------
Kenneth T. King 3,671 758 455 77,050
- -------------------------------------------------------------------------------------------------------------------
John W. McIntyre 3,681 0 0 98,500
- -------------------------------------------------------------------------------------------------------------------
Larry Soll 3,551 0 0 96,000
- -------------------------------------------------------------------------------------------------------------------
Total 29,967 4,284 3,260 767,950
- -------------------------------------------------------------------------------------------------------------------
% of Net Assets 0.0028%(5) 0.0004%(5) 0.0035%(6)
- -------------------------------------------------------------------------------------------------------------------

(1) The vice chairman of the board, the chairmen of the Funds' committees
who are Independent Directors, and the members of the Funds' committees who are
Independent Directors each receive compensation for serving in such capacities
in addition to the compensation paid to all Independent Directors.

(2) Represents estimated benefits accrued with respect to the Defined
Benefit Deferred Compensation Plan discussed below, and not compensation
deferred at the election of the directors.

(3) These amounts represent the Company's share of the estimated annual
benefits payable by the INVESCO Funds upon the directors' retirement, calculated
using the current method of allocating director compensation among the INVESCO
Funds. 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 Funds, and for other reasons
during the period in which retirement benefits are accrued on behalf of the

<PAGE>

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. With the exception of Drs. Soll and
Gramm, each of these directors has served as a director of one or more of the
funds in the INVESCO Funds for the minimum five-year period required to be
eligible to participate in the Defined Benefit Deferred Compensation Plan.
Although Mr. McIntyre became eligible to participate in the Defined Benefit
Deferred Compensation Plan as of November 1, 1998, he was not included in the
calculation of retirement benefits until November 1, 1999.

(4) Mr. Chabris retired as a director of the Company on September 30, 1998.

(5) Totals as a percentage of the Company's net assets as of July 31, 1999.

(6) Total as a percentage of the net assets of the INVESCO Complex as of
December 31, 1998.

Messrs. Brady and Williamson, as "interested persons" of the Company and the
other INVESCO Funds, receive compensation as officers 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 Funds for their
service as directors.

The boards of directors of the mutual funds in the INVESCO Funds have adopted a
Defined Benefit Deferred Compensation Plan (the "Plan") for the Independent
Directors of the funds. Under this Plan, each director who is not an interested
person of the funds (as defined in Section 2(a)(19) of the 1940 Act) and who has
served for at least five years (a "Qualified Director") is entitled to receive,
upon termination of service as a director (normally, at the retirement age of 72
or the retirement age of 73 or 74, if the retirement date is extended by the
boards 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
and annualized board meeting fees payable by the funds to the Qualified Director
at the time of his/her retirement (the "Basic Benefit"). Commencing with any
such director's second year of retirement, and commencing with the first year of
retirement of any 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 50% of the Basic Benefit. These payments will continue for the
remainder of the Qualified Director's life or ten years, whichever is longer
(the "Reduced Benefit 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 Reduced Benefit Payments will be made to
him/her or to his/her 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 Benefit Payments will be made to
his/her 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 Funds
in a manner determined to be fair and equitable by the committee. The Company
began making payments under the Plan to Mr. Chabris as of October 1, 1998. 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. A

<PAGE>

similar plan has been adopted by INVESCO Global Health Sciences Fund's board of
trustees. All trustees of INVESCO Global Health Sciences Fund are also directors
of the INVESCO Funds.

The Independent Directors have contributed to a deferred compensation plan,
pursuant to which they have deferred receipt of a portion of the compensation
which they would otherwise have been paid as directors of certain of the INVESCO
Funds. Certain of the deferred amounts have been invested in the shares of all
INVESCO Funds, except Funds offered by INVESCO Variable Investment Funds, Inc.,
in which the directors are legally precluded from investing. Each Independent
Director may, therefore, be deemed to have an indirect interest in shares of
each such INVESCO Fund, in addition to any INVESCO Fund shares the Independent
Director may own either directly or beneficially.

CONTROL PERSONS AND PRINCIPAL SHAREHOLDERS

As of October 31, 1999, the following persons owned more than 5% of the
outstanding shares of the Funds. This level of share ownership is considered to
be a "principal shareholder" relationship with a Fund under the 1940 Act. Shares
that are owned "of record" are held in the name of the person indicated. Shares
that are owned "beneficially" are held in another name, but the owner has the
full economic benefit of ownership of those shares:

Realty Fund
- --------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage Owned
(Record/Beneficial)
- --------------------------------------------------------------------------------

Charles Schwab & Co Inc. Record 19.07%
Special Custody Account For
The Exclusive Benefit Of
The Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104-4122
- --------------------------------------------------------------------------------
Resources Trust Co Cust For Record 9.03%
The Exclusive Benefit Of The
Various Customers of IMS
P.O. Box 3865
Englewood, CO 80155-3865

- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage Owned
(Record/Beneficial)
- --------------------------------------------------------------------------------

Dorothy Berg TR
Dominican Sts Congregation Record 5.39%
of Holy Cross Trust
UDT 07/21/98
P.O. Box 280
Edmonds, WA 98020-0280
- --------------------------------------------------------------------------------

Telecommunications Fund

- --------------------------------------------------------------------------------
Name and Address Basis of Ownership Percentage Owned
(Record/Beneficial)
- --------------------------------------------------------------------------------
Charles Schwab & Co Inc. Record 26.52%
Special Custody Account For
The Exclusive Benefit Of The
Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104-4122
- --------------------------------------------------------------------------------
Nat'l Financial Services Corp
The Exclusive Benefit Of Cust Record 9.71%
One World Financial Center
200 Liberty Street, 4th Flr
Attn: Kate Recon
New York, NY 10281-1003
- --------------------------------------------------------------------------------

As of November 9, 1999, officers and directors of the Company, as a group,
beneficially owned less than 1% of any Fund's outstanding shares.

DISTRIBUTOR

INVESCO Distributors, Inc. ("IDI"), a wholly owned subsidiary of INVESCO,
is the distributor of the Funds. IDI receives no compensation and bears all
expenses, including the cost of printing and distributing prospectuses, incident
to marketing of the Funds' shares, except for such distribution expenses as are
paid out of Fund assets under the Company's plan of distribution which has been
adopted by each Fund pursuant to Rule 12b-1 under the 1940 Act.

<PAGE>

The Company has adopted a Plan and Agreement of Distribution (the "Plan") which
provides that each Fund will make monthly payments to IDI computed at an annual
rate no greater than 0.25% of the Fund's average net assets. These payments
permit IDI, at its discretion, to engage in certain activities and provide
services in connection with the distribution of the Fund's shares to investors.
Payments by a Fund under the Plan, for any month, may be made to compensate IDI
for permissible activities engaged in and services provided during the rolling
12-month period in which that month falls.

A significant expenditure under the Plan is compensation paid to securities
companies and other financial institutions and organizations, which may include
INVESCO-affiliated companies, 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 IDI to broker-dealers who sell shares of a Fund 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, INVESCO does not believe
that these limitations would affect the ability of such banks to enter into
arrangements with IDI, 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 the Funds
possibly could decrease to the extent that the banks would no longer invest
customer assets in the Funds. 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 a Fund.

During the period ended July 31, 1999, the Funds made payments to IDI under the
Plan in the amounts of $54,902 and $1,072,046 for Realty and Telecommunications
Funds, respectively. In addition, as of July 31, 1999, $4,089 and $226,264 of
additional distribution accruals had been incurred for Realty and
Telecommunications Funds, respectively, and will be paid during the fiscal year
ended July 31, 2000. For the fiscal year ended July 31, 1999, allocation of
12b-1 amounts paid by the Funds for the following categories of expenses were:

Realty Fund

Advertising--$18,175;
Sales literature, printing, and postage--$14,694;
Direct Mail--$1,323;
Public Relations/Promotion--$2,252;
Compensation to securities dealers and other organizations--$10,881; and
Marketing personnel--$7,578.

Telecommunications Fund

Advertising--$306,382;
Sales literature, printing, and postage--$145,991;
Direct Mail--$41,844;
Public Relations/Promotion--$65,179;

<PAGE>

Compensation to securities dealers and other organizations--$347,466; and
Marketing personnel--$165,182.

The services which are provided by securities dealers and other organizations
may vary by dealer but include, among other things, processing new shareholder
account applications, preparing and transmitting to the Company's Transfer Agent
computer-processable tapes of all Fund transactions by customers, serving as the
primary source of information to customers in answering questions concerning the
Funds, and assisting in other customer transactions with the Funds.

The Plan provides that it shall continue in effect with respect to each Fund as
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, including the vote of a majority of the
Independent Directors. The Plan can also be terminated at any time by a Fund,
without penalty, if a majority of the Independent Directors, or shareholders of
the Fund, vote to terminate the Plan. The Company may, in its absolute
discretion, suspend, discontinue or limit the offering of its shares 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 a Fund, the investment climate for a Fund, general
market conditions, and the volume of sales and redemptions of a Fund's shares.
The Plan may continue in effect and payments may be made under the Plan
following any temporary suspension or limitation of the offering of Fund 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 or her 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 the amount of a Fund's
payments under the Plan 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 Independent Directors. Under the
agreement implementing the Plan, IDI or a Fund, the latter by vote of a majority
of the Independent Directors or the holders of a majority of the 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
a Fund under the Plan in the event of its termination.

To the extent that the Plan constitutes a plan of distribution adopted pursuant
to Rule 12b-1 under the 1940 Act, it shall remain in effect as such, so as to
authorize the use of Fund assets in the amounts and for the purposes set forth
therein, notwithstanding the occurrence of an assignment, as defined by the 1940
Act, and rules thereunder. To the extent it constitutes an agreement pursuant to
a plan, a Fund's obligation to make payments to IDI shall terminate
automatically, in the event of such "assignment." In this event, a Fund may
continue to make payments pursuant to the Plan only upon the approval of new
arrangements regarding the use of the amounts authorized to be paid by a Fund
under the Plan. Such new arrangements must be approved by the directors,
including a majority of the Independent Directors, by a vote cast in person at a
meeting called for such purpose. These new arrangements might or might not be
with IDI. On a quarterly basis, the directors review information about the

<PAGE>

distribution services that have been provided to each Fund and the 12b-1 fees
paid for such services. On an annual basis, the directors consider whether the
Plan should be continued and, if so, whether any amendment to the Plan,
including changes in the amount of 12b-1 fees paid by each Fund, should be made.

The only Company directors and interested persons, as that term is defined in
Section 2(a)(19) of the 1940 Act, who have a direct or indirect financial
interest in the operation of the Plan are the officers and directors of the
Company who are also officers either of IDI or other companies affiliated with
IDI. The benefits which the Company believes will be reasonably likely to flow
to a Fund and its shareholders under the Plan include the following:

o 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;

o 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; and

o Increased Fund assets may result in reducing each investor's share of
certain expenses through economies of scale (e.g., exceeding established
breakpoints in an advisory fee schedule and allocating fixed expenses over
a larger asset base), thereby partially offsetting the costs of the plan.

The positive effect which increased Fund assets will have on INVESCO's revenues
could allow INVESCO and its affiliated companies:

o To have greater resources to make the financial commitments necessary to
improve the quality and level of the Funds' shareholder services (in both
systems and personnel);

o To increase the number and type of mutual funds available to investors from
INVESCO and its affiliated companies (and support them in their infancy),
and thereby expand the investment choices available to all shareholders;
and

o To acquire and retain talented employees who desire to be associated with a
growing organization.

OTHER SERVICE PROVIDERS

INDEPENDENT ACCOUNTANTS

PricewaterhouseCoopers LLP, 950 Seventeenth Street, Suite 2500, Denver,
Colorado, are the independent accountants of the Company. The independent
accountants are responsible for auditing the financial statements of the Funds.

<PAGE>

CUSTODIAN

State Street Bank and Trust Company, P.O. Box 351, Boston, Massachusetts, is the
custodian of the cash and investment securities of the Company. The custodian is
also responsible for, among other things, receipt and delivery of each Fund's
investment securities in accordance with procedures and conditions specified in
the custody agreement with the Company. The custodian is authorized to establish
separate accounts in foreign countries and to cause foreign securities owned by
the Funds to be held outside the United States in branches of U.S. banks and, to
the extent permitted by applicable regulations, in certain foreign banks and
securities depositories.

TRANSFER AGENT

INVESCO, 7800 E. Union Avenue, Denver, Colorado is the Company's transfer agent,
registrar, and dividend disbursing agent. Services provided by INVESCO include
the issuance, cancellation and transfer of shares of the Funds, and the
maintenance of records regarding the ownership of such shares.

LEGAL COUNSEL

The firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W., 2nd
Floor, Washington, D.C., is legal counsel for the Company. The firm of Moye,
Giles, O'Keefe, Vermeire & Gorrell LLP, 1225 17th Street, Suite 2900, Denver,
Colorado, acts as special counsel to the Company.

BROKERAGE ALLOCATION AND OTHER PRACTICES

As the investment adviser to the Funds, INVESCO places orders for the purchase
and sale of securities with broker-dealers based upon an evaluation of the
financial responsibility of the brokers and dealers and the ability of the
broker-dealers to effect transactions at the best available prices.

While INVESCO seeks reasonably competitive commission rates, the Funds do not
necessarily pay the lowest commission or spread available. INVESCO is permitted
to, and does, consider qualitative factors in addition to price in the selection
of brokers. Among other things, INVESCO considers the quality of executions
obtained on a Fund's portfolio transactions, viewed in terms of the size of
transactions, prevailing market conditions in the security purchased or sold,
and general economic and market conditions. INVESCO has found that a broker's
consistent ability to execute transactions is at least as important as the price
the broker charges for those services.

In seeking to ensure that the commissions charged a Fund are consistent with
prevailing and reasonable commissions, INVESCO monitors brokerage industry
practices and commissions charged by broker-dealers on transactions effected for
other institutional investors like the Funds.

Consistent with the standard of seeking to obtain favorable execution on
portfolio transactions, INVESCO may select brokers that provide research
services to INVESCO and the Company, as well as other INVESCO mutual funds and
other accounts managed by INVESCO. Research services include statistical and
analytical reports relating to issuers, industries, securities and economic

<PAGE>

factors and trends, which may be of assistance or value to INVESCO in making
informed investment decisions. Research services prepared and furnished by
brokers through which a Fund effects securities transactions may be used by
INVESCO in servicing all of its accounts and not all such services may be used
by INVESCO in connection with a particular Fund. Conversely, a Fund receives
benefits of research acquired through the brokerage transactions of other
clients of INVESCO.

In order to obtain reliable trade execution and research services, INVESCO may
utilize brokers that charge higher commissions than other brokers would charge
for the same transaction. This practice is known as "paying up." However, even
when paying up, INVESCO is obligated to obtain favorable execution of a Fund's
transactions.

Portfolio transactions also may be effected through broker-dealers that
recommend the Funds to their clients, or that act as agent in the purchase of a
Fund's shares for their clients. When a number of broker-dealers can provide
comparable best price and execution on a particular transaction, INVESCO may
consider the sale of a Fund's shares by a broker-dealer in selecting among
qualified broker-dealers.

Certain of the INVESCO Funds utilize fund brokerage commissions to pay custody
fees for each respective fund. This program requires that the funds
participating receive favorable execution.

The aggregate dollar amount of brokerage commissions paid by each Fund for the
fiscal years ended July 31, 1999, 1998 and 1997 were:

Realty Fund
July 31, 1999 $545,584
July 31, 1998 $315,807
July 31, 1997(a) $182,397

Telecommunications Fund
July 31, 1999 $2,429,429
July 31, 1998 $1,506,116
July 31, 1997 $ 397,609

(a) For the period January 2, 1997, commencement of operations, through July 31,
1997.

For the fiscal year ended July 31, 1999, brokers providing research services
received $1,243,263 in commissions on portfolio transactions effected for the
Funds. The aggregate dollar amount of such portfolio transactions was
$800,734,758. Commissions totaling $0 were allocated to certain brokers in
recognition of their sales of shares of the Funds on portfolio transactions of
the Funds effected during the fiscal year ended July 31, 1999.

At July 31, 1999, each Fund held debt securities of its regular brokers or
dealers, or their parents, as follows:

- --------------------------------------------------------------------------------
Fund Broker or Dealer Value of Securities
at July 31, 1999
- --------------------------------------------------------------------------------
Realty State Street Bank and Trust $ 839,000
Company
- --------------------------------------------------------------------------------
Telecommunications American Express Credit $ 40,000,000
Corporation
- --------------------------------------------------------------------------------
Ford Motor Credit Company $ 40,000,000
- --------------------------------------------------------------------------------
State Street Bank and Trust $ 19,540,000
Company
- --------------------------------------------------------------------------------

<PAGE>

Neither INVESCO nor any affiliate of INVESCO receives any brokerage commissions
on portfolio transactions effected on behalf of the Funds, and there is no
affiliation between INVESCO or any person affiliated with INVESCO or the Funds
and any broker or dealer that executes transactions for the Funds.

CAPITAL STOCK

The Company is authorized to issue up to 800,000,000 shares of common stock with
a par value of $0.01 per share. As of October 31, 1999, the following shares of
each Fund were outstanding:

Realty Fund 2,662,754
Telecommunications Fund 36,514,642

All shares of each Fund are of one class with equal rights as to voting,
dividends and liquidation. All shares issued and outstanding are, and all shares
offered hereby when issued will be, fully paid and nonassessable. The board of
directors has the authority to designate additional classes of common stock
without seeking the approval of shareholders and may classify and reclassify any
authorized but unissued shares.

Shares have no preemptive rights and are freely transferable on the books of
each Fund.

All shares of the Company have equal voting rights based on one vote for each
share owned. The Company is not generally required and does not expect to hold
regular annual meetings of shareholders. However, when requested to do so in
writing by the holders of 10% or more of the outstanding shares of the Company
or as may be required by applicable law or the Company's Articles of
Incorporation, the board of directors will call special meetings of
shareholders.

Directors may be removed by action of the holders of a majority of the
outstanding shares of the Company. The Funds will assist shareholders in
communicating with other shareholders as required by the 1940 Act.

Fund shares have noncumulative voting rights, which means that the holders of a
majority of the shares of the Company voting for the election of directors of
the Company can elect 100% of the directors if they choose to do so. If that
occurs, 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.
Directors may be removed by action of the holders of a majority of the
outstanding shares of the Company.

TAX CONSEQUENCES OF OWNING SHARES OF A FUND

Each Fund intends to continue to conduct its business and satisfy the applicable
diversification of assets, distribution and source of income requirements to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended. Each Fund qualified as a regulated investment
company and intends to continue to qualify during its current fiscal year. It is
the policy of each Fund to distribute all investment company taxable income and
net capital gains. As a result of this policy and the Funds' qualification as
regulated investment companies, it is anticipated that none of the Funds will
pay federal income or excise taxes and that all of the Funds will be accorded
conduit or "pass through" treatment for federal income tax purposes. Therefore,
any taxes that a Fund would ordinarily owe are paid by its shareholders on a
pro-rata basis. If a Fund does not distribute all of its net investment income
or net capital gains, it will be subject to income and excise tax on the amount
that is not distributed. If a Fund does not qualify as a regulated investment
company, it will be subject to corporate tax on its net investment income and
net capital gains at the corporate tax rates.

Dividends paid by a Fund from net investment income as well as distributions of
net realized short-term capital gains and net realized gains from certain
foreign currency transactions are taxable for federal income tax purposes as
ordinary income to shareholders. After the end of each calendar year, the Funds
send shareholders information regarding the amount and character of dividends
paid in the year, including the dividends eligible for the dividends received
deduction for corporations. Dividends eligible for the dividends received
deduction will be limited to the aggregate amount of qualifying dividends that a
Fund derives from its portfolio investments.

<PAGE>

A Fund realizes a capital gain or loss when it sells a portfolio security for
more or less than it paid for that security. Capital gains and losses are
divided into short-term and long-term, depending on how long the Fund held the
security which gave rise to the gain or loss. If the security was held one year
or less the gain or loss is considered short-term, while holding a security for
more than one year will generate a long-term gain or loss. A capital gain
distribution consists of long-term capital gains which are taxed at the capital
gains rate. Short-term capital gains are included with income from dividends and
interest as ordinary income and are paid to shareholders as dividends, as
discussed above. If total long-term gains on sales exceed total short-term
losses, including any losses carried forward from previous years, a Fund will
have a net capital gain. Distributions by a Fund of net capital gains are, for
federal income tax purposes, taxable to the shareholder as a long-term capital
gain regardless of how long a shareholder has held shares of the particular
Fund. Such distributions are not eligible for the dividends received deduction.
After the end of each calendar year, the Funds send information to shareholders
regarding the amount and character of distributions paid during the year.

All dividends and other distributions are taxable income to the shareholder,
whether or not such dividends and distributions are reinvested in additional
shares or paid in cash. If the net asset value of a Fund's shares should be
reduced below a shareholder's cost as a result of a distribution, such
distribution would be taxable to the shareholder although a portion would be a
return of invested capital. The net asset value of shares of a Fund reflects
accrued net investment income and undistributed realized capital and foreign
currency gains; therefore, when a distribution is made, the net asset value is
reduced by the amount of the distribution. If shares of a Fund 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.

If it invests in foreign securities, a Fund may be subject to the withholding of
foreign taxes on dividends or interest it receives on foreign securities.
Foreign taxes withheld will be treated as an expense of the Fund unless the Fund
meets the qualifications and makes the election to enable it to pass these taxes
through to shareholders for use by them as a foreign tax credit or deduction.
Tax conventions between certain countries and the United States may reduce or
eliminate such taxes.

A Fund may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is a foreign corporation that, in general, meets either of the
following tests: (1) at least 75% of its gross income is passive or (2) an
average value of at least 50% of its assets produce, or are held for the
production of, passive income. Each Fund intends to "mark-to-market" its stock
in any PFIC. In this context, "marking-to-market" means including in ordinary
income for each taxable year the excess, if any, of the fair market value of the
PFIC stock over the Fund's adjusted basis in the PFIC stock as of the end of the
year. In certain circumstances, a Fund will also be allowed to deduct from
ordinary income the excess, if any, of its adjusted basis in PFIC stock over the
fair market value of the PFIC stock as of the end of the year. The deduction
will only be allowed to the extent of any PFIC mark-to-market gains recognized
as ordinary income in prior years. A Fund's adjusted tax basis in each PFIC
stock for which it makes this election will be adjusted to reflect the amount of
income included or deduction taken under the election.

Gains or losses (1) from the disposition of foreign currencies, (2) from the
disposition of debt securities denominated in foreign currencies that are
attributable to fluctuations in the value of the foreign currency between the
date of acquisition of each security and the date of disposition, and (3) that
are attributable to fluctuations in exchange rates that occur between the time a
Fund accrues interest, dividends or other receivables or accrues expenses or
other liabilities denominated in a foreign currency and the time the Fund
actually collects the receivables or pays the liabilities, generally will be
treated as ordinary income or loss. These gains or losses may increase or
decrease the amount of a Fund's investment company taxable income to be
distributed to its shareholders.

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 Funds recommend any

<PAGE>

particular method of determining cost basis. Other methods may result in
different tax consequences. If you have reported gains or losses for a Fund in
past years, you must continue to use the method previously used, unless you
apply to the IRS for permission to change methods.

If you sell Fund shares at a loss after holding them for six months or less,
your loss will be treated as long-term (instead of short-term) capital loss to
the extent of any capital gain distributions that you may have received on those
shares.

Each Fund will be subject to a nondeductible 4% excise tax to the extent it
fails to distribute by the end of any calendar year substantially all of its
ordinary income for that year and its net capital gains for the one-year period
ending on October 31 of that year, plus certain other amounts.

You should consult your own tax adviser regarding specific questions as to
federal, state and local taxes. Dividends and capital gain distributions will
generally be subject to applicable state and local taxes. Qualification as a
regulated investment company under the Internal Revenue Code of 1986, as
amended, for income tax purposes does not entail government supervision of
management or investment policies.

PERFORMANCE

To keep shareholders and potential investors informed, INVESCO will occasionally
advertise the Funds' total return for one-, five-, and ten-year periods (or
since inception). Total return figures show the rate of return on a $10,000
investment in a Fund, assuming reinvestment of all dividends and capital gain
distributions for the periods cited.

Cumulative total return shows the actual rate of return on an investment for the
period cited; average annual total return represents the average annual
percentage change in the value of an investment. Both cumulative and average
annual total returns tend to "smooth out" fluctuations in a Fund's investment
results, because they do not show the interim variations in performance over the
periods cited. More information about the Funds' recent and historical
performance is contained in the Company's Annual Report to Shareholders. You can
get a free copy by calling or writing to INVESCO using the phone number or
address on the back cover of the Funds' Prospectuses.

When we quote mutual fund rankings published by Lipper Inc., we may compare a
Fund to others in its appropriate Lipper category, as well as the broad-based
Lipper general fund groupings. These rankings allow you to compare a Fund to its
peers. Other independent financial media also produce performance- or
service-related comparisons, which you may see in our promotional materials.

Performance figures are based on historical earnings and are not intended to
suggest future performance.

Average annual total return performance for the one-, five-, and ten-year
periods (or since inception) ended July 31, 1999 was:

<PAGE>

Name of Fund 1 Year 5 Year 10 Year
Or Since Inception
Realty Fund -13.29% N/A -3.59%(1)
Telecommunications Fund 65.52% 33.89% 33.89%(2)

(1) The Fund commenced operations on January 2, 1997.
(2) The Fund commenced operations on August 1, 1994.

Average annual total return performance for each of the periods indicated was
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 = a hypothetical initial payment of $10,000
T = average annual total return
n = number of years
ERV = ending redeemable value of initial payment

The average annual total return performance figures shown above were determined
by solving the above formula for "T" for each time period indicated.

In conjunction with performance reports, comparative data between a Fund's
performance for a given period and other types of investment vehicles, including
certificates of deposit, may be provided to prospective investors and
shareholders.

In conjunction with performance reports and/or analyses of shareholder services
for a Fund, comparative data between that Fund's performance for a given period
and recognized indices of investment results for the same period, and/or
assessments of the quality of shareholder service, may be provided to
shareholders. Such indices include indices provided by Dow Jones & Company, S&P,
Lipper, Inc., Lehman Brothers, National Association of Securities Dealers
Automated Quotations, Frank Russell Company, Value Line Investment Survey, the
American Stock Exchange, Morgan Stanley Capital International, Wilshire
Associates, the Financial Times Stock Exchange, the New York Stock Exchange, the
Nikkei Stock Average and Deutcher Aktienindex, all of which are unmanaged market
indicators. In addition, rankings, ratings, and comparisons of investment
performance and/or assessments of the quality of shareholder service made by
independent sources may be used in advertisements, sales literature or
shareholder reports, including reprints of, or selections from, editorials or
articles about the Fund. These sources utilize information compiled (i)
internally; (ii) by Lipper Inc.; or (iii) by other recognized analytical
services. The Lipper Inc. mutual fund rankings and comparisons which may be used

<PAGE>

by the Fund in performance reports will be drawn from the following mutual fund
groupings, in addition to the broad-based Lipper general fund groupings:

Realty Fund Real Estate Funds
Telecommunications Fund Global 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 INC.'S MUTUAL FUND PERFORMANCE ANALYSIS
MONEY
MORNINGSTAR
MUTUAL FUND FORECASTER
NO-LOAD ANALYST
NO-LOAD FUND X
PERSONAL INVESTOR
SMART MONEY
THE NEW YORK TIMES
THE NO-LOAD FUND INVESTOR
U.S. NEWS AND WORLD REPORT
UNITED MUTUAL FUND SELECTOR
USA TODAY
THE WALL STREET JOURNAL
WIESENBERGER INVESTMENT COMPANIES SERVICES
WORKING WOMAN
WORTH

<PAGE>

FINANCIAL STATEMENTS

The financial statements for INVESCO Specialty Funds, Inc. for the fiscal year
ended July 31, 1999, are incorporated herein by reference from the Company's
Annual Report to Shareholders dated July 31, 1999.

<PAGE>

APPENDIX A

BOND RATINGS

The following is a description of Moody's and S&P's bond ratings:

Moody's 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. S&P Corporate Bond Ratings

<PAGE>

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>

PART C. OTHER INFORMATION
ITEM 23. EXHIBITS

(a) Articles of Incorporation.(3)

(1) Articles Supplementary to Articles of Incorporation
dated January 6, 1995.(1)

(2) Articles Supplementary to Articles of Incorporation filed
June 28, 1995.(1)

(3) Articles of Supplementary to Articles of Incorporation
filed November 26, 1996.(2)

(4) Articles Supplementary to Articles of Incorporation filed
September 24, 1997.(4)

(5) Articles of Amendment to Articles of Incorporation filed
May 25, 1999.(7)

(6) Articles of Amendment to Articles of Incorporation filed
July 30, 1999.(7)

(b) Bylaws.(1)

(d) (1) Investment Advisory Agreement between Registrant and
INVESCO Funds Group, Inc. dated February 28, 1997.(3)

(a) Amendment dated October 1, 1997 to Advisory Agreement.(4)

(b) Amendment dated May 13, 1999 to Advisory Agreement.(7)

(2) Sub-Advisory Agreement between INVESCO Funds Group, Inc.
and INVESCO Asset Management Limited dated
February 28, 1997.(2)

(3) Sub-Advisory Agreement between INVESCO Funds Group, Inc.
and INVESCO Realty Advisors, Inc. dated February 28, 1997.(2)

(e) (1) General Distribution Agreement between Registrant and
INVESCO Distributors, Inc. dated September 30, 1997.(5)

(f) (1) Defined Benefit Deferred Compensation Plan for Non-
Interested Directors and Trustees.(2)

(2) Amended Defined Benefit Deferred Compensation Plan
for Non-Interested Directors and Trustees.(7)

<PAGE>

(g) Custody Agreement between Registrant and State Street Bank
and Trust Company dated May 2, 1994.(1)

(1) Amendment to Custody Agreement dated October 25, 1995.(1)

(2) Data Access Services Addendum.(3)

(3) Additional Fund Letter dated April 15, 1998.(2)

(4) Additional Fund Letter dated December 9, 1994.(6)

(5) Additional Fund Letter dated May 19, 1997.(6)

(6) Additional Fund Letter dated July 23, 1998.(6)

(h) (1) Transfer Agency Agreement between Registrant and INVESCO
Funds Group, Inc. dated February 28, 1997.(2)

(2) Administrative Services Agreement between the Fund and
INVESCO Funds Group, Inc. dated February 28, 1997.(2)

(a) Amendment dated May 13, 1999 to Administrative
Services Agreement.(7)

(i) (1) Opinion and consent of counsel as to the legality of the
securities being registered, indicating whether they will, when
sold, be legally issued, fully paid and non-assessable dated May
18, 1994.(2)

(j) Consent of Independent Accountants.

(k) Not applicable.

(l) Not applicable.

(m) (1) Amended Plan and Agreement of Distribution between
Registrant and INVESCO Distributors, Inc. adopted pursuant to
Rule 12b-1 under the Investment Company Act of 1940 dated
September 30, 1997.(6)

(n) Not Applicable.

(o) Not Applicable.

(1) Previously filed with Post-Effective Amendment No. 10 to the
Registration Statement on November 22, 1996, and incorporated by reference
herein.

(2) Previously filed with Post-Effective Amendment No. 11 to the
Registration Statement on June 27, 1997 and incorporated by reference herein.

(3) Previously filed with Post-Effective Amendment No. 12 to the
Registration Statement on July 16, 1997, and incorporated by reference herein.

<PAGE>

(4) Previously filed with Post-Effective Amendment No. 13 to the
Registration Statement on October 1, 1997, and incorporated by reference herein.

(5) Previously filed with Post-Effective Amendment No. 14 to the
Registration Statement on November 24, 1997, and incorporated by reference
herein.

(6) Previously filed with Post-Effective Amendment No. 15 to the
Registration Statement on September 29, 1998, and incorporated by reference
herein.

(7) Previously filed with Post-Effective Amendment No. 16 to the
Registration Statement on September 15, 1999, and incorporated by reference
herein.

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH INVESCO SPECIALTY
FUNDS, INC. (THE "COMPANY")

No person is presently controlled by or under common control with the Company.

ITEM 25. INDEMNIFICATION

Indemnification provisions for officers, directors and employees of the Company
are set forth in Article X of the Amended Bylaws and Article Seventh (3) of the
Articles of Restatement of the Articles of Incorporation, and are hereby
incorporated by reference. See Item 24(b)(1) and (2) above. Under these
Articles, directors and officers will be indemnified to the fullest extent
permitted to directors by the Maryland General Corporation Law, subject only to
such limitations as may be required by the Investment Company Act of 1940, as
amended, and the rules thereunder. Under the Investment Company Act of 1940,
directors and officers of the Company cannot be protected against liability to a
Fund or its shareholders to which they would be subject because of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties of
their office. The Company also maintains liability insurance policies covering
its directors and officers.

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

See "Fund Management" in the Funds' Prospectuses and "Management of the Funds"
in the Statement of Additional Information for information regarding the
business of the investment adviser, INVESCO.

Following are the names and principal occupations of each director and officer
of the investment adviser, INVESCO. Certain of these persons hold positions with
IDI, a subsidiary of INVESCO.

</TABLE>
<TABLE>
<CAPTION>

- ---------------------------------------------------------------------------------------------------
Name Position with Adviser Principal Occupation and Company Affiliation

- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Mark H. Williamson Chairman, President & Chief Executive
Director and Officer
Officer INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------
Raymond R. Cunningham Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------
<PAGE>
- ---------------------------------------------------------------------------------------------------
William J. Galvin, Jr. Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------
Ronald L. Grooms Officer & Senior Vice President & Treasurer
Director INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------
Richard W. Healey Officer & Senior Vice President
Director INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------
William R. Keithler Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------
Charles P. Mayer Officer & Senior Vice President
Director INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------
Timothy J. Miller Officer & Senior Vice President
Director INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------
Donovan J. (Jerry) Paul Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------
Glen A. Payne Officer Senior Vice President, Secretary
& General Counsel
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------
John R. Schroer, II Officer Senior Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------
Marie E. Aro Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------
Ingeborg S. Cosby Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------
<PAGE>
- ---------------------------------------------------------------------------------------------------
Stacie Cowell Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------
Dawn Daggy-Mangerson Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------
Elroy E. Frye, Jr. Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------
Linda J. Gieger Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------
Mark D. Greenberg Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------
Brian B. Hayward Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------
Richard R. Hinderlie Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------
Thomas M. Hurley Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------
Patricia F. Johnston Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------
Campbell C. Judge Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------
Peter M. Lovell Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------
<PAGE>
- ---------------------------------------------------------------------------------------------------
James F. Lummanick Officer Vice President & Assistant
General Counsel
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------
Thomas A. Mantone, Jr. Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------
Trent E. May Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------
Corey M. McClintock Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------
Douglas J. McEldowney Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------
Frederick R. (Fritz) Meyer Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------
Stephen A. Moran Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------
Jeffrey G. Morris Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------
Laura M. Parsons Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------
Jon B. Pauley Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------
Pamela J. Piro Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------
<PAGE>
- ---------------------------------------------------------------------------------------------------
Anthony R. Rogers Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------
Gary L. Rulh Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------
James B. Sandidge Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------
John S. Segner Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------
Terri B. Smith Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------

Tane T. Tyler Officer Vice President & Assistant
General Counsel
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237

- ---------------------------------------------------------------------------------------------------
Thomas R. Wald Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------
Alan I. Watson Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------
Judy P. Wiese Officer Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------
Thomas H. Scanlan Officer Regional Vice President
INVESCO Funds Group, Inc.
12028 Edgepark Court
Potomac, MD 20854
- ---------------------------------------------------------------------------------------------------
Reagan A. Shopp Officer Regional Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------
<PAGE>
- ---------------------------------------------------------------------------------------------------
Michael D. Legoski Officer Assistant Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------
Donald R. Paddack Officer Assistant Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------

Kent T. Schmeckpeper Officer Assistant Vice President
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237

- ---------------------------------------------------------------------------------------------------
Jeraldine E. Kraus Officer Assistant Secretary
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, CO 80237
- ---------------------------------------------------------------------------------------------------

ITEM 27. (a) PRINCIPAL UNDERWRITERS

INVESCO Bond Funds, Inc.
INVESCO Combination Stock & Bond Funds, Inc.
INVESCO International Funds, Inc.
INVESCO Money Market Funds, Inc.
INVESCO Sector Funds, Inc.
INVESCO Specialty Funds, Inc.
INVESCO Stock Funds, Inc.
INVESCO Treasurer's Series Funds, Inc.
INVESCO Variable Investment Funds, Inc.

(b)

Positions and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter the Company

- ------------------ ------------ --------------
William J. Galvin, Jr. Senior Vice Assistant Secretary
7800 E. Union Avenue President &
Denver, CO 80237 Asst. Secretary

Ronald L. Grooms Senior Vice Treasurer,
7800 E. Union Avenue President, Chief Fin'l
Denver, CO 80237 Treasurer, & Officer, and
Director Chief Acctg.Off.

Richard W. Healey Senior Vice
7800 E. Union Avenue President &
Denver, CO 80237 Director

Charles P. Mayer Director
7800 E. Union Avenue
Denver, CO 80237

<PAGE>

Timothy J. Miller Director
7800 E. Union Avenue
Denver, CO 80237

Glen A. Payne Senior Vice Secretary
7800 E. Union Avenue President,
Denver, CO 80237 Secretary &
General Counsel

Pamela J. Piro Assistant Treasurer Assistant Treasurer
7800 E. Union Avenue
Denver, CO 80237

Judy P. Wiese Assistant Secretary Assistant Secretary
7800 E. Union Avenue
Denver, CO 80237

Mark H. Williamson Chairman of the Board, President,
7800 E. Union Avenue President, & Chief CEO & Director
Denver, CO 80237 Executive Officer

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS

Mark H. Williamson
7800 E. Union Avenue
Denver, CO 80237

ITEM 29. MANAGEMENT SERVICES

Not applicable.

ITEM 30. UNDERTAKINGS

Not applicable

<PAGE>

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Company certifies that it meets all of the requirements
for effectiveness of this registration statement under Rule 485(b) under the
Securities Act and has duly caused this post-effective amendment to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Denver,
County of Denver, and State of Colorado, on the 12th day of November, 1999.

Attest: INVESCO Specialty Funds, Inc.

/s/ Glen A. Payne /s/ Mark H. Williamson
- ------------------------------ ----------------------------------
Glen A. Payne, Secretary Mark H. Williamson, President

Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons in the capacities and
on the date indicated.

/s/ Mark H. Williamson /s/ Lawrence H. Budner*
- ------------------------------- -----------------------------
Mark H. Williamson, President & Lawrence H. Budner, Director
Director (Chief Executive Officer)

/s/ Ronald L. Grooms /s/ John W. McIntyre*
- ------------------------------- -----------------------------
Ronald L. Grooms, Treasurer John W. McIntyre, Director
(Chief Financial and Accounting
Officer)

/s/ Victor L. Andrews* /s/ Fred A. Deering*
- ------------------------------- -----------------------------
Victor L. Andrews, Director Fred A. Deering, Director

/s/ Bob R. Baker* /s/ Larry Soll*
- ------------------------------- -----------------------------
Bob R. Baker, Director Larry Soll, Director

/s/ Charles W. Brady* /s/ Kenneth T. King*
- ------------------------------- -----------------------------
Charles W. Brady, Director Kenneth T. King, Director

/s/ Wendy L. Gramm*
- -------------------------------
Wendy L. Gramm, Director

By_____________________________ By /s/ Glen A. Payne
-------------------------
Edward F. O'Keefe Glen A. Payne
Attorney in Fact Attorney in Fact

* Original Powers of Attorney authorizing Edward F. O'Keefe and Glen A. Payne,
and each of them, to execute this post-effective amendment to the Registration
Statement of the Registrant on behalf of the above-named directors and officers
of the Registrant have been filed with the Securities and Exchange Commission on
May 23, 1994, June 22, 1995, August 25, 1995, August 30, 1996, November 22,
1996, June 27, 1997 and October 1, 1997, respectively.

<PAGE>

Exhibit Index

Page in
Exhibit Number Registration Statement
- -------------- ----------------------
j 110

</TABLE>

Consent of Independent Accountants

We hereby consent to the incorporation by reference in the Prospectuses and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 17 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated September 8, 1999, relating to the financial
statements and financial highlights appearing in the July 31, 1999 Annual Report
to Shareholders of INVESCO Specialty Funds, Inc., which is also incorporated by
reference into the Registration Statement. We also consent to the references to
us under the heading "Financial Highlights" in the Prospectuses and under the
heading "Independent Accountants" in the Statement of Additional Information.

/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP

Denver, Colorado
November 12, 1999