KNOWLEDGE o DISCIPLINE o SERVICE o CHOICE
- --------------------------------------------------------------------------------
YOU SHOULD KNOW WHAT INVESCO KNOWS (TM)
- --------------------------------------------------------------------------------
INVESCO SPECIALTY FUNDS
REAL ESTATE OPPORTUNITY FUND
TELECOMMUNICATIONS FUND
SEMIANNUAL
SEMIANNUAL REPORT | January 31, 2000 [INVESCO ICON] INVESCO FUNDS (R)
A MEMBER OF THE AMVESCAP GROUP
<PAGE>
"MANY OF THESE HIGHLY SPECIALIZED FIRMS CANNOT KEEP UP WITH THEIR ORDERS--OFTEN
A SURE SIGNAL OF TREMENDOUS EARNINGS GROWTH AHEAD." (PAGE 4)
"IN A SENSE, WE HAVE MADE CHANGES IN THE PORTFOLIO TO BETTER ADAPT TO THE
CONTOURS OF THE NEW ECONOMY BASED AROUND SERVICE INDUSTRIES AND TECHNOLOGY."
(PAGE 6)
Graph: Telecommunications Fund
Total Return Since Inception 8/94 vs. S&P 500 Index and MSCI-EAFE
Index
This line graph compares the value of a $10,000 investment in
INVESCO Telecommunications Fund to the value of a $10,000 investment
in the S&P 500 Index and a $10,000 investment in the MSCI-EAFE
Index, assuming in each case reinvestment of all dividends and
capital gain distributions, for the period from inception (8/94)
through 1/31/00.
Graph: Real Estate Opportunity Fund
Total Return Since Inception 1/97 vs. S&P 500 Index and NARIET Index
This line graph compares the value of a $10,000 investment in
INVESCO Real Estate Opportunity Fund to the value of a $10,000
investment in the S&P 500 Index and a $10,000 investment in the
NAREIT Index, assuming in each case reinvestment of all dividends
and capital gain distributions, for the period from inception (1/97)
through 1/31/00.
The line graphs illustrate the value of a $10,000 investment, plus reinvested
dividends and capital gain distributions, for the periods since inception and
ended 1/31/00. The charts and other total return figures cited reflect the
funds' operating expenses, but the indexes do not have expenses, which would, of
course, have lowered their performance. (Of course, past performance is no
guarantee of future results.)(1),(2)
Note: Because we believe Telecommunications Fund is best compared to the S&P 500
Index due to the nature of our investment strategy, this is the last report in
which we will refer the the MSCI-EAFE Index.
<TABLE>
<CAPTION>
TOTAL RETURN
PERIODS ENDED 3/31/00(1)
6 months 1 year 5 years* Since Inception* Page #
<S> <C> <C> <C> <C> <C>
TELECOMMUNICATIONS 65.20% 117.36% 46.59% 42.81%** 3
REAL ESTATE OPPORTUNITY FUND -3.61% -2.21% N/A -4.16%*** 5
</TABLE>
* ANNUALIZED
** 8/94
*** 1/97
<PAGE>
TELECOMMUNICATIONS FUND
YOUR FUND'S PERFORMANCE: A REPORT FROM THE MANAGER
- --------------------------------------------------------------------------------
Dear Shareholder:
The six months ended in January were again extremely rewarding for investors in
leading telecommunications firms. It is becoming increasingly clear, however,
that simply being in the sector is no longer enough to drive strong stock
performance for individual firms; indeed, the stocks of many of the largest
communications firms have endured significant declines.
Instead, the market for telecommunications stocks seems to have reached a new
stage, one that recognizes that the rapid growth that remains ahead for the
sector will benefit only those firms that enjoy unique competitive advantages.
We are pleased to report that we have been able to focus our investments on many
of these companies. As a result, our performance has been exceptionally strong -
although we would repeat our warning that investors should not expect such
returns to be the norm as we move forward.
For the six-month period ended January 31, 2000, the value of your shares rose
65.20%. This performance greatly exceeded that of the S&P 500 Index, which
increased 5.58% over the same period, as it did that of the MSCI-Europe,
Australia, Far East Index, which rose 11.19%. (Of course, past performance is
not a guarantee of future results.)(1),(2)
FINDING COMPETITIVE ADVANTAGE
What creates a unique competitive advantage in the telecommunications sector?
Clearly, the benefits that once accrued to phone companies by reason of
geography are steadily disappearing. With the Telecommunications Act of 1996,
the deregulation process that began with the breakup of AT&T two decades ago has
now reached the level of AT&T's descendants, known as the regional Bell
operating companies. With new competition from upstart local and regional
service firms, the incumbent carriers have faced declining margins in many of
their areas of business.
Indeed, while they still own a small part of the total market, "competitive
local exchange carriers" are currently responsible for the installation of
roughly half of all new phone lines. We have focused on competitive carriers
such as McLeodUSA Inc and Allegiance Telecom, which impress us as more
aggressively pursuing their markets than their established competitors.
BEYOND THE CALLING PLANS
Competition is also strong in the long-distance wire and cellular phone markets.
As many consumers have lately been pleased to discover, rates on both
long-distance and cellular calls have been coming down as carriers add capacity
and compete for new business. But what is great for consumers is not necessarily
great for shareholders of many of these companies.
- --------------------------------------------------------------------------------
FUND MANAGER
BRIAN B. HAYWARD
THE FUND IS MANAGED BY VICE PRESIDENT BRIAN B. HAYWARD. BEFORE COMING TO
INVESCO, HE WAS A SENIOR EQUITY ANALYST FOR MISSISSIPPI VALLEY ADVISORS. BRIAN
HAS A BA IN MATHEMATICS AND A MA IN ECONOMICS FROM THE UNIVERSITY OF MISSOURI.
HE IS A CHARTERED FINANCIAL ANALYST.
<PAGE>
Thus, we believe, the real future for many of these firms lies outside such
"calling plan" competition. Large firms with national and even global networks
are ideally positioned to benefit from the explosion in data traffic that is
accompanying the growth of the Internet. Firms such as AT&T Corp and Qwest
Communications International that are making acquisitions to gain access to
residential consumers may someday be in the enviable position of providing
Internet, video, and data traffic to millions of households. This is a
high-stakes strategy, but we have maintained key positions in these two firms
because the risk that the attempt may fail appears to be already reflected in
their stock prices.
SYSTEMS AND SUBSYSTEMS
While competition has been fierce in many areas even as the sector has boomed,
equipment manufacturers have enjoyed a much more favorable environment. This has
been particularly true of component manufacturers, the firms that supply the
chips, lasers, cable, software, routers and other equipment that are necessary
to make data and voice traffic speed across the fiber-optic networks being
installed around the world. Many of these highly specialized firms cannot keep
up with orders -- often a sure signal of tremendous earnings growth ahead.
JDS Uniphase is a prime example of one of the stocks that has served our fund
well. Through acquisitions, JDS Uniphase has developed expertise in producing a
number of fiber optic components, and it is well recognized as the leading
producer of the "passive" lasers that feed light signals along the cables.
Component, or "sub-system," companies like JDS Uniphase seem better-positioned
to us than even large system manufacturers, such as Lucent. Indeed, in just the
past year, JDS Uniphase has gone from relative obscurity to becoming a
large-capitalization company with a major imprint on the industry.
Such is the pace of change in the telecommunications sector. As we move forward,
we are optimistic that investors who are able to withstand some volatility will
continue to be rewarded -- and we hope to be able to report similar success
stories in our next report.
/s/ Brian B. Hayward
Brian Hayward
Vice President
<PAGE>
REAL ESTATE OPPORTUNITY FUND
YOUR FUND'S PERFORMANCE: A REPORT FROM THE MANAGER
- -----------------------------------------------------------------------
Dear Shareholder:
Once again, real estate investors have endured a difficult period. Despite the
hopes of many that the real estate sector would revive last spring when some
prominent investors showed renewed interest, the long-awaited rebound has yet to
appear. Instead, along with most slower-growing companies, the stocks of many
real estate investment trusts (REITs) have languished as investors have focused
on high-growth firms in areas such as telecommunications and technology.
Although we can do nothing to change these past results, we are taking steps to
better position the fund for growth investing -- while also seeking to benefit
from any general rebound in the sector.
For the six-month period ended January 31, 2000, the value of your shares
declined 3.61%. This return was disappointing, but it was better than that of
the NAREIT Index, which declined 5.67% over the same period. (Of course, past
performance is no guarantee of future results.)(1),(2)
In the past, our fund has been almost exclusively focused on REITs, which by law
invest only in real estate and pay out the vast majority of their funds from
operations to shareholders. Thus, while REITs can provide good income, they are
also structurally unable to acquire the funds from internal sources to invest in
new opportunities. This has been one of the largest factors in their poor stock
performance over the past few years, during which investors have been anxious to
find companies that are putting their capital to work. As we have related to you
before, many REITs are in fact making a great deal of money -- but the market
has attached a low value to that underlying performance.
TWO FACTORS DRIVING CHANGE
Two factors -- one internal to the fund and the other external -- make us
confident that we will be able to better diversify while still maintaining our
focus on the opportunities represented by real estate. First, the external: The
REIT Modernization Act, passed last year, will soon allow REITs to keep a larger
portion of their funds from operation for reinvestment. More importantly, the
Act will also allow REITs to provide a greater a range of services to their
tenants. The most interesting of these ancillary services, perhaps, is the
provision of high-speed data connections. Some leading REITs have already wired
their buildings in order to position themselves for a piece of this lucrative
revenue stream.
The internal factors will be felt more immediately. As we have informed you, we
have moved the fund's operations to Denver and given it a new name. Both of
these actions were taken to better exploit a strategy of diversification within
the fund. While REITs will remain a dominant portion of the portfolio, we plan
to broaden our investments into a number of higher-growth industries connected
with the real estate sector.
- --------------------------------------------------------------------------------
FUND MANAGER
SEAN KATOF
SEAN KATOF WAS RECENTLY NAMED THE PORTFOLIO MANAGER OF REAL ESTATE OPPORTUNITY
FUND. SEAN RECEIVED HIS BS IN BUSINESS ADMINISTRATION FROM THE UNIVERSITY OF
COLORADO AT BOULDER AND HIS MS IN FINANCE FROM THE UNIVERSITY OF COLORADO AT
DENVER. HE ALSO SERVES AS ASSISTANT PORTFOLIO MANAGER ON THE EQUITY INCOME TEAM
COVERING THE BASIC MATERIAL, CAPITAL GOODS AND TRANSPORTATION SECTORS. HE JOINED
INVESCO IN 1994.
<PAGE>
TAKING A BROADER LOOK
Since relocating management to Denver, we have made several investments in
non-traditional real estate companies. A prime example would be our position
(established following our reporting period) in Crown Castle, which owns and
operates cellular towers. On the one hand, this is a quintessential real estate
play: With communities highly suspicious of new towers, the demand by cellular
providers for "space" on the towers is growing rapidly. On the other hand, our
investment in a company like Crown Castle allows us to participate in
telecommunications, one of the fastest-growing areas of the economy.
In a sense, we have made changes in the portfolio to better adapt to the
contours of the New Economy based around service industries and technology. At
the same time, however, we are cognizant -- as are virtually all real estate
investors -- of the significant values that now exist in the sector. Should
traditional real estate firms bounce back, we plan to be there to benefit as
well.
We are optimistic that shareholders will enjoy the best of both worlds with
these changes. Well-positioned for a change in market sentiment toward REITs,
they will also benefit should the stocks of the New Economy continue to steam
ahead.
We will look forward to reporting to you on the fruits of this strategy in six
months.
/s/ Sean Katof
Sean Katof
Portfolio Manager
<PAGE>
INVESCO | SEMIANNUAL REPORT | JANUARY 31, 2000
MOVING FORWARD
- --------------------------------------------------------------------------------
MARKET HEADLINES: AUGUST 1999 TO JANUARY 2000
The six months ended in January 2000 continued the "tale of two markets" that
had characterized the investment landscape for the last couple of years. One
market, characterized primarily by fast-growing technology and
telecommunications stocks, continued to rocket ahead, based on investors'
enthusiasm for earnings growth in the "New Economy." Meanwhile, the other
market, dominated by traditional firms, moved sideways as investors fretted
about rising interest rates. Indeed, as the list of favored firms narrowed, some
recent star performers -- particularly the major drug companies -- lagged
seriously as investors became even more selective in looking for high unit
growth rates and expanding markets.
With world growth re-accelerating following the emerging markets crisis of 1998,
inflation again seemed a real threat to the advanced economies. Indeed,
commodity prices surged as worldwide demand picked up. Helped along by OPEC, oil
more than doubled its price of last year. Increasing energy costs helped the
producer price index rise at a roughly 3% annual rate, although consumer price
inflation registered a more modest 2% increase throughout much of the period.
Given the surging economy, however, modest inflationary signs were not enough to
ease Federal Reserve Board worries. Even though many economists had come to
accept that the economy had a higher non-inflationary speed limit than
previously thought -- roughly 3.5% instead of 2.5% -- gross domestic product
growth easily surpassed even this target in both the first and third quarters.
To stave off inflation, the Fed brought increased official interest rates by
0.25% in August and again in November, which helped drive long-term bond yields
to their highest levels since 1997. In part, the Fed's action worked as
intended, as higher mortgage interest rates caused a slowdown in the red-hot
property sector.
If the Fed was intending to puncture some of the "irrational exuberance" in the
stock market, however, it failed resoundingly. Although higher interest rates
should theoretically bring down price-to-earnings ratios, multiples remained
roughly the same as they had been at the end of 1998; as profits increased,
therefore, so did stock prices for many companies. Thus, interest rates and
stock prices headed higher together, baffling many "old paradigm" market
watchers. In fact, as 1999 ended and a new stock market century began,
enthusiasm for technology stocks seemed virtually without bounds. Even a
downturn in the broader market indexes at the end of January did little to slow
down the technology-dominated Nasdaq Index.
Pessimists worried that a dangerous bubble in technology stocks was
emerging. But optimists pointed to the remarkable worldwide demand for
technology by businesses seeking to remain competitive -- not to mention
consumers desiring computers, cell phones, and other trinkets of the digital
age. Periods of economic and technological change like this come along once in a
lifetime, they argued, and the real risk to investors was in not adjusting their
portfolios accordingly.
- --------------------------------------------------------------------------------
SINCE THE FUNDS ARE ACTIVELY MANAGED, HOLDINGS WILL CHANGE OVER TIME.
(1)TOTAL RETURN ASSUMES REINVESTMENT OF DIVIDENDS AND CAPITAL GAIN
DISTRIBUTIONS FOR THE PERIODS INDICATED. PAST PERFORMANCE IS NOT A GUARANTEE OF
FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT,
WHEN REDEEMED, AN INVESTOR'S SHARES MAY BE WORTH MORE OR LESS THAN WHEN
PURCHASED. THE NASDAQ IS AN UNMANAGED INDEX REFLECTING STOCKS TRADED OVER THE
COUNTER.
(2)THE S&P 500 IS AN UNMANAGED INDEX OF COMMON STOCKS CONSIDERED
REPRESENTATIVE OF THE BROAD U.S. STOCK MARKET. THE MSCI-EAFE IS AN UNMANAGED
INDEX CONSIDERED REPRESENTED OF THE EQUITY MARKETS OF EUROPE, AUSTRALIA, AND THE
FAR EAST. THE NAREIT IS AN UNMANAGED INDEX INDICATIVE OF THE U.S. REAL ESTATE
INVESTMENT TRUST MARKET.
<PAGE>
TEN LARGEST COMMON STOCK HOLDINGS
INVESCO SPECIALTY FUNDS, INC.
JANUARY 31, 2000
UNAUDITED
DESCRIPTION VALUE
- --------------------------------------------------------------------------------
REAL ESTATE OPPORTUNITY FUND
Apartment Investment & Management Class A Shrs $ 1,117,312
ProLogis Trust 1,105,625
Liberty Property Trust SBI 916,181
Trizec Hahn 915,563
Equity Office Properties Trust SBI 869,125
Post Properties 805,875
Avalonbay Communities 766,693
Public Storage 712,388
Essex Property Trust 680,000
General Growth Properties 627,000
TELECOMMUNICATIONS FUND
JDS Uniphase $ 92,159,356
Mannesmann AG Registered Shrs 77,186,343
Nokia Corp Sponsored ADR Representing Ord Shrs 73,620,900
Cisco Systems 73,425,225
EMC Corp 71,472,150
Gemstar International Group Ltd 69,813,225
SDL Inc 66,235,366
Amdocs Ltd 65,675,925
EchoStar Communications Class A Shrs 64,807,962
Nortel Networks 59,985,563
Composition of holdings is subject to change.
<PAGE>
STATEMENT OF INVESTMENT SECURITIES
INVESCO SPECIALTY FUNDS, INC.
JANUARY 31, 2000
UNAUDITED
<TABLE>
<CAPTION>
COUNTRY SHARES OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
<S> <C> <C> <C> <C>
REAL ESTATE OPPORTUNITY FUND
92.31 COMMON STOCKS
1.83 GAMING
Harrah's Entertainment(a) 18,800 $ 374,825
======================================================================================
2.52 INSURANCE
John Hancock Financial Services(a) 29,500 514,406
======================================================================================
2.00 LODGING -- HOTELS
Marriott International Class A Shrs 13,200 410,025
======================================================================================
3.09 PAPER & FOREST PRODUCTS
Champion International 5,600 327,600
Weyerhaeuser Co 5,300 304,088
======================================================================================
631,688
76.48 REAL ESTATE INVESTMENT TRUST
Apartment Investment & Management Class A Shrs 29,500 1,117,312
Archstone Communities Trust 20,000 401,250
Arden Realty 27,600 583,050
Avalonbay Communities 22,223 766,693
Boston Properties 18,900 567,000
Brandywine Realty Trust SBI 20,900 342,237
CarrAmerica Realty 28,100 609,419
CBL & Associates Properties 20,000 421,250
Cornerstone Properties 13,000 186,875
Developers Diversified Realty 30,000 390,000
Duke-Weeks Realty 20,000 396,250
Equity Office Properties Trust SBI 34,000 869,125
Equity Residential Properties Trust SBI 10,000 415,000
Essex Property Trust 20,000 680,000
Gables Residential Trust 20,000 433,750
General Growth Properties 22,000 627,000
Health Care Property Investors 20,000 511,250
Kilroy Realty 16,600 322,663
Liberty Property Trust SBI 39,300 916,181
Mack-Cali Realty 10,000 254,375
MeriStar Hospitality 10,700 174,544
Mills Corp 10,000 174,375
New Plan Excel Realty Trust 10,000 163,750
Post Properties 21,000 805,875
Prentiss Properties Trust SBI 24,500 514,500
ProLogis Trust SBI 58,000 1,105,625
<PAGE>
COUNTRY SHARES OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
Public Storage 31,400 $ 712,388
Reckson Associates Realty 21,100 416,725
Simon Property Group 20,500 506,094
Taubman Centers 23,200 259,550
======================================================================================
15,644,106
6.39 REAL ESTATE RELATED
HomeStore.com Inc(a) 1,400 136,587
Security Capital Group Class B Shrs(a) 20,000 255,000
Trizec Hahn 57,000 915,563
======================================================================================
1,307,150
TOTAL COMMON STOCKS (Cost $19,227,276) 18,882,200
======================================================================================
7.69 SHORT-TERM INVESTMENTS -- REPURCHASE AGREEMENTS
Repurchase Agreement with State Street dated
1/31/2000 due 2/1/2000 at 5.580%,
repurchased at $1,572,244 (Collateralized
by U.S. Treasury Notes, due 9/30/2000 at
4.500%, value $1,606,473) (Cost $1,572,000) $ 1,572,000 1,572,000
======================================================================================
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $20,799,276)
(Cost for Income Tax Purposes $21,611,480) $ 20,454,200
======================================================================================
TELECOMMUNICATIONS FUND
89.31 COMMON STOCKS
2.81 BROADCASTING
EchoStar Communications Class A Shrs(a) 795,800 $ 64,807,962
Grupo Televisa SA de CV Sponsored GDR
Representing 2 Ord Participation
Certificates(a) MX 223,000 12,376,500
======================================================================================
77,184,462
1.17 CABLE
NTL Inc(a) 256,250 32,239,453
======================================================================================
16.97 COMMUNICATIONS - EQUIPMENT & MANUFACTURING
CIENA Corp(a) 263,000 17,259,375
Comverse Technology(a) 406,900 58,339,287
Copper Mountain Networks(a) 320,600 17,713,150
JDS Uniphase(a) 451,900 92,159,356
Metasolv Software(a) 125,800 13,429,150
Motorola Inc 373,765 51,112,364
Nokia Corp Sponsored ADR Representing
Ord Shrs FI 402,300 73,620,900
Nortel Networks CA 627,300 59,985,563
QUALCOMM Inc(a) 266,000 33,782,000
Scientific-Atlanta Inc 310,500 23,927,906
Tellabs Inc(a) 462,400 24,969,600
======================================================================================
466,298,651
<PAGE>
COUNTRY SHARES OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
16.50 COMPUTER RELATED
Cisco Systems(a) 670,550 $ 73,425,225
Covad Communications Group(a) 233,500 16,520,125
EMC Corp(a) 671,100 71,472,150
Exodus Communications(a) 360,000 41,355,000
Foundry Networks(a) 56,000 7,542,500
Inktomi Corp(a) 284,000 28,240,250
Internap Network Services(a) 341,000 21,142,000
Juniper Networks(a) 125,300 16,954,656
Metromedia Fiber Network Class A Shrs(a) 582,600 39,434,737
Microsoft Corp(a) 197,700 19,349,888
PSINet Inc(a) 536,300 42,836,963
Redback Networks(a) 134,800 25,098,075
Sycamore Networks(a) 19,900 6,348,100
Verio Inc(a) 200,000 12,875,000
Yahoo! Inc(a) 95,600 30,789,175
======================================================================================
453,383,844
9.86 ELECTRONICS -- SEMICONDUCTOR
Applied Micro Circuits(a) 270,900 40,025,475
Broadcom Corp Class A Shrs(a) 101,900 29,480,944
Conexant Systems(a) 382,800 32,346,600
PMC-Sierra Inc(a) CA 232,100 41,894,050
RF Micro Devices(a) 355,100 28,718,713
SDL Inc(a) 255,550 66,235,366
Texas Instruments 103,600 11,175,850
Vitesse Semiconductor(a) 482,300 20,980,050
======================================================================================
270,857,048
2.54 ENTERTAINMENT
Gemstar International Group Ltd(a) 1,051,800 69,813,225
======================================================================================
2.81 MACHINERY
Mannesmann AG Registered Shrs GM 281,500 77,186,343
======================================================================================
0.90 MANUFACTURING
Corning Inc 160,900 24,818,825
======================================================================================
0.72 RETAIL
Tandy Corp 405,900 19,838,363
======================================================================================
3.02 SERVICES
America Online(a) 300,000 17,081,250
CMGI Inc(a) 306,400 34,489,150
CSG Systems International(a) 830,500 31,403,281
======================================================================================
82,973,681
<PAGE>
COUNTRY SHARES OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
7.38 TELECOMMUNICATIONS - CELLULAR & WIRELESS
China Telecom Ltd(a) HK 3,115,000 $ 19,257,310
Crown Castle International(a) 410,500 12,982,062
Nextel Communications Class A Shrs(a) 225,650 24,003,519
NTT Mobile Communications Network JA 1,220 41,485,357
Partner Communications Ltd ADR
Representing Ord Shrs(a) IS 727,550 13,368,731
Telecom Italia Mobile SpA IT 2,315,200 25,528,710
Teligent Inc Class A Shrs(a) 146,450 9,821,303
VoiceStream Wireless(a) 279,000 32,747,625
WinStar Communications(a) 333,600 23,623,050
======================================================================================
202,817,667
11.36 TELECOMMUNICATIONS -- LONG DISTANCE
Allegiance Telecom(a) 197,600 20,822,100
AT&T Corp 529,920 27,953,280
Equant NV New York Shrs(a) NL 139,300 14,408,844
Esat Telecom Group PLC Sponsored ADR
Representing 2 Ord Shrs(a) IE 443,200 43,184,300
Global Crossing Ltd(a) BD 786,121 39,895,641
Global TeleSystems Group(a) 888,600 22,159,463
Infonet Services Class B Shrs(a) 615,450 17,386,462
ITC DeltaCom(a) 369,300 10,709,700
KPNQwest NV Class C Shrs(a) NL 378,200 24,062,975
Nippon Telegraph & Telephone JA 1,968 29,783,362
Qwest Communications International(a) 499,200 19,656,000
Sprint Corp 448,800 29,031,750
Viatel Inc(a) 350,000 12,928,125
======================================================================================
311,982,002
13.27 TELEPHONE
Amdocs Ltd(a) 1,234,800 65,675,925
AT&T Canada Class B Depository
Receipts(a) CA 831,600 42,359,625
BellSouth Corp 602,400 28,350,450
Cable & Wireless PLC UK 934,700 19,036,669
COLT Telecom Group PLC(a) UK 221,000 10,517,307
COLT Telecom Group PLC Sponsored ADR
Representing 4 Ord Shrs(a) UK 241,100 45,899,413
Illuminet Holdings(a) 222,100 11,188,287
McLeodUSA Inc(a) 445,500 30,628,125
NEXTLINK Communications Class A Shrs(a) 248,800 20,992,500
RCN Corp(a) 355,500 21,130,031
SBC Communications 664,186 28,643,021
<PAGE>
COUNTRY SHARES OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
Time Warner Telecom Class A Shrs(a) 181,500 $ 11,026,125
US WEST 439,400 29,220,100
======================================================================================
364,667,578
TOTAL COMMON STOCKS (Cost $1,404,372,177) 2,454,061,142
======================================================================================
0.76 PREFERRED STOCKS
0.22 COMMUNICATIONS - EQUIPMENT & MANUFACTURING
Corvis Corp, Pfd Series H Shrs 74,505 5,999,888
======================================================================================
0.54 TELECOMMUNICATIONS -- LONG DISTANCE
IXC Communications, Jr Exchangeable Pfd
Series B Shrs(b), 12.500%, 13,626 14,852,340
======================================================================================
TOTAL PREFERRED STOCKS (Cost $21,158,813) 20,852,228
======================================================================================
0.34 FIXED INCOME SECURITIES
0.34 CORPORATE BONDS
0.34 TELECOMMUNICATIONS -- LONG DISTANCE
Esat Telecom Group PLC
Sr Notes, Series B, 11.875%,
12/1/2008 IE $ 2,500,000 2,931,250
Sr Step-Up Notes, Zero Coupon(c),
2/1/2007 IE $7,154 ,000 6,402,830
======================================================================================
TOTAL FIXED INCOME SECURITIES
(Cost $9,389,740) 9,334,080
======================================================================================
9.59 SHORT-TERM INVESTMENTS
9.46 COMMERCIAL PAPER
2.91 CONSUMER FINANCE
General Motors Acceptance, 5.506%, 2/2/2000 $50,000,000 50,000,000
Sears Roebuck Acceptance, 5.656%, 2/3/2000 $30,000,000 30,000,000
======================================================================================
80,000,000
6.55 FINANCIAL
Associates First Capital, 5.811%, 2/1/2000 $50,000,000 50,000,000
Ford Motor Credit, 5.586%, 2/4/2000 $50,000,000 50,000,000
Heller Financial, 5.817%, 2/7/2000 $40,000,000 40,000,000
Texaco Inc, 5.547%, 2/4/2000 $40,000,000 40,000,000
======================================================================================
180,000,000
TOTAL COMMERICAL PAPER (Cost $260,000,000) 260,000,000
======================================================================================
0.13 REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
dated 1/31/2000 due 2/1/2000 at
5.580%, repurchased at $3,518,545
(Collateralized by US Treasury Notes,
due 9/30/2000 at 4.500%, value $3,589,464)
(Cost $3,518,000) $ 3,518,000 3,518,000
======================================================================================
TOTAL SHORT-TERM INVESTMENTS
(Cost $263,518,000) 263,518,000
======================================================================================
<PAGE>
COUNTRY SHARES OR
CODE IF PRINCIPAL
% DESCRIPTION NON US AMOUNT VALUE
100.00 TOTAL INVESTMENT SECURITIES AT VALUE
(Cost $1,698,438,730)
(Cost for Income Tax Purposes $1,699,029,509) $2,747,765,450
======================================================================================
</TABLE>
(a) Security is non-income producing.
(b) Security is a payment-in-kind (PIK) security. PIK securities may make
interest payments in additional securities.
(c) Step-up bonds are obligations which increase the interest payment rate at a
specified point in time. Rate shown reflects current rate which may step up
at a future date.
SUMMARY OF INVESTMENTS BY COUNTRY
% OF
COUNTRY INVESTMENT
COUNTRY CODE SECURITIES VALUE
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS FUND
Bermuda BD 1.45% $ 39,895,641
Canada CA 5.25 144,239,238
Finland FI 2.68 73,620,900
Germany GM 2.81 77,186,343
Hong Kong HK 0.70 19,257,310
Ireland IE 1.91 52,518,380
Isreal IS 0.49 13,368,731
Italy IT 0.93 25,528,710
Japan JA 2.59 71,268,719
Mexico MX 0.45 12,376,500
Netherlands NL 1.40 38,471,819
United Kingdom UK 2.75 75,453,389
United States US 76.59 2,104,579,770
================================================================================
100.00% $ 2,747,765,450
================================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
INVESCO SPECIALTY FUNDS, INC.
JANUARY 31, 2000
UNAUDITED
REAL ESTATE
OPPORTUNITY TELECOMMUNICATIONS
FUND FUND
- --------------------------------------------------------------------------------
ASSETS
Investment Securities:
At Cost(a) $ 20,799,276 $ 1,698,438,730
================================================================================
At Value(a) $ 20,454,200 $ 2,747,765,450
Cash 911 0
Receivables:
Investment Securities Sold 2,634,822 0
Fund Shares Sold 424,818 51,122,029
Dividends and Interest 16,474 1,115,480
Prepaid Expenses and Other Assets 155,138 209,540
================================================================================
TOTAL ASSETS 23,686,363 2,800,212,499
================================================================================
LIABILITIES
Payables:
Custodian 0 47,823
Distributions to Shareholders 8,674 0
Investment Securities Purchased 2,885,408 60,296,679
Fund Shares Repurchased 39,265 14,977,923
Accrued Distribution Expenses 4,246 505,083
Accrued Expenses and Other Payables 8,205 25,304
================================================================================
TOTAL LIABILITIES 2,945,798 75,852,812
================================================================================
NET ASSETS AT VALUE $ 20,740,565 $ 2,724,359,687
================================================================================
NET ASSETS
Paid-in Capital(b) $ 29,940,623 $ 1,609,418,688
Accumulated Undistributed
(Distributions in Excess of)
Net Investment Income (Loss) (13,830) (2,808,889)
Accumulated Undistributed Net
Realized Gain (Loss) on
Investment Securities and
Foreign Currency Transactions (8,841,152) 68,424,856
Net Appreciation (Depreciation)
of Investment Securities and
Foreign Currency Transactions (345,076) 1,049,325,032
================================================================================
NET ASSETS AT VALUE $ 20,740,565 $ 2,724,359,687
================================================================================
Shares Outstanding 3,198,843 52,043,668
NET ASSET VALUE, Offering and
Redemption Price per Share $ 6.48 $ 52.35
================================================================================
(a)Investment securities at cost and value at January 31, 2000 include
repurchase agreements of $1,572,000 and $3,518,000 for Real Estate
Opportunity and Telecommunications Funds, respectively.
(b)The Fund has 800 million authorized shares of common stock, par value of
$0.01 per share. Of such shares, 100 million have been allocated to Real
Estate Opportunity Fund and 200 million have been allocated to
Telecommnuciations Fund.
See Notes to Financial Statements
<PAGE>
STATEMENT OF OPERATIONS
INVESCO SPECIALTY FUNDS, INC.
SIX MONTHS ENDED JANUARY 31, 2000
UNAUDITED
REAL ESTATE
OPPORTUNITY TELECOMMUNICATIONS
FUND FUND
- --------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 562,752 $ 1,541,700
Interest 43,528 4,134,722
Foreign Taxes Withheld (866) (19,897)
================================================================================
TOTAL INCOME 605,414 5,656,525
================================================================================
EXPENSES
Investment Advisory Fees 68,243 4,291,855
Distribution Expenses 22,748 1,966,811
Transfer Agent Fees 87,907 1,283,207
Administrative Fees 9,095 359,026
Custodian Fees and Expenses 4,527 118,769
Directors' Fees and Expenses 4,669 28,211
Interest Expense 364 0
Professional Fees and Expenses 13,970 37,886
Registration Fees and Expenses 21,154 87,890
Reports to Shareholders 21,430 225,559
Other Expenses 585 17,670
================================================================================
TOTAL EXPENSES 254,692 8,416,884
Fees and Expenses Absorbed by
Investment Adviser (132,227) 0
Fees and Expenses Paid Indirectly (3,297) (101,222)
================================================================================
NET EXPENSES 119,168 8,315,662
================================================================================
NET INVESTMENT INCOME (LOSS) 486,246 (2,659,137)
================================================================================
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT SECURITIES
Net Realized Gain (Loss) on:
Investment Securities (1,313,644) 72,849,571
Foreign Currency Transactions 0 105,329
================================================================================
Total Net Realized Gain (Loss) (1,313,644) 72,954,900
================================================================================
Change in Net Appreciation
(Depreciation) of:
Investment Securities 253,349 767,014,256
Foreign Currency Transactions 0 (5,428,828)
================================================================================
Total Net Appreciation 253,349 761,585,428
================================================================================
NET GAIN (LOSS)ON INVESTMENT
SECURITIES AND FOREIGN CURRENCY
TRANSACTIONS (1,060,295) 834,540,328
================================================================================
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ (574,049) $ 831,881,191
================================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
REAL ESTATE OPPORTUNITY FUND
SIX MONTHS YEAR
ENDED ENDED
JANUARY 31 JULY 31
- --------------------------------------------------------------------------------
2000 1999
UNAUDITED
OPERATIONS
Net Investment Income $ 486,246 $ 887,199
Net Realized Loss on Investment
Securities and Foreign Currency
Transactions (1,313,644) (7,214,616)
Change in Net Appreciation of
Investment Securities and Foreign
Currency Transactions 253,349 3,469,151
================================================================================
NET DECREASE IN NET ASSETS FROM
OPERATIONS (574,049) (2,858,266)
================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income (486,910) (860,435)
In Excess of Net Realized Gain on
Investment Securities and Foreign
Currency Transactions 0 (1,731,958)
================================================================================
TOTAL DISTRIBUTIONS (486,910) (2,592,393)
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 47,820,564 116,589,416
Reinvestment of Distributions 473,429 2,451,567
================================================================================
48,293,993 119,040,983
Amounts Paid for Repurchases of
Shares (43,898,159) (119,732,760)
================================================================================
NET INCREASE (DECREASE) IN NET
ASSETS FROM FUND SHARE
TRANSACTIONS 4,395,834 (691,777)
================================================================================
TOTAL INCREASE (DECREASE) IN NET
ASSETS 3,334,875 (6,142,436)
NET ASSETS
Beginning of Period 17,405,690 23,548,126
================================================================================
End of Period (Including Accumulated
Undistributed (Distributions in
Excess of) Net Investment Loss of
($13,830) and ($13,166),
respectively) $20,740,565 $ 17,405,690
================================================================================
-----------------------------------------------
FUND SHARE TRANSACTIONS
Shares Sold 7,282,170 15,431,175
Shares Issued from Reinvestment of
Distributions 73,501 346,136
================================================================================
7,355,671 15,777,311
Shares Repurchased (6,680,308) (15,826,855)
================================================================================
NET INCREASE (DECREASE) IN FUND
SHARES 675,363 (49,544)
================================================================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
TELECOMMUNICATIONS FUND
SIX MONTHS YEAR
ENDED ENDED
JANUARY 31 JULY 31
- --------------------------------------------------------------------------------
2000 1999
UNAUDITED
OPERATIONS
Net Investment Loss $ (2,659,137) $ (2,448,036)
Net Realized Gain on Investment
Securities and Foreign Currency
Transactions 72,954,900 1,700,782
Change in Net Appreciation of
Investment Securities and Foreign
Currency Transactions 761,585,428 245,324,402
================================================================================
NET INCREASE IN NET ASSETS FROM
OPERATIONS 831,881,191 244,577,148
================================================================================
DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income (1,760) 0
Net Realized Gain on Investment
Securities and Foreign Currency
Transactions (6,140,551) (5,207,012)
================================================================================
TOTAL DISTRIBUTIONS (6,142,311) (5,207,012)
================================================================================
FUND SHARE TRANSACTIONS
Proceeds from Sales of Shares 1,792,191,679 1,499,364,986
Reinvestment of Distributions 5,888,117 5,082,544
================================================================================
1,798,079,796 1,504,447,530
Amounts Paid for Repurchases of
Shares (928,715,382) (991,137,779)
================================================================================
NET INCREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS 869,364,414 513,309,751
================================================================================
TOTAL INCREASE IN NET ASSETS 1,695,103,294 752,679,887
NET ASSETS
Beginning of Period 1,029,256,393 276,576,506
================================================================================
End of Period (Including Accumulated
Undistributed (Distributions in
Excess of) Net Investment Loss of
($2,808,889) and ($147,992),
respectively) $2,724,359,687 $ 1,029,256,393
================================================================================
------------------------------------------------------
FUND SHARE TRANSACTIONS
Shares Sold 42,913,497 57,707,098
Shares Issued from Reinvestment of
Distributions 140,450 268,634
================================================================================
43,053,947 57,975,732
Shares Repurchased (23,379,088) (39,721,071)
================================================================================
NET INCREASE IN FUND SHARES 19,674,859 18,254,661
================================================================================
See Notes to Financial Statements
<PAGE>
INVESCO Notes to financial statements -- INVESCO Specialty Funds, Inc.
UNAUDITED
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. INVESCO
Specialty Funds, Inc. is incorporated in Maryland and presently consists of two
separate Funds: Real Estate Opportunity Fund and Telecommunications Fund
(individually the "Fund" and collectively, the "Funds"). Effective February 15,
2000, Realty Fund's name changed to INVESCO Specialty Funds, Inc. - Real Estate
Opportunity Fund. The investment objectives of the Funds are: to achieve current
income for Real Estate Opportunity Fund, and to achieve a high total return on
investments through capital appreciation and current income for
Telecommunications Fund. The Fund is registered under the Investment Company Act
of 1940 (the "Act") as a diversified, open-end management investment company.
On May 20, 1999, shareholders of Real Estate Opportunity Fund and on May 28,
1999, shareholders of Telecommunications Funds approved an Agreement and Plan of
Reorganization and Termination, providing for the conversion of each Fund from a
separate series of INVESCO Specialty Funds, Inc. to a separate series of INVESCO
Sector Funds, Inc., effective March 20, 2000.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
A. SECURITY VALUATION -- Equity securities traded on national securities
exchanges or in the over-the-counter market are valued at the last sales price
at the close of the regular trading day on that exchange (generally 4:00 p.m.
Eastern time) in the market where such securities are primarily traded. If last
sales prices are not available, securities are valued at the highest closing bid
prices at the close of the regular trading day and obtained from one or more
dealers making a market for such securities or by a pricing service approved by
the Fund's board of directors.
Foreign securities are valued at the closing price on the principal stock
exchange on which they are traded. In the event that closing prices are not
available for foreign securities, prices will be obtained from the principal
stock exchange at or prior to the close of the New York Stock Exchange. Foreign
currency exchange rates are determined daily prior to the close of the New York
Stock Exchange.
If market quotations or pricing service valuations are not readily available,
securities are valued at fair value as determined in good faith under procedures
established by the Fund's board of directors.
Short-term securities are stated at amortized cost (which approximates market
value) if maturity is 60 days or less at the time of purchase, or market value
if maturity is greater than 60 days.
Assets and liabilities initially expressed in terms of foreign currencies are
translated into U.S. dollars at the prevailing market rates as quoted by one or
more banks or dealers on the date of valuation.
<PAGE>
B. REPURCHASE AGREEMENTS -- Repurchase agreements held by the Fund are fully
collateralized by U.S. Government securities and such collateral is in the
possession of the Fund's custodian. The collateral is evaluated daily to ensure
its market value exceeds the current market value of the repurchase agreements
including accrued interest. In the event of default on the obligation to
repurchase, the Fund has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation.
C. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME -- Security
transactions are accounted for on the trade date and dividend income is recorded
on the ex-dividend date. Certain dividends from foreign securities will be
recorded as soon as the Fund is informed of the dividend if such information is
obtained subsequent to the ex-dividend date. Interest income, which may be
comprised of stated coupon rate, market discount, original issue discount and
amortized premium, is recorded on the accrual basis. Income and expenses on
foreign securities are translated into U.S. dollars at rates of exchange
prevailing when accrued. Discounts and premiums on debt securities purchased are
amortized over the life of the respective security as adjusted to interest
income. Cost is determined on the specific identification basis. The cost of
foreign securities is translated into U.S. dollars at the rates of exchange
prevailing when such securities are acquired.
The Fund may have elements of risk due to concentrated investments in specific
industries or foreign issuers located in a specific country. Such concentrations
may subject the Fund to additional risks resulting from future political or
economic conditions and/or possible impositions of adverse foreign governmental
laws or currency exchange restrictions. Net realized and unrealized gain or loss
from investment securities includes fluctuations from currency exchange rates
and fluctuations in market value.
The Fund's use of short-term forward foreign currency contracts may subject it
to certain risks as a result of unanticipated movements in foreign exchange
rates. The Fund does not hold short-term forward foreign currency contracts for
trading purposes. The Fund may hold foreign currency in anticipation of settling
foreign security transactions and not for investment purposes.
D. FEDERAL AND STATE TAXES -- The Fund has complied, and continues to comply,
with the provisions of the Internal Revenue Code applicable to regulated
investment companies and, accordingly, has made or intends to make sufficient
distributions of net investment income and net realized capital gains, if any,
to relieve it from all federal and state income taxes and federal excise taxes.
Real Estate Opportunity Fund incurred and elected to defer post-October 31 net
capital losses of $894,436 to the year ended March 31, 2000. Telecommunications
Fund incurred and elected to defer post-October 31 net currency losses of
$142,796 to the year ended March 31, 2000.
To the extent future capital gains and income are offset by capital loss
carryovers and deferred post-October 31 losses, such gains will not be
distributed to shareholders.
Dividends paid by the Fund from net investment income and distributions of net
realized short-term capital gains are, for federal income tax purposes, taxable
as ordinary income to shareholders.
Investment income received from foreign sources may be subject to foreign
withholding taxes. Dividend and interest income is shown gross of foreign
withholding taxes in the accompanying financial statements.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends and distributions to
shareholders are recorded by the Fund on the ex-dividend/distribution date. The
Fund distributes net realized capital gains, if any, to its shareholders at
least annually, if not offset by capital loss carryovers. Income distributions
and capital gain distributions are determined in accordance with income tax
regulations which may differ from accounting principles generally accepted in
the United States. These differences are primarily due to differing treatments
for foreign currency transactions, nontaxable dividends, net operating losses
and expired capital loss carryforwards.
<PAGE>
F. FORWARD FOREIGN CURRENCY CONTRACTS -- The Fund enters into short-term forward
foreign currency contracts in connection with planned purchases or sales of
securities as a hedge against fluctuations in foreign exchange rates pending the
settlement of transactions in foreign securities. A forward foreign currency
contract is an agreement between contracting parties to exchange an amount of
currency at some future time at an agreed upon rate. These contracts are
marked-to-market daily and the related appreciation or depreciation of the
contracts is presented in the Statement of Assets and Liabilities. Any realized
gain or loss incurred by the Fund upon the sale of securities is included in the
Statement of Operations.
G. EXPENSES -- Each of the Funds bears expenses incurred specifically on its
behalf and, in addition, each Fund bears a portion of general expenses, based on
the relative net assets of each Fund.
Under an agreement between each Fund and the Fund's Custodian, agreed upon
Custodian Fees and Expenses are reduced by credits granted by the Custodian from
any temporarily uninvested cash. Such credits are included in Fees and Expenses
Paid Indirectly in the Statement of Operations.
NOTE 2 -- INVESTMENT ADVISORY AND OTHER AGREEMENTS. INVESCO Funds Group, Inc.
("IFG") serves as the Funds' investment adviser. As compensation for its
services to the Funds, IFG receives an investment advisory fee which is accrued
daily at the applicable rate and paid monthly. The fee is based on the annual
rate of each Fund's average net assets as follows:
<TABLE>
<CAPTION>
AVERAGE NET ASSETS
- ---------------------------------------------------------------------------------------------------
$500 $1 $2 $4 $6
$0 TO MILLION BILLION BILLION BILLION BILLION OVER
$500 TO $1 TO $2 TO $4 TO $6 TO $8 $8
FUND MILLION BILLION BILLION BILLION BILLION BILLION BILLION
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Real Estate Opportunity
Fund 0.75% 0.65% 0.55% 0.45% 0.40% 0.375% 0.35%
Telecommunications
Fund 0.65% 0.55% 0.45% 0.45% 0.40% 0.375% 0.35%
</TABLE>
A Sub-Advisory Agreement between IFG and INVESCO Realty Advisors ("IRAI"), an
affiliate of IFG, provides that investment decisions of Real Estate Opportunity
Fund are made by IRAI. Fees for such sub-advisory services are paid by IFG.
Effective January 27, 2000, the sub-advisory agreement with IRAI was terminated
and such responsibilities were transferred to IFG.
A plan of distribution pursuant to Rule 12b-1 of the Act ("the Plan") provides
for compensation of marketing and advertising expenditures to INVESCO
Distributors, Inc. ("IDI" or the "Distributor"), a wholly owned subsidiary of
IFG, to a maximum of 0.25% of annual average net assets. For the six months
ended, January 31, 2000, Real Estate Opportunity and Telecommunications Funds
paid the Distributor $22,472 and $1,680,884, respectively, under the plan of
distribution.
IFG receives a transfer agent fee from each Fund at an annual rate of
$20.00 per shareholder account, or, where applicable, per participant in an
omnibus account, per year. IFG may pay such fee for participants in omnibus
accounts to affiliates or third parties. The fee is paid monthly at one-twelfth
of the annual fee and is based upon the actual number of accounts in existence
during each month.
In accordance with an Administrative Services Agreement, each Fund pays IFG an
annual fee of $10,000, plus an additional amount computed at an annual rate of
0.045% of average net assets to provide administrative, accounting and clerical
services. The fee is accrued daily and paid monthly.
<PAGE>
IFG has voluntarily agreed to absorb certain fees and expenses incurred by Real
Estate Opportunity Fund for the six months ended January 31, 2000.
NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES. For the six months ended
January 31, 2000, the aggregate cost of purchases and proceeds from sales of
investment securities (excluding all U.S. Government securities and short-term
securities) were as follows:
FUND PURCHASES SALES
- --------------------------------------------------------------------------------
Real Estate Opportunity Fund $ 38,341,219 $ 33,314,694
Telecommunications Fund 1,043,661,880 325,444,861
There were no purchases or sales of U.S. Government securities.
NOTE 4 -- APPRECIATION AND DEPRECIATION. At January 31, 2000, the gross
appreciation of securities in which there was an excess of value over tax cost,
the gross depreciation of securities in which there was an excess of tax cost
over value and the resulting net appreciation (depreciation) by Fund were as
follows:
<TABLE>
<CAPTION>
NET
GROSS GROSS APPRECIATION
FUND APPRECIATION DEPRECIATION (DEPRECIATION)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Real Estate Opportunity Fund $ 91,496 $ 1,248,776 $ (1,157,280)
Telecommunications Fund 1,058,915,235 10,179,294 1,048,735,941
</TABLE>
NOTE 5 -- TRANSACTIONS WITH AFFILIATES. Certain of the Funds' officers and
directors are also officers and directors of IFG, IDI or IRAI.
Each Fund has adopted an unfunded defined benefit deferred compensation plan
covering all independent directors of the Fund who will have served as an
independent director for at least five years at the time of retirement. Benefits
under this plan are based on an annual rate equal to 50% of the sum of the
retainer fee at the time of retirement plus the meeting attendance fees.
Pension expenses for the six months ended January 31, 2000, included in
Directors' Fees and Expenses in the Statement of Operations, and unfunded
accrued pension costs and pension liability included in Prepaid Expenses and
Accrued Expenses, respectively, in the Statement of Assets and Liabilities were
as follows:
<TABLE>
<CAPTION>
UNFUNDED
PENSION ACCRUED PENSION
FUND EXPENSES PENSION COSTS LIABILITY
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Real Estate Opportunity Fund $ 320 $ 0 $ 1,360
Telecommunications Fund 7,783 0 0
</TABLE>
The independent directors have contributed to a deferred fee agreement plan,
pursuant to which they have deferred receipt of a portion of the compensation
which they would otherwise have been paid as directors of selected INVESCO
Funds. The deferred amounts may be invested in the shares of any of the INVESCO
Funds, excluding the INVESCO Variable Investment Funds.
NOTE 6 -- LINE OF CREDIT. Each Fund has available a Redemption Line of Credit
Facility ("LOC"), from a consortium of national banks, to be used for temporary
or emergency purposes to fund redemptions of investor shares. The LOC permits
borrowings to a maximum of 10% of the Net Assets at Value of each respective
Fund. Each Fund agrees to pay annual fees and interest on the unpaid principal
balance based on prevailing market rates as defined in the agreement. At January
31, 2000, there were no such borrowings.
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
REAL ESTATE OPPORTUNITY FUND
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
SIX MONTHS PERIOD
ENDED ENDED
JANUARY 31 YEAR ENDED JULY 31 JULY 31
- ------------------------------------------------------------------------------------------------
2000 1999 1998 1997(a)
UNAUDITED
<S> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value-- Beginning of Period $ 6.90 $ 9.15 $ 10.99 $ 10.00
================================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.17 0.33 0.38 0.22
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) (0.42) (1.56) (0.96) 0.99
================================================================================================
TOTAL FROM INVESTMENT OPERATIONS (0.25) (1.23) (0.58) 1.21
================================================================================================
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.17 0.34 0.39 0.22
Distributions from Capital Gains 0.00 0.00 0.87 0.00
In Excess of Capital Gains 0.00 0.68 0.00 0.00
================================================================================================
TOTAL DISTRIBUTIONS 0.17 1.02 1.26 0.22
================================================================================================
Net Asset Value -- End of Period $ 6.48 $ 6.90 $ 9.15 $ 10.99
================================================================================================
TOTAL RETURN (3.61%)(b) (13.29%) (6.49%) 12.24%(b)
RATIOS
Net Assets-- End of Period
($000 Omitted) $ 20,741 $ 17,406 $ 23,548 $ 36,658
Ratio of Expenses to Average
Net Assets(c)(d) 0.68%(b) 1.34% 1.22% 1.20%(e)
Ratio of Net Investment Income to
Average Net Assets(c) 2.69%(b) 4.23% 3.53% 4.08%(e)
Portfolio Turnover Rate 199%(b) 697%(f) 258% 70%(b)
</TABLE>
(a) From January 1, 1997, commencement of investment operations, to July 31,
1997.
(b) Based on operations for the period shown and, accordingly, are not
representative of a full year.
(c) Various expenses of the Fund were voluntarily absorbed by IFG for the six
months ended January 31, 2000, 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 1.41%, 2.76%, 1.97% and 1.83% (annualized), respectively,
and ratio of net investment income to average net assets would have been
1.96%, 2.81%, 2.78% and 3.45% (annualized), respectively.
(d) Ratio is based on Total Expenses of the Fund, less Expenses Absorbed by
Investment Adviser, 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>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
TELECOMMUNICATIONS FUND
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
SIX MONTHS
ENDED
JANUARY 31 YEAR ENDED JULY 31
- -------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995(a)
UNAUDITED
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value -- Beginning
of Period $ 31.80 $ 19.60 $ 15.31 $ 12.43 $ 12.30 $ 10.00
=======================================================================================================
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income (Loss)(b) (0.05) (0.00) 0.01 0.06 0.22 0.11
Net Gains on Securities
(Both Realized and Unrealized) 20.75 12.57 5.32 3.90 1.38 2.35
=======================================================================================================
TOTAL FROM INVESTMENT
OPERATIONS 20.70 12.57 5.33 3.96 1.60 2.46
=======================================================================================================
LESS DISTRIBUTIONS
Dividends from Net Investment Income 0.00 0.00 0.00 0.06 0.22 0.11
Distributions from Capital Gains 0.15 0.37 1.04 1.02 1.25 0.05
=======================================================================================================
TOTAL DISTRIBUTIONS 0.15 0.37 1.04 1.08 1.47 0.16
=======================================================================================================
Net Asset Value -- End of Period $ 52.35 $ 31.80 $ 19.60 $ 15.31 $ 12.43 $ 12.30
=======================================================================================================
TOTAL RETURN 65.20%(c) 65.52% 36.79% 33.93% 13.67% 24.83%
RATIOS
Net Assets -- End of Period
($000 Omitted) $ 2,724,360 $1,029,256 $ 276,577 $ 72,458 $ 50,516 $ 27,254
Ratio of Expenses to Average
Net Assets 0.54%(c)(d) 1.24%(d) 1.32%(d) 1.69%(d) 1.66%(d) 1.95%
Ratio of Net Investment Income
(Loss) to Average Net Assets (0.17%)(c) (0.49%) (0.16%) 0.56% 1.78% 1.43%
Portfolio Turnover Rate 22%(c) 62% 55% 96% 157% 215%
</TABLE>
(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) Based on operations for the period shown and, accordingly, are not
representative of a full year.
(d) Ratio is based on Total Expenses of the Fund, which is before any expense
offset arrangements.
<PAGE>
INVESCO FAMILY OF FUNDS
INVESTOR CLASS NEWSPAPER
FUND NAME FUND CODE TICKER SYMBOL ABBREVIATION
- --------------------------------------------------------------------------------
STOCK
Growth & Income 21 IVGIX Gro&Inc
Blue Chip Growth 10 FLRFX BlChpGro
Dynamics 20 FIDYX Dynm
Small Company Growth 60 FIEGX SmCoGth
INVESCO Endeavor 61 IVENX Endeavor
Value Equity 46 FSEQX ValEq
S&P 500 Index Fund 23 ISPIX SP500II
- --------------------------------------------------------------------------------
BOND
U.S. Government Securities 32 FBDGX USGvt
Select Income 30 FBDSX SelInc
High Yield 31 FHYPX HiYld
Tax-Free Bond 35 FTIFX TxFreeBd
- --------------------------------------------------------------------------------
COMBINATION STOCK & BOND
Equity Income 15 FIIIX EquityInc
Total Return 48 FSFLX TotRtn
Balanced 71 IMABX Bal
- --------------------------------------------------------------------------------
SECTOR
Energy 50 FSTEX Enrgy
Financial Services 57 FSFSX FinSvc
Gold 51 FGLDX Gold
Health Sciences 52 FHLSX HlthSc
Leisure 53 FLISX Leisur
Real Estate Opportunity 42 IVSRX Realty
Technology 55 FTCHX Tech
Telecommunications 39 ISWCX Telecomm
Utilities 58 FSTUX Util
- --------------------------------------------------------------------------------
INTERNATIONAL
International Blue Chip 09 IIBCX ItlBlChp
Pacific Basin 54 FPBSX PcBas
European 56 FEURX Europ
Latin American Growth 34 IVSLX LtnAmerGr
- --------------------------------------------------------------------------------
MONEY MARKET
U.S. Government Money 44 FUGXX InvGvtMF
Cash Reserves 25 FDSXX InvCshR
Tax-Free Money 40 FFRXX InvTaxFree
Treasurer's Money Market 96 IMRXX INVESCOMMR
Reserve Fund
Treasurer's Tax-Exempt 95 ITTXX INVESCOTTE
Reserve Fund
FOR MORE INFORMATION ABOUT ANY OF THE INVESCO FUNDS, INCLUDING MANAGEMENT FEES,
RISKS, AND EXPENSES, PLEASE VISIT OUR WEB SITE OR CALL US AT 1-800-525-8085 FOR
A PROSPECTUS. READ IT CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
<PAGE>
YOU
SHOULD
KNOW
WHAT
INVESCO
KNOWS (R)
[INVESCO ICON] INVESCO FUNDS (R)
We're easy to stay in touch with:
Investor Services: 1-800-525-8085
Personal Account Line: 1-800-424-8085
On the World Wide Web: www.invesco.com
INVESCO Distributors, Inc.,(SM) Distributor
Post Office Box 173707
Denver, Colorado 80217-3707
This information must be preceded or accompanied by a current prospectus.
SISF 9049 03/00
