THE
GLOBAL
HEALTH SCIENCES
FUND
ANNUAL REPORT
OCTOBER 31, 1995
[ART WORK]
INVESCO TRUST COMPANY [LOGO]
<PAGE>
The Global Health Sciences Fund
Annual Report
TABLE OF CONTENTS
- -------------------------------------------------------------------------------
Report of Investment Manager 1
- -------------------------------------------------------------------------------
Statement of Investment Securities 10
- -------------------------------------------------------------------------------
Statement of Assets and Liabilities 17
- -------------------------------------------------------------------------------
Statement of Operations 18
- -------------------------------------------------------------------------------
Statement of Cash Flows 19
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Statement of Changes in Net Assets 20
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Notes to Financial Statements 21
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Quarterly Results of Operations 26
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Financial Highlights 27
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Report of Independent Accountants 28
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Other Information:
Dividends and Capital Gains Distribution History 29
Dividend Reinvestment Plan 29
Annual Shareholders Meeting 31
Miscellaneous 31
- -------------------------------------------------------------------------------
<PAGE>
OCTOBER 31, 1995
ANNUAL REPORT
REPORT OF INVESTMENT MANAGER
Dear Shareholder:
We are happy to report that 1995 was The Global Health Sciences Fund's ("GHS" or
the "Fund") most successful year. While past performance is no guarantee of
future results, for the fiscal year ending October 31, 1995, the Fund's net
asset value ("NAV") climbed 49.5% and the share price advanced 47.5%. This
performance compares favorably with the Standard and Poor's ("S&P") Health Care
Composite Index (up 42.2%)--the benchmark measure we use to gauge our
performance vis-a-vis a broad universe of health care stocks--as well as the
market overall as measured by the S&P 500 Index (up 26.3%). We are particularly
gratified with the Fund's stellar performance given the challenges of the past
few years, and we would like to thank those patient shareholders who "hung in"
with the Fund during a rocky period in health care investing. Of course, we also
welcome any new shareholders that have more recently purchased the Fund.
An obvious question that most of you have is: With GHS' stock having advanced so
much over the last twelve months, is it time to buy, hold or sell? Clearly, this
is a legitimate question given the superb run that the Fund's NAV and share
price have had of late. We are sympathetic to this question because, as your
portfolio manager, we are confronted with the same decision almost daily. The
best way to help you answer this difficult question is to explain the thought
process that we go through when examining a stock that has moved up sharply.
First, we focus on the basic fundamentals of the company (in order to determine
its outlook and growth prospects) and the fundamentals of the industry or market
niche within which this particular company operates. Second, we scrutinize
valuation in order to determine whether the stock is overvalued, undervalued or
fairly valued. Clearly, if the stock in question is overvalued and fully
reflects all of the conceivable "good news", we either wait for a pull-back in
the price of the stock, or if the stock is held, we trim the holding. However,
if the company and/or market niche in which the company operates has strong,
long-term growth characteristics, we tend to be less critical about valuation.
We leave it to you, the shareholder, to go through a similar decision-making
process with respect to GHS' stock, but we must admit that our own bias is still
an optimistic one. This optimism is based on the following observations:
o ECONOMIC OUTLOOK--We anticipate slow to moderate economic growth in the
U.S. and internationally. This bodes well for health care stocks, which
should continue to display stronger relative earnings growth as compared to
the economically sensitive sectors of the stock market.
1
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o REGULATORY REFORM--The Food and Drug Administration ("FDA") has made
meaningful progress toward streamlining and shortening the product approval
process. New products are the life blood of the drug, biotechnology and
medical device industries; and any progress on this front only improves the
outlook for these sectors of the health care market.
o UNIT GROWTH IMPROVING--There has been an acceleration in unit volume growth
reported by many health care providers. We believe this indicates that
demand for health care goods and services is returning to historically
strong levels.
o CONSOLIDATION--The health care industry is consolidating through mergers
and acquisitions, a trend that bodes well for the industry and for
individual stocks. Companies that gain economies of scale and product
breadth through mergers and acquisitions will be able to leverage their
sales forces and manufacturing capabilities.
PERFORMANCE
The performance momentum that was achieved in the first six months continued
throughout the fiscal year. The Fund's NAV rose 49.5% for the year and GHS'
share price advanced 47.5%. While past performance is no guarantee of future
results, we are still optimistic about the outlook for health care stocks. One
also has to bear in mind that health care stocks are still recovering from the
very depressed and oversold levels of 1993 and 1994.
As displayed in the following graph, since inception of the Fund (January 24,
1992) GHS' NAV has risen 34.6%, versus a 20.0% rise in the S&P Health Care
Composite Index. Although we are pleased with this relative performance, we are
disappointed by the continued lag in the performance of the Fund's share price
(down 1.7% since inception).
THE VALUE OF A $10,000 INVESTMENT IN THE GLOBAL HEALTH SCIENCES FUND NET ASSET
VALUE, SHARE PRICE AND THE S&P HEALTH CARE COMPOSITE FROM THE
FUND'S INCEPTION DATE (1/24/92) THROUGH 10/31/95
[LINE GRAPH]
2
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While we are very pleased with both the absolute and relative performance of the
NAV over this time period, the Fund's stock price continues to trade at an
unusually high discount to NAV. At the time of this report, the Fund's share
price is trading at a 20.3% discount to the NAV. Coincidentally, this was the
same discount level reported in the semi-annual report. Fund management has gone
to great lengths to get the GHS story out to investors and brokers. We are
hopeful that greater awareness of the Fund, coupled with continued strong NAV
performance, will help to narrow the discount.
INVESTMENT STRATEGY
The same investment themes that have guided the investment process in the past
will prevail going forward. We are constantly looking for companies that have
one or more of the following characteristics:
--Expanding global opportunities
--New technological innovations for unsolved medical needs
--Low-cost solutions and services for health care purchasers
--Benefactors of consolidation
We not only monitor the specific weighting or exposure of any given company in
the portfolio, but we also manage the percentage of the portfolio that is
invested in any given sub-sector. Fundamentals and valuation drive the
investment decision process. Clearly, the investment process is "bottoms up",
although we utilize macro-analysis to cross-check our thinking.
RECENT CHANGES AND OUTLOOK
As you know, we break down the health care industry into four basic sub-sectors:
biotechnology, health care delivery, medical devices & supplies, and
pharmaceuticals. The graph below displays the changes that have occurred during
the past twelve months.
THE GLOBAL HEALTH SCIENCES FUND
% OF TOTAL NET ASSETS BY SUB-SECTOR
[BAR GRAPH]
3
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Biotechnology
As we discussed in the semi-annual report, we have been attempting to increase
the Fund's exposure to the biotechnology sub-sector. Given that this area has
been one of the best performing groups within health care over the past six
months, we perhaps could have moved more aggressively to add stocks in this
area. We will continue to selectively add to this group. Currently 14.4% of the
Fund is invested in this sector. Clearly, investing in biotechnology can be
tricky, and we hope to cautiously steer the Fund back into the group. We look
for companies with strong technology platforms and sufficient cash to fund
product development. Given the strong performance in this sub-sector, we are not
inclined to chase stocks, but will continue our plan of a gradual and selective
increase over time.
Health Care Delivery
As you can see from the graph on page 3, we have meaningfully reduced our
exposure to this sub-sector. Last February, we decreased our weighting in health
maintenance organizations ("HMOs") from over 8% to 4% of the Fund. At that time,
we had concerns that the pricing environment would become more difficult. In
addition, we also had concerns that rising medical costs would lead to pressure
on profit margins. As it turned out, this segment was severely punished in the
market during April and May; and in hindsight, it might have been wise to have
completely liquidated our HMO position. Currently, we are selectively looking to
increase our weighting in the health care delivery sub-sector (which includes
HMOs). The reason for the change in heart is primarily due to the attractive
valuation of numerous stocks. We believe the market is now discounting
greater-than-expected pricing pressure from the government-paid business. Hence,
we believe this sub-sector represents the cheapest area within the medical
services group.
The Fund's current exposure for health care delivery is 18.0% of the Fund; and
we would not be surprised if this weighting moved closer to 25% within the next
few months. Our current holdings in this sub-sector include HBO & Co and PhyCor
Inc, which have been strong performers during the fiscal year, up 118% and 141%,
respectively. These two companies are nicely positioned to benefit from some of
the major trends that are occurring in the health care delivery sub-sector.
First, hospital capital expenditure budgets are dramatically increasing in one
single area, hospital information systems. Hospitals require better financial
and clinical information systems to effectively compete in the marketplace. HBO
& Co, one of the largest purveyors of information systems to hospitals, has
benefitted from this strong demand. Our HBO & Co holding represents 4.2% of the
Fund, a meaningful commitment. A second major trend within the health care
delivery sub-sector is toward the formation of physician practice management
companies. The evolution of these companies stems from the need for physicians
to organize and create greater bargaining power vis-a-vis ever-larger
4
<PAGE>
buying groups, like HMOs and hospitals. PhyCor Inc is one of the largest
companies operating within this niche. We have high expectations for one of our
private companies, Advanced Health, which also operates in this market. It is
evolving into one of the major physician practice management companies in the
New York area and hopefully will make its public debut soon.
Medical Devices & Supplies
As mentioned in the semi-annual report, we dramatically increased our weighting
in this area last April. The rationale for this increase in exposure was due to
the elimination of many of the negatives--such as high inventory levels at
hospitals, sluggish demand and a sloppy pricing environment--that had hurt these
companies during 1993-1994. With the demise of health care reform, the
environment has improved dramatically and company fundamentals have improved. As
a result, our weighting in this sub-sector increased from 16.0% of the Fund at
fiscal year end 1994 to 34.3% currently.
We also believe that an important positive fundamental factor affecting this
group has been the change in physician practice patterns. During 1992-93 with
the threat of health care reform looming, many physicians began to practice
medicine more conservatively. As a result, hospital admissions and surgical
procedures slowed. About the middle of calendar 1994, hospital admissions and
surgical procedures once again began to increase at a more normal pace. The
table below displays industry data compiled by the American Hospital Association
("AHA") and Columbia/HCA ("COL").
Growth Rates In
---------------------------------------------------
U.S. Hospital Admissions Surgical Procedures
------------------------ -------------------
Time Period AHA COL AHA
- ----------- ---- ---- ----
1Q 1994 .............. 0.2% 1.8% 0.3%
2Q 1994 .............. 1.2% 1.5% 2.5%
3Q 1994 .............. 0.9% 2.3% 2.9%
4Q 1994 .............. 1.3% 2.0% 4.5%
1Q 1995 .............. 5.9% 5.2% 6.4%
2Q 1995 .............. 3.2% 3.8% 1.7%
- -------------
Source: American Hospital Association & Columbia/HCA Healthcare (Columbia
Hospital data based on same store comparisons). Data is trailing three
months, year over year, for the period ending 6/30/95.
These trends bode well for increased demand for medical devices and supplies.
Confirmation of this increased demand has come from reports of accelerated unit
growth by companies manufacturing and selling these products. We have positioned
the portfolio to benefit from these trends with major positions in Biomet Inc,
Boston Scientific, Medtronic Inc, Nellcor Puritan Bennett, and Sofamor/Danek
Group.
5
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Pharmaceuticals
We started the fiscal year with 31.4% of the Fund in pharmaceuticals. At
present, we have 29.2% devoted to this area. We believe that the pharmaceutical
industry is a potential benefactor of any health care reform tied to the
government's balancing of the Federal budget. As more seniors in Medicare move
into managed care programs, pharmaceutical demand should rise. This is because a
significant number of Medicare patients do not have prescription drug benefits,
whereas most managed care plans offer drug benefits as part of the standard
package.
We recently reduced our exposure to U.S.-based, large-capitalization drug
companies and have been swapping into their European cousins, which are more
attractively valued. Astra AB and Sandoz AG are two of our major European
pharmaceutical holdings that we expect strong performance from during the next
twelve months.
Other major commitments made to the portfolio during the fiscal year include
Forest Laboratories and Watson Pharmaceuticals. Forest Labs recently negotiated
a deal with one of our portfolio companies, Biovail Corp International, for the
rights to its once-a-day calcium channel blocker, which is used for high blood
pressure. Additionally, Forest Labs licensed the rights for an estrogen patch
product for menopause. We believe these new products will provide the fuel for
accelerated earnings growth for Forest Labs in the near future and will help
propel the stock higher over the next 12-18 months. Watson Pharmaceuticals
recently merged with Circa Pharmaceuticals, a combination that we believe will
lead to greater efficiencies and marketing clout. Currently, Watson has seven
abbreviated new drug applications ("ANDAs") on file at the FDA and should file
two to three more during early 1996. Additionally, the company expects to have a
New Drug Application approved in the first half of 1996 that addresses a $500
million market. As you can see, Watson has quite an impressive near term new
product pipeline for a company with only $130 million in revenues. We have a lot
of confidence and respect for management and believe the outlook for Watson is
promising.
Food and Drug Administration
The prevailing sentiment in Washington has once again swung in the direction of
reduced government regulation. This sentiment bodes well for the health care
industry. More specifically, there have been numerous hearings in Congress
discussing the possibility of reducing or streamlining the bureaucracy at the
FDA. Realizing the political threat of legislatively-imposed reform, the FDA has
taken steps to reform itself. As a result, we have started to see some progress
as measured by the number of new product approvals. The tables on the next page
review new product approvals in medical devices (510K and PMA Approvals) and
pharmaceuticals (New Chemical Entity and New Drug Application Approvals). As the
graphs display, there has been an increase in approvals by the FDA, and we
believe this trend is likely to continue.
6
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PROGRESSION OF FDA APPROVALS
[THREE BAR GRAPHS]
Private Placements
Currently 13.9% of the Fund is invested in private placements (please refer to
the Schedule of Restricted or Illiquid Securities on page 16). The breakdown by
sub-sector is as follows:
% of
Sub-Sector Net Assets
---------- ----------
Biotechnology ............................... 4.1%
Health Care Delivery ........................ 2.7
Medical Devices & Supplies .................. 6.3
Pharmaceuticals ............................. 0.8
----
Total ..................................... 13.9%
====
7
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As you are aware, the Fund's prospectus allows up to 25% of its total assets to
be invested in private companies. We are not likely to invest in any new private
companies over the near term, but due to the recent success of many of our
private companies in completing Initial Public Offerings ("IPOs"), it is very
likely that we could start looking at new opportunities in the first half of
calendar 1996.
It is worth mentioning that approximately one third of the private placements in
the portfolio are now public entities. These positions are carried at a discount
to market since they are not freely tradable securities (noted in the Schedule
of Restricted or Illiquid Securities on page 16). They will be marked up
systematically as they reach full liquidity. Stated differently, less than 10%
of the portfolio is invested in illiquid securities of privately-owned
companies. The last twelve months have been a very fruitful period for this
segment of the portfolio. We have had five companies go public this past fiscal
year, which has contributed significantly to the Fund's performance. We are
aware of seven additional companies in the portfolio that are eager to go public
within the next six months. If they are successful, this should positively
impact the Fund's performance. If part of the reason for the large discount of
the share price to NAV is due to our holdings of private placements, it behooves
investors to look more closely at our holdings in this area and truly understand
the positive contribution that they have made to the portfolio.
Top Ten Holdings
The table on the next page displays the Fund's top ten holdings as of October
31, 1995. As you can see, these holdings represent slightly less than 33% of the
Fund, versus 24% at the end of the last fiscal year. We have been slowly
reducing the total number of holdings in the portfolio, resulting in more
concentrated investments. For example, we currently hold 39 different
publicly-traded, non-restricted positions in the portfolio. At the end of fiscal
year 1994 we had 70 publicly-traded positions in the portfolio.
8
<PAGE>
TOP TEN HOLDINGS AS OF OCTOBER 31, 1995
Market Percent of
Company Value Net Assets
------- ----------- ----------
Nellcor Puritan Bennett ............ $21,045,000 5.5%
HBO & Co ........................... 15,910,260 4.2
Boston Scientific .................. 14,549,975 3.8
Biovail Corp International ......... 12,507,221 3.3
Watson Pharmaceuticals ............. 11,256,415 3.0
Forest Laboratories ................ 11,171,250 2.9
Amgen Inc .......................... 10,080,000 2.7
St. Jude Medical ................... 9,585,000 2.5
Sofamor/Danek Group ................ 9,432,500 2.5
IDEXX Laboratories ................. 9,295,075 2.5
----
Total ............................ 32.9%
====
CONCLUSION
We hope that after you have read the annual report, you are as enthusiastic
about health care investing as we are. Investors must remember that science and
technology continue to move forward daily. There are many opportunities to
address unmet medical needs. The confluence of factors that led to a bear market
for health care stocks a couple of years ago is not likely to repeat itself in
the foreseeable future and investor psychology has improved. Remember, this is a
global fund, and we do have the ability to invest in foreign markets if we feel
it is appropriate. We continue to believe that The Global Health Sciences Fund
is the best way to invest in the health care industry, and we truly believe that
health care is a "growth industry". In closing, we would like to thank all the
shareholders of the Fund and those of you who have taken time to read this
annual report. We appreciate your interest, investment and support.
Sincerely,
BARRY KUROKAWA
Barry Kurokawa
Portfolio Manager & Vice President, The Global Health Sciences Fund
Senior Vice President, INVESCO Trust Company
November 1995
9
<PAGE>
The Global Health Sciences Fund
STATEMENT OF INVESTMENT SECURITIES
October 31, 1995
- -------------------------------------------------------------------------------
Country Code,
if
Description Applicable Shares Value
- -------------------------------------------------------------------------------
COMMON STOCKS
& WARRANTS 85.52%
BIOTECHNOLOGY 11.44%
Alexion Pharmaceuticals * + # ............ 312,500 $ 587,500
Alexion Pharmaceuticals Warrants
(Exp 1997) * + (tilde) .................. 78,125 0
Amgen Inc * .............................. 210,000 10,080,000
Athena Neurosciences * ................... 480,000 4,500,000
BioCryst Pharmaceuticals * + ............. 166,666 1,556,244
Cephalon Inc * ........................... 305,000 9,150,000
Creative BioMolecules * .................. 400,000 2,100,000
Ecogen Technologies I * + # .............. 60 792,000
I D Biomedical * # ....................... CA 640,000 4,480,000
INCYTE Pharmaceuticals * ................. 250,000 5,187,500
LXR Biotechnology * # .................... 425,000 850,000
MedClone Inc Warrants
(Exp 1998) * + (tilde) .................. 209,300 0
Pharmos Corp * # ......................... 567,763 1,100,041
Unisyn Technologies * + .................. 20,755 20,755
Unisyn Technologies Warrants
(Exp 2000) * + (tilde) .................. 1 0
Vical Inc * .............................. 200,000 2,050,000
Xenometrix Inc * + ....................... 261,004 1,566,024
------------
44,020,064
------------
HEALTH CARE DELIVERY 15.12%
Caremark International ................... 375,000 7,734,375
Columbia/HCA Healthcare .................. 132,000 6,484,500
HBO & Co ................................. 224,880 15,910,260
Inphynet Medical Management * ............ 250,000 4,500,000
Medical Associates of America * + # ...... 502,935 1
OrNda Healthcorp * ....................... 187,000 3,295,875
PhyCor Inc * ............................. 191,250 7,028,437
Pyxis Corp * ............................. 290,000 3,661,250
RoTech Medical * ......................... 200,000 4,550,000
Salick Health Care * ..................... 137,000 4,983,375
------------
58,148,073
------------
10
<PAGE>
- -------------------------------------------------------------------------------
Country Code,
if
Description Applicable Shares Value
- -------------------------------------------------------------------------------
MEDICAL DEVICES & SUPPLIES 30.73%
ATS Medical * ............................ 166,666 $ 1,312,495
ATS Medical Warrants
(Exp 1997) * + (tilde) .................. 166,666 0
Biocompatibles International PLC * + ..... UK 960,000 4,951,779
Biomet Inc * ............................. 430,000 7,148,750
Boston Scientific * ...................... 345,400 14,549,975
Clarus Medical Systems Warrants
(Exp 2000) * + (tilde) .................. 11,119 0
Corvita Corp * ........................... 68,659 549,272
Corvita Corp * + ......................... 148,633 1,070,157
Corvita Corp Warrants
(Exp 1999) * + (tilde) .................. 16,114 0
Diametrics Medical * ..................... 326,221 2,507,824
Electroscope Inc * + # ................... 150,000 750,000
Electroscope Inc Warrants
(Exp 1996) * + (tilde) .............. 40,000 0
Hemasure Inc * ........................... 325,000 4,143,750
IDEXX Laboratories * ..................... 228,100 9,295,075
Imatron Inc Warrants
(Exp 1996) * + # ........................ 400,000 142,500
KeraVision Inc * + ....................... 206,185 2,296,385
Matritech Inc * .......................... 414,900 1,529,944
Medtronic Inc ............................ 160,000 9,240,000
Metra Biosystems * + ..................... 210,356 2,879,248
Nellcor Puritan Bennett * ................ 366,000 21,045,000
Protocol Systems * # ..................... 530,000 5,300,000
St. Jude Medical * ....................... 180,000 9,585,000
Sofamor/Danek Group * .................... 385,000 9,432,500
Tecnol Medical Products * ................ 385,000 7,315,000
UroMed Corp * ............................ 219,467 2,331,837
Xillix Technologies * .................... CA 711,538 839,103
------------
118,215,594
------------
PHARMACEUTICALS 28.23%
ALPHARMA Inc, Class A .................... 350,000 8,400,000
American Home Products ................... 95,000 8,419,375
Astra AB, Series A Shares ................ SW 200,000 7,348,733
Biovail Corp International * ............. CA 322,767 12,507,221
CIMA Labs * .............................. 333,333 2,374,998
Crown Laboratories * + # ................. 726,458 1,119,199
Dura Pharmaceuticals * ................... 240,000 7,020,000
11
<PAGE>
- -------------------------------------------------------------------------------
Country Code,
if
Description Applicable Shares Value
- -------------------------------------------------------------------------------
PHARMACEUTICALS--(continued)
Forest Laboratories * .................... 270,000 $ 11,171,250
Matrix Pharmaceutical * .................. 361,300 5,238,850
Merck & Co ............................... 125,000 7,187,500
Mylan Laboratories ....................... 418,500 7,951,500
Penederm Inc * ........................... 200,000 1,975,000
Pharmacia AB Sponsored ADR ............... SW 166,300 5,820,500
Quintiles Transnational * ................ 32,500 2,088,125
Sandoz AG, Registered Shares ............. CHF 9,200 7,593,059
Shaman Pharmaceuticals * ................. 166,667 1,104,169
Watson Pharmaceuticals * ................. 251,540 11,256,415
------------
108,575,894
------------
TOTAL COMMON STOCKS
& WARRANTS
(Cost $233,540,806) 328,959,625
------------
PREFERRED STOCKS 8.84%
BIOTECHNOLOGY 2.77%
Alexion Pharmaceuticals, Series A
Pfd * + # ............................... 526,316 1,000,000
Cadus Pharmaceuticals, Series A
Conv Pfd * + # .......................... 2,188,184 2,735,230
Ingenex Inc, Series B Pfd * + # .......... 103,055 600,000
MedClone Inc, Series G
Conv Pfd * + ............................ 872,096 1,046,515
Osiris Therapeutics, Series C
Conv Pfd * + ............................ 352,941 1,199,999
Synaptic Pharmaceuticals, Series III
Conv Pfd * + ............................ 250,000 1,000,000
Titan Pharmaceuticals,
Series A Pfd * + # ...................... 922,617 2,306,542
Unisyn Technologies, Series A
Conv Pfd * + # .......................... 758,258 758,258
------------
10,646,544
------------
12
<PAGE>
- -------------------------------------------------------------------------------
Country Code,
if
Description Applicable Shares Value
- -------------------------------------------------------------------------------
HEALTH CARE DELIVERY 2.68%
Advanced Health
Series A Conv Pfd * + # ................. 485,900 $ 3,187,504
Series C Conv Pfd * + # ................. 200,000 1,348,000
Multum Information Services,
Series B Pfd * + # ...................... 1,000,000 2,570,000
Physicians Online, Series A
Conv Pfd * + ............................ 2,410 3,220,965
------------
10,326,469
------------
MEDICAL DEVICES & SUPPLIES 2.87%
Adeza Biomedical, Series II
Conv Pfd * + # .......................... 1,000,000 1,000,000
Cambridge Heart, Series A
Conv Pfd * + # .......................... 1,300,000 1,950,000
Cardiometrics Inc, Series C
Conv Pfd * + ............................ 300,000 1,200,000
Clarus Medical Systems
Series I Pfd * + # ...................... 533,320 399,990
Series II Pfd * + # ..................... 111,196 83,397
InterVentional Technologies,
Series F Pfd + .......................... 250,000 2,125,000
InVision Technologies, Series A
Pfd * + ................................. 400,000 272,000
Janus Biomedical, Series A
Conv Pfd * + ........................... 400,000 1,000,000
Norian Corp, Series D Pfd + .............. 2,142,858 1,500,001
OrbTek Inc, Series A
Conv Pfd * + ........................... 714,286 1,500,001
Tetrad Corp, Series B Pfd + (dagger) ..... 1,142,858 100
------------
11,030,489
------------
PHARMACEUTICALS 0.52%
Fuisz Technologies Ltd
Series C Conv Pfd * + ................... 89,552 1,499,996
Series D Conv Pfd * + ................... 25,000 500,000
------------
1,999,996
------------
TOTAL PREFERRED STOCKS
(Cost $26,315,367) ...................... 34,003,498
------------
13
<PAGE>
- -------------------------------------------------------------------------------
Country Code,
if Principal
Description Applicable Amount Value
- -------------------------------------------------------------------------------
FIXED INCOME SECURITIES 0.25%
BIOTECHNOLOGY 0.03%
MedClone Inc, 10.00%
Promissory Notes, 12/31/1995 + .......... $ 55,260 $ 55,260
Promissory Notes
6/30/1996 + ............................ $ 55,260 55,260
------------
110,520
------------
HEALTH CARE DELIVERY 0.00%
Medical Associates of America,
7.00% Senior Conv Notes
2/28/1999 * + (at sign) ................ $ 1,689,904 100
------------
MEDICAL DEVICES & SUPPLIES 0.22%
OrbTek Inc, 10.00%
Conv Promissory Notes,
6/30/2000 + ............................. $ 500,000 500,000
Tetrad Corp, 10.00% Senior
Subordinated Promissory Notes,
3/16/1996 + (circumflex) ................ $ 353,000 353,000
------------
853,000
------------
TOTAL FIXED INCOME SECURITIES
(Cost $2,653,424) ....................... 963,620
------------
14
<PAGE>
- -------------------------------------------------------------------------------
Country Code,
if Principal
Description Applicable Amount Value
- -------------------------------------------------------------------------------
COMMERCIAL PAPER 5.39%
FINANCE RELATED 5.39%
General Electric Capital
5.73%, 11/3/1995 ........................ $ 3,830,000 $ 3,830,000
Household Finance
5.82%, 11/1/1995 ........................ $16,902,000 16,902,000
------------
TOTAL COMMERCIAL PAPER
(Cost $20,732,000) ...................... 20,732,000
------------
TOTAL INVESTMENT
SECURITIES AT VALUE (100.00%)
(Cost $283,241,597) ..................... $384,658,743
============
ADR American Depositary Receipt
Pfd Preferred stock
Conv Pfd Convertible preferred stock
* Security is non-income producing.
+ Restricted or illiquid security as of October 31, 1995. See page
16. Such securities are valued as defined in Note 1A.
# Security is an affiliated company (See Note 3).
(tilde) Security has no market value at October 31, 1995.
(dagger) Security is a defaulted security at October 31, 1995. The security
has been devalued to $100.
(at sign) Security is a defaulted security with respect to cumulative
interest of $197,155 at October 31, 1995. The security has been
devalued to $100.
(circumflex) Security is a defaulted security with respect to cumulative
interest payments of $17,552 at October 31, 1995. Subsequent to
year end, the security was devalued to $1.
SUMMARY OF INVESTMENTS BY COUNTRY
% of Investment
Country Securities Value
- -------------------------------------------------------------------------------
Canada ...................... CA 4.64% $ 17,826,324
Sweden ...................... SW 3.42 13,169,233
Switzerland ................. CHF 1.97 7,593,059
United Kingdom .............. UK 1.29 4,951,779
United States 88.68 341,118,348
------ ------------
100.00% $384,658,743
====== ============
See Notes to Financial Statements
15
<PAGE>
SCHEDULE OF RESTRICTED OR ILLIQUID SECURITIES
<TABLE>
<CAPTION>
Fair Value
Date Fair as a % of
Security Name Acquired Cost Value Net Assets
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ATS Medical Warrants (Exp 1997) 11/18/1992 $ 0 $ 0 0.00%
Adeza Biomedical, Series II Conv Pfd 12/21/1994 1,000,000 1,000,000 0.26
Advanced Health, Series A Conv Pfd 08/30/1993 48,590 3,187,504 0.84
Advanced Health, Series C Conv Pfd 01/27/1995 1,500,000 1,348,000 0.36
Alexion Pharmaceuticals 06/15/1993 1,000,000 587,500 0.15
Alexion Pharmaceuticals, Series A Pfd 06/15/1993 1,000,000 1,000,000 0.26
Alexion Pharmaceuticals Warrants
(Exp 1997) 06/15/1993 0 0 0.00
Biocompatibles International PLC 03/03/1993 960,000 4,951,779(a) 1.30
BioCryst Pharmaceuticals 11/12/1992 999,999 1,556,244(c) 0.41
Cadus Pharmaceuticals, Series A Conv Pfd 07/30/1993 1,000,000 2,735,230 0.72
Cambridge Heart, Series A Conv Pfd 09/29/1993 1,300,000 1,950,000 0.51
Cardiometrics Inc, Series C Conv Pfd 03/17/1993 1,200,000 1,200,000 0.32
Clarus Medical Systems, Series I Pfd 12/23/1992 533,320 399,990 0.11
Clarus Medical Systems, Series II Pfd 12/23/1992 111,196 83,397 0.02
Clarus Medical Systems Warrants (Exp 2000) 12/23/1992 0 0 0.00
Corvita Corp 11/05/1992 1,249,996 1,070,157(c) 0.28
Corvita Corp Warrants (Exp 1999) 11/04/1992 0 0 0.00
Crown Laboratories 08/20/1993 1,089,698 1,119,199(b) 0.29
Ecogen Technologies I 11/16/1992 684,000 792,000 0.21
Electroscope Inc 04/27/1993 750,000 750,000 0.20
Electroscope Inc Warrants (Exp 1996) 04/27/1993 0 0 0.00
Fuisz Technologies, Series C Conv Pfd 09/28/1992 1,499,996 1,499,996 0.40
Fuisz Technologies, Series D Conv Pfd 08/11/1994 500,000 500,000 0.13
Imatron Inc Warrants (Exp 1996) 09/11/1992 400,000 142,500 0.04
Ingenex Inc, Series B Pfd 09/27/1994 600,000 600,000 0.16
InterVentional Technologies, Series F Pfd 10/19/1992 2,000,000 2,125,000 0.56
InVision Technologies, Series A Pfd 09/11/1992 400,000 272,000 0.07
Janus Biomedical, Series A Conv Pfd 03/02/1994 1,000,000 1,000,000 0.26
KeraVison Inc 11/19/1992 1,500,000 2,296,385(c) 0.61
MedClone Inc, Series G Conv Pfd 10/21/1993 1,500,005 1,046,515 0.28
MedClone Inc, 10.00% Promissory
Notes, 12/31/1995 12/06/1994 55,260 55,260 0.01
MedClone Inc, 10.00% Promissory
Notes, 6/30/1996 06/29/1995 55,260 55,260 0.01
MedClone Inc Warrants (Exp 1998) 10/21/1993 0 0 0.00
Medical Associates of America 02/24/1992 530,491 1 0.00
Medical Associates of America,
7.00% Senior Conv Notes, 2/28/1999 02/24/1992 1,689,904 100 0.00
Metra Biosystems 01/11/1994 1,300,000 2,879,248(a) 0.76
Multum Information Services, Series B Pfd 03/25/1993 1,000,000 2,570,000 0.68
Norian Corp, Series D Pfd 08/05/1992 1,500,001 1,500,001 0.40
OrbTek Inc, Series A Conv Pfd 05/12/1994 1,500,001 1,500,001 0.40
OrbTek Inc, 10.00% Conv Promissory
Notes, 6/30/2000 06/30/1995 500,000 500,000 0.13
Osiris Therapeutics, Series C Conv Pfd 05/24/1994 1,199,999 1,199,999 0.32
Physicians Online, Series A Pfd 08/30/1993 964,000 3,220,965 0.85
Synaptic Pharmaceuticals, Series III
Conv Pfd 01/19/1993 1,000,000 1,000,000 0.26
Tetrad Corp, Series B Pfd 03/15/1993 1,200,001 100 0.00
Tetrad Corp, 10.00% Senior Subordinated
Promissory Notes, 3/16/1996 09/14/1995 353,000 353,000 0.09
Titan Pharmaceuticals, Series A Pfd 07/19/1993 2,000,000 2,306,542 0.61
Unisyn Technologies 02/28/1994 1,000,000 20,755 0.01
Unisyn Technologies, Series A Conv Pfd 12/27/1994 758,258 758,258 0.20
Unisyn Technologies Warrants (Exp 2000) 07/27/1994 0 0 0.00
Xenometrix Inc 07/28/1992 2,100,000 1,566,024(a) 0.41
----------- ----------- -----
$42,532,975 $52,698,910 13.89%
=========== =========== =====
<FN>
(a)- Fair value represents 75% of the security's publicly traded value.
(b)- Fair value represents 85% of the security's publicly traded value.
(c)- Fair value represents 90% of the security's publicly traded value.
</FN>
</TABLE>
See Notes to Financial Statements
16
<PAGE>
The Global Health Sciences Fund
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1995
ASSETS
Investment Securities at Value
(Cost $283,241,597) ....................................... $384,658,743
Cash ....................................................... 16
Receivables:
Investment Securities Sold ................................ 3,562,825
Dividends and Interest .................................... 84,978
Prepaid Expenses and Other Assets .......................... 16,621
------------
TOTAL ASSETS ............................................... 388,323,183
------------
LIABILITIES
Payables:
Investment Securities Purchased ........................... 8,283,417
Investment Advisory Fees .................................. 320,170
Administrative Fees ....................................... 46,880
Accrued Expenses and Other Payables ........................ 169,652
------------
TOTAL LIABILITIES .......................................... 8,820,119
------------
NET ASSETS AT VALUE ........................................ $379,503,064
============
NET ASSETS
Paid-in Capital ............................................ $281,405,932
Accumulated Net Realized Loss on Investments ............... (3,320,014)
Net Appreciation of Investments ............................ 101,417,146
------------
NET ASSETS AT VALUE ........................................ $379,503,064
============
Shares Outstanding* ........................................ 20,507,200
NET ASSET VALUE PER SHARE .................................. $18.51
============
* At October 31, 1995, there was an unlimited number of authorized Fund
shares, par value of $0.01 per share.
See Notes to Financial Statements
17
<PAGE>
The Global Health Sciences Fund
STATEMENT OF OPERATIONS
For the Year Ended October 31, 1995
INVESTMENT INCOME
Dividends (Net of Foreign Withholding Taxes of $9,755) ..... $ 954,805
Interest ................................................... 876,549
------------
TOTAL INCOME ............................................... 1,831,354
------------
EXPENSES
Investment Advisory Fees ................................... 3,021,282
Administrative Fees ........................................ 477,099
Reports to Shareholders .................................... 192,050
Custody and Accounting Fees ................................ 93,670
Trustees' Fees and Expenses ................................ 53,000
Audit Fees and Expenses .................................... 37,601
Transfer Agent Fees ........................................ 36,838
NYSE Listing Fee ........................................... 32,340
Insurance Expense .......................................... 28,915
Legal Fees and Expenses .................................... 24,827
Other Expenses ............................................. 22,266
------------
TOTAL EXPENSES ............................................. 4,019,888
------------
NET INVESTMENT LOSS ........................................ (2,188,534)
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS
Net Realized Gain (Loss) on:
Investments ............................................... 46,759,546
Other Assets and Liabilities Denominated
in Foreign Currencies .................................... (10,012)
Net Change in Appreciation of Investments
and Other Assets and Liabilities Denominated in
Foreign Currencies ........................................ 81,107,756
------------
NET REALIZED AND UNREALIZED GAIN ON
INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS .............................................. 127,857,290
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ................. $125,668,756
============
See Notes to Financial Statements
18
<PAGE>
The Global Health Sciences Fund
STATEMENT OF CASH FLOWS
For the Year Ended October 31, 1995
INCREASE (DECREASE) IN CASH
Cash Flows Used for Operating Activities:
Dividends and Interest Received, Net of Foreign
Withholding Taxes ........................................ $ 1,960,818
Expenses Paid ............................................. (3,910,442)
Purchases of Short-Term Portfolio Investments, Net ........ (11,802,000)
Purchases of Long-Term Portfolio Investments .............. (301,873,877)
Sales of Long-Term Portfolio Investments .................. 315,591,525
Other ..................................................... 6,884
-------------
Net Cash Flows Used for Operating Activities .............. (27,092)
-------------
Net Decrease in Cash ....................................... (27,092)
Decrease in Appreciation of Foreign Currencies ............. (1)
Cash at Beginning of Year .................................. 27,109
-------------
Cash at End of Year ........................................ $ 16
=============
RECONCILIATION OF NET INCREASE IN NET
ASSETS FROM OPERATIONS TO NET CASH
FLOWS USED FOR OPERATING ACTIVITIES
Net Increase in Net Assets From Operations ................. $ 125,668,756
-------------
Increase in Investments .................................... (3,446,508)
Net Realized Gain .......................................... (46,759,546)
Increase in Appreciation ................................... (81,107,756)
Decrease in Dividends and Interest Receivable .............. 129,464
Decrease in Receivable for Investment Securities Sold ...... 2,978,262
Increase in Payable for Investment Securities Purchased .... 2,393,906
Decrease in Prepaid Expenses and Other Assets .............. 6,884
Increase in Accrued Expenses and Other Payables ............ 109,446
-------------
Total Adjustments ........................................ (125,695,848)
-------------
Net Cash Flows Used for Operating Activities ............... $ (27,092)
=============
See Notes to Financial Statements
19
<PAGE>
The Global Health Sciences Fund
STATEMENT OF CHANGES IN NET ASSETS
For the Year
Ended
October 31,
------------------------------
1995 1994
------------ ------------
OPERATIONS
Net Investment Loss ......................... $ (2,188,534) $ (1,753,371)
Net Realized Gain on Investments
and Other Assets and Liabilities
Denominated in Foreign Currencies .......... 46,749,534 7,605,821
Net Change in Appreciation/Depreciation
of Investments and Other Assets and
Liabilities Denominated in Foreign
Currencies ................................. 81,107,756 3,518,916
------------ ------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS ............................ 125,668,756 9,371,366
------------ ------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net Investment Income ....................... -- (4,101,429)
------------ ------------
NET INCREASE IN NET ASSETS .................. 125,668,756 5,269,937
NET ASSETS
Beginning of Year ........................... 253,834,308 248,564,371
------------ ------------
End of Year ................................. $379,503,064 $253,834,308
============ ============
See Notes to Financial Statements
20
<PAGE>
The Global Health Sciences Fund
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES. The Global Health Sciences Fund (the
"Fund") was organized as a Massachusetts Business Trust on November 18, 1991.
The Fund is registered under the Investment Company Act of 1940 (the "Act") as a
diversified, closed-end management investment company. Prior to commencing
investment operations on January 24, 1992, the Fund had no operations other than
the sale to INVESCO Trust Company (the "Investment Adviser") of 7,200 shares of
beneficial interest for $100,440 on January 13, 1992. Organizational costs of
$34,800 have been deferred and are being amortized on a straight-line basis over
a 60-month period from the date the Fund commenced operations.
The following is a summary of significant accounting policies consistently
followed by the Fund.
A. SECURITY VALUATION -- Securities traded on national securities exchanges or
NASDAQ National Market Systems are valued at the last sale price on the
exchange where such securities are primarily traded. If last sale prices
are not available, securities are valued at their highest closing bid
prices (or, for debt securities, yield equivalent thereof) obtained from
one or more dealers making markets for such securities or by a pricing
service approved by the Fund's board of trustees. Values of foreign
securities are determined as of the time that trading of such securities is
completed each day, generally at various times prior to the close of the
New York Stock Exchange. If market quotations or pricing service valuations
are not readily available, securities (including restricted securities) are
valued at fair value as determined in good faith by or under the
supervision of the Fund's board of trustees in accordance with procedures
established by the Fund's board of trustees. Short-term securities are
stated at amortized cost (which approximates market value) if maturity is
60 days or less, or by amortizing their value on the 61st day prior to
maturity if their term to maturity from date of purchase exceeded 60 days.
Assets and liabilities initially expressed in terms of foreign currency are
translated into U.S. dollars at the prevailing market rates as quoted by
one or more banks or dealers on the date of valuation. The cost of
securities is translated into U.S. dollars at the rates of exchange
prevailing when such securities were acquired. Income and expenses are
translated into U.S. dollars at rates of exchange prevailing when accrued.
B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME -- Security
transactions are accounted for on the trade date and dividend income is
recorded on the ex-dividend date. Interest income is recorded on the
accrual basis. The Fund amortizes premiums and accretes discounts on
securities over the life of the respective security as adjustments to
interest
21
<PAGE>
income. Cost is determined on the specific identification basis. The
foreign currency portion of realized gains (losses) on the sale of foreign
equity securities is included in net realized gain (loss) on investments.
The Fund may have elements of risk due to concentrated investments in
specific industries or investments in foreign issuers located in a specific
country. Such concentrations may subject the Fund to additional risks
resulting from future political or economic conditions and
possible imposition of adverse foreign governmental laws or currency
exchange restrictions.
Restricted securities may not be sold except in exempt transactions or in
a public offering registered under the Securities Act of 1933. The risk of
investing in such securities generally is greater than the risk of
investing in the securities of widely held, publicly traded companies. Lack
of a secondary market and resale restrictions may result in the inability
of the Fund to sell a security at a fair price and may substantially delay
the sale of a security which the Fund seeks to sell. In addition, these
securities may exhibit greater price volatility than securities for which
secondary markets exist. The Fund has demand registration rights for
restricted securities held at October 31, 1995, which can be exercised upon
the registration of a qualifying public offering by each company in the
future. The Fund may incur registration costs associated with these public
offerings. There is no assurance such offerings will occur.
C. FEDERAL AND STATE TAXES -- The Fund has complied and will continue to
comply with the provisions of the Internal Revenue Code applicable to
regulated investment companies, and accordingly, intends to make sufficient
distributions of net investment income and net realized capital gains, if
any, to relieve it from all federal and state income taxes and federal
excise taxes.
Dividends paid by the Fund from net investment income and 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 income is shown net of foreign withholding
taxes in the accompanying financial statements.
At October 31, 1995, the Fund had a capital loss carryforward of
$3,086,263 available as a reduction, to the extent provided in the
regulations, of any future net capital gains realized before the end of
fiscal year 2001. To the extent that these losses are used to offset future
capital gains, such gains will not be distributed to shareholders. Net
capital loss carryforwards utilized during fiscal 1995 totaled $46,693,558.
22
<PAGE>
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends and distributions
to shareholders are recorded by the Fund on the ex-dividend/distribution
date. The amount of dividends and distributions from net investment income
and net realized capital gains are determined in accordance with federal
income tax regulations, which may differ from generally accepted accounting
principles. These "book/tax" differences are either considered temporary or
permanent in nature. To the extent these differences are permanent in
nature, such amounts are reclassified within the capital accounts based on
their federal tax-basis treatment; temporary differences do not require
reclassification. Dividends and distributions which exceed net investment
income and net realized capital gains for financial reporting purposes but
not for tax purposes are reported as dividends in excess of net investment
income and net realized capital gains. To the extent they exceed net
investment income and net realized capital gains for tax purposes, they are
reported as distributions of paid-in capital. Net realized foreign currency
losses of $10,012 have been reclassified to accumulated net investment
loss. As a result of a permanent book/tax difference attributable to a net
investment loss, $2,198,546 has been reclassified to paid-in capital. Net
assets were not affected by this reclassification.
E. SHORT SALES -- Short sales are transactions in which the Fund sells a
security it does not own in anticipation of an expected decline in the
price of that security. The Fund is obligated to replace the borrowed
security. A separate asset account is created for the proceeds retained by
the broker, and an offsetting liability account is established until the
short sale is closed. The liability account is marked-to-market to reflect
the current value of the securities sold short. At October 31, 1995, the
Fund did not have any short sales outstanding.
Although the Fund's potential for gain as a result of a short sale is
limited to the price at which it sold the security short less the cost of
borrowing the security, its potential for loss is theoretically unlimited
because there is no limit to the replacement cost of the borrowed security.
F. FORWARD FOREIGN CURRENCY CONTRACTS -- The Fund may enter into forward
foreign currency contracts in connection with planned purchases or sales of
securities or to hedge the U.S. dollar value of portfolio securities
denominated in a particular currency. The Fund's custodian will place and
maintain cash not available for investment or U.S. Government securities in
a separate account of the Fund having a value equal to the aggregate amount
of the Fund's commitments under forward foreign currency contracts entered
into with respect to position hedges. At October 31, 1995, the Fund did not
have any forward foreign currency contracts outstanding.
23
<PAGE>
NOTE 2 -- INVESTMENT ADVISORY AND OTHER AGREEMENTS.INVESCO Trust Company serves
as the Fund's Investment Adviser. The Investment Adviser is responsible for the
management of the assets of the Fund. As compensation for its services to the
Fund, the Investment Adviser receives an investment advisory fee. The fee is
calculated at the annual rate of 1.00% of the Fund's ending weekly net assets
and is paid monthly.
Mitchell Hutchins Asset Management Inc. (the "Administrator") has an
Administration Agreement ("Administration Agreement") with the Fund. Under the
terms of the Administration Agreement, the Administrator provides certain
administrative services to the Fund. Fees for these services are determined
monthly at the annual rate of 0.20% of the Fund's ending weekly net assets up to
$62.5 million, 0.18% of the Fund's ending weekly net assets in excess of $62.5
million but not in excess of $125 million, 0.15% of the Fund's ending weekly net
assets in excess of $125 million and up to $250 million and 0.10% of the Fund's
ending weekly net assets in excess of $250 million, with a minimum annual fee of
$125,000.
NOTE 3 -- AFFILIATED TRANSACTIONS. For the year ended October 31, 1995,
PaineWebber Incorporated (an affiliate of the Administrator) earned $74,815 in
commissions for brokerage transactions.
Certain of the Fund's officers and trustees are also officers and directors
of INVESCO Trust Company and/or INVESCO Funds Group, Inc.
An affiliated company represents ownership by the Fund of at least 5% of
the voting securities of the issuer during the year, as defined in the Act. A
summary of the transactions with affiliates during the year ended October 31,
1995, is as follows:
<TABLE>
<CAPTION>
Purchases Sales Realized
----------------- --------------- Gain Dividend
Affiliate Shares Cost Shares Cost (Loss) Income
--------- ------ ---- ------ ---- --------- ------
<S> <C> <C> <C> <C> <C> <C>
Adeza Biomedical,
Series II Conv Pfd ...... 1,000,000 $1,000,000 -- -- -- $ 0
Advanced Health,
Series C Conv Pfd ....... 200,000 1,500,000 -- -- -- 0
Alexion Pharmaceuticals,
Series A Pfd ............ 526,316 1,000,000 -- -- -- 0
Biocompatibles
International PLC ....... -- -- 640,000 $ 640,000 $1,704,949 0
Clarus Medical Systems,
Series II Pfd ........... 111,196 111,196 -- -- -- 0
Crown Laboratories ....... -- -- 100,000 150,001 (97,335) 0
Orthologic Corp .......... -- -- 395,714 1,714,999 1,443,391 0
Pharmos Corp ............. 567,763 709,704 258,334 1,373,126 (745,877) 0
Protocol Systems ......... 530,000 5,207,040 -- -- -- 0
Selectide Corp ........... -- -- 681,818 1,500,000 1,227,172 0
Selectide Corp Pfd ....... -- -- 194,633 291,950 448,119 0
Unisyn Technologies
Conv Pfd ................ 758,258 758,258 -- -- -- 0
---------- ----
$3,980,419 $ 0
========== ====
</TABLE>
24
<PAGE>
NOTE 4 -- PURCHASES AND SALES OF INVESTMENT SECURITIES. For the year ended
October 31, 1995, the aggregate cost of purchases and proceeds from sales of
investments (excluding short-term securities) were $304,267,783 and
$312,623,275, respectively. There were no purchases or sales of U.S. Government
securities.
NOTE 5 -- APPRECIATION AND DEPRECIATION. At October 31, 1995, the cost of
investment securities for federal income tax purposes was $283,475,348.
Accordingly, net unrealized appreciation of $101,183,395 was composed of gross
appreciation of $113,310,928 for those investment securities having an excess of
value over tax cost, and gross depreciation of $12,127,533 for those investment
securities having an excess of tax cost over value.
25
<PAGE>
The Global Health Sciences Fund
QUARTERLY RESULTS OF OPERATIONS
UNAUDITED
<TABLE>
<CAPTION>
Net Realized
and Unrealized
Gain (Loss) on
Net Investments and
Investment Investment Foreign Currency
Income Loss Transactions
---------------- ------------------- ------------------
Total Per Total Per Total Per
Quarter Ended (000) Share (000) Share (000) Share
- ------------- ------ ------ ------- ------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
January 31, 1995 .. $ 332 $0.016 $ (783) $(0.038) $ 16,035 $0.782
April 30, 1995 .... 631 0.031 (62) (0.003) 26,838 1.309
July 31, 1995 ..... 488 0.024 (148) (0.007) 41,947 2.045
October 31, 1995 .. 380 0.018 (1,195) (0.059) 43,037 2.099
------ ------ ------- ------- -------- ------
Totals ........... $1,831 $0.089 $(2,188) $(0.107) $127,857 $6.235
====== ====== ======= ======= ======== ======
January 31, 1994 .. $ 593 $0.029 $ (256) $(0.012) $ 22,626 $1.103
April 30, 1994 .... 295 0.014 (605) (0.030) (17,076) (0.832)
July 31, 1994 ..... 336 0.017 (687) (0.033) (15,086) (0.736)
October 31, 1994 .. 531 0.026 (205) (0.010) 20,661 1.007
------ ------ ------- ------- -------- ------
Totals ........... $1,755 $0.086 $(1,753) $(0.085) $ 11,125 $0.542
====== ====== ======= ======= ======== ======
</TABLE>
Net Increase
(Decrease) in
Net Assets Market Price
from Operations on NYSE
------------------- ------------------
Total Per
Quarter Ended (000) Share High Low
- ------------- -------- ------ ------- -------
January 31, 1995 .. $ 15,252 $0.744 $10.625 $ 9.375
April 30, 1995 .... 26,776 1.306 12.000 10.625
July 31, 1995 ..... 41,799 2.038 13.500 11.000
October 31, 1995 .. 41,842 2.040 15.125 13.250
-------- ------
Totals ........... $125,669 $6.128
======== ======
January 31, 1994 .. $ 22,370 $1.091 $12.000 $10.500
April 30, 1994 .... (17,681) (0.862) 11.625 9.875
July 31, 1994 ..... (15,773) (0.769) 10.875 9.375
October 31, 1994 .. 20,456 0.997 10.750 9.500
-------- ------
Totals ........... $ 9,372 $0.457
======== ======
26
<PAGE>
The Global Health Sciences Fund
FINANCIAL HIGHLIGHTS
Selected data for a share outstanding throughout each period is presented below:
<TABLE>
<CAPTION>
For the Year Ended For the Period
October 31, January 24, 1992*
----------------------------------------- through
1995 1994 1993 October 31, 1992
-------- -------- -------- ------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ....... $ 12.378 $ 12.121 $ 12.643 $ 13.950
-------- -------- -------- --------
Net Investment Income (Loss) ............... (0.107) (0.085) 0.205 0.071
Net Realized and Unrealized Gain
(Loss) on Investments and Foreign
Currency Transactions ..................... 6.235 0.542 (0.652) (1.345)
-------- -------- -------- --------
Net Increase (Decrease) in Net Assets
from Operations ........................... 6.128 0.457 (0.447) (1.274)
-------- -------- -------- --------
Dividends from Net Investment
Income .................................... -- (0.200) (0.075) --
-------- -------- -------- --------
Offering Costs Charged to Paid-In
Capital ................................... -- -- -- (0.033)
-------- -------- -------- --------
Net Asset Value, End of Period ............. $ 18.506 $ 12.378 $ 12.121 $ 12.643
======== ======== ======== ========
Share Price, End of Period ................. $ 14.750 $ 10.000 $ 11.500 $ 11.500
======== ======== ======== ========
Total Investment Return (1) (2) ............ 47.50% (11.49%) 0.67% (17.56%)
======== ======== ======== ========
Ratios/Supplemental Data:
Net Assets, End of Period
(000 omitted) ............................. $379,503 $253,834 $248,564 $259,279
Ratio of Expenses to Average
Net Assets ................................ 1.33% 1.41% 1.39% 1.35%**
Ratio of Net Investment Income (Loss)
to Average Net Assets ..................... (0.72%) (0.70%) 1.74% 0.72%**
Portfolio Turnover Rate .................... 105% 121% 226% 215%
- ----------------
<FN>
* Commencement of investment operations
** Annualized
(1) Total investment return is calculated assuming a purchase of common stock
at the current market price on the first day and a sale at the current
market price on the last day of each period reported. Dividends and
distributions, if any, are assumed, for purposes of this calculation, to be
reinvested at prices obtained under the Fund's dividend reinvestment plan.
Total investment return does not reflect sales charges or brokerage
commissions.
(2) Total investment return for a period of less than one year is not
annualized.
</FN>
</TABLE>
27
<PAGE>
The Global Health Sciences Fund
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Trustees of
The Global Health Sciences Fund
In our opinion, the accompanying statement of assets and liablilities,
including the statement of investment securities, and the related statements of
operations, of cash flows and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
The Global Health Sciences Fund (the "Fund") at October 31, 1995, the results of
its operations and cash flows for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the periods indicated, in conformity with generally
accepted accounting principles. These financial statements and the financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 1995 by
correspondence with the custodian and the application of alternative auditing
procedures for unsettled security transactions, provide a reasonable basis for
the opinion expressed above.
At October 31, 1995, the Fund held restricted securities valued at
$52,698,910 (13.89 percent of net assets), whose values have been estimated by
the Trustees in the absence of readily ascertainable market values. We have
reviewed the procedures used by the Trustees in arriving at their estimate of
value and have inspected the underlying documentation; and, in the circumstances
we believe the procedures are reasonable and the documentation appropriate.
However, because of the inherent uncertainty of valuation, those estimated
values may differ significantly from the values that would have been used had a
ready market for the securities existed, and the differences could be material
to the financial statements.
PRICE WATERHOUSE LLP
Denver, Colorado
December 15, 1995
28
<PAGE>
The Global Health Sciences Fund
OTHER INFORMATION
Dividends and Capital Gains Distribution History
Net Investment Capital
For the Period Income Gains Payable
Ended October 31, (per share) (per share) Date
----------------- --------------- ----------- ----------------
1992 -- --
1993 $0.200 -- January 15, 1993
1994 $0.075 -- January 14, 1994
1995 -- --
DIVIDEND REINVESTMENT PLAN
Shareholders of the Fund who have Shares registered directly in their own
names automatically participate in the Fund's Dividend Reinvestment Plan (the
"Plan"), unless and until an election is made to withdraw from the Plan as
herein provided. State Street Bank and Trust Company (the "Agent") acts as agent
under the Plan on behalf of participating shareholders. Shareholders who do not
wish to have distributions automatically reinvested should so notify the Fund
c/o State Street Bank and Trust Company, P.O. Box 366, Boston, Massachusetts
02101. Under the Plan, all of the Fund's dividends and capital gains and other
distributions to shareholders will be reinvested in full and fractional Shares
as described below. A shareholder who owns Shares registered in his broker's or
nominee name, and whose broker does not provide facilities for a dividend
reinvestment program, may be required to have his Shares registered in his own
name in order to participate in the Plan. Shareholders wishing to participate in
the Plan whose Shares are held in the name of a broker or nominee should consult
their brokers as to how to accomplish dividend reinvestment.
Whenever the Fund declares an income dividend or a capital gain or other
distribution (collectively, "Dividends"), non-participants in the Plan will
receive cash and participants in the Plan will receive the equivalent in Shares.
The Shares will be acquired by the Agent for the participant's account,
depending upon the circumstances described below, either (i) through receipt of
additional unissued but authorized Shares ("Newly Issued Shares") or (ii) by the
purchase of outstanding Shares on the open market ("Open-Market Purchases") on
the New York Stock Exchange or elsewhere.
If on the payment date for a Dividend the net asset value per Share is
equal to or less than the market price per Share plus estimated brokerage
commissions (such condition being referred to herein as "Market Premium"), the
Agent will purchase from the Fund Newly Issued Shares on behalf of the
participant at a price per Share equal to the greater of the net asset value per
Share or 95% of the then current market price per Share. This discount from the
current market price reflects savings in underwriting and other costs which the
Fund would otherwise incur to raise additional capital.
29
<PAGE>
If on the payment date for a Dividend the net asset value per share is
greater than the market price per Share (such condition being referred to herein
as "Market Discount"), the Agent will endeavor to invest the Dividend amount in
Shares acquired on behalf of the participant in Open-Market Purchases. In the
event of a Market Discount on the payment date, the Agent will have up to 30
days after the payment date to invest the Dividend amount in Shares acquired in
Open-Market Purchases.
Registered shareholders who acquire their Shares in open-market
transactions and who do not wish to have their Dividends automatically
reinvested should so notify the Fund in writing. If a shareholder has not
previously elected to receive cash Dividends and the Agent does not receive
notice of an election to receive cash Dividends prior to the record date of any
Dividends, the Shareholder will automatically receive such Dividends in
additional Shares.
Participants in the Plan may withdraw from the Plan by providing written
notice to the Agent at least 30 days prior to the applicable Dividend payment
date. When a participant withdraws from the Plan, or upon termination of the
Plan as provided below, certificates for whole Shares credited to his account
under the Plan will, upon request, be issued. Whether or not a participant
requests that certificates for whole Shares be issued, a cash payment will be
made for any fraction of a Share credited to such account.
The Agent will maintain all shareholder accounts in the Plan and furnish
written confirmations of all transactions in the accounts, including information
needed by shareholders for personal and tax records. Shares in the account of
each Plan participant will be held by the Agent in non-certificated form in the
name of the participant, and each shareholder's proxy will include those shares
purchased pursuant to the Plan. Each participant, nevertheless, has the right to
receive certificates for whole Shares owned. The Agent will distribute all proxy
solicitation materials to participating shareholders.
In the case of shareholders, such as banks, brokers or nominees, which hold
Shares for others who are the beneficial owners participating in the Plan, the
Agent will administer the Plan on the basis of the number of Shares certified
from time to time by the shareholder as representing the total amount of Shares
registered in the shareholder's name and held for the account of beneficial
owners participating in the Plan.
There will be no charge to participants for reinvesting Dividends other
than their share of brokerage commissions as discussed below. The Agent's fees
for administering the Plan and handling the reinvestment of Dividends will be
paid by the Fund. Each participant's account will be charged a pro-rata share of
brokerage commissions incurred with respect to the Agent's Open-Market Purchases
in connection with the reinvestment of Dividends. Brokerage charges for
purchasing small amounts of Shares for individual accounts through the Plan are
expected to be less than the usual brokerage charges for such transactions
30
<PAGE>
because the Agent will be purchasing Shares for all the participants in blocks
and prorating the lower commission that may be attainable.
The automatic reinvestment of Dividends will not relieve participants of
any income tax which may be payable on such Dividends. In the case of non-U.S.
participants whose Dividends are subject to United States income tax withholding
and in the case of any participants subject to 30% federal backup withholding,
the Agent will reinvest Dividends after deduction of the amount required to be
withheld.
The Fund reserves the right to amend or terminate the Plan by written
notice to participants. All correspondence concerning the Plan should be
directed to the Agent at the address referred to in the first paragraph of this
section.
ANNUAL SHAREHOLDERS MEETING
The Fund's annual meeting of shareholders was held on April 19, 1995.
Shareholders voted to re-elect Dan J. Hesser and Larry Soll, Ph.D. as Trustees
and ratified the appointment of Price Waterhouse LLP as the Fund's independent
accountants. The resulting vote count for each proposal is listed below:
1. Election of Two Trustees:
Dan J. Hesser For: 11,970,776
Withheld Authority: 261,882
Larry Soll, Ph.D. For: 12,047,166
Withheld Authority: 185,432
2. Ratification of Appointment of Price Waterhouse LLP as the Fund's
Independent Accountants:
For: 12,100,625
Against: 62,390
Abstain: 69,583
In addition to Messrs. Hesser and Soll, the following persons continue to
serve as Trustees of the Fund: Mr. Charles W. Brady, Mr. Fred A. Deering, Mr.
A.D. Frazier, Jr., Mr. R. Dalton Sim and Mr. John W. McIntyre.
MISCELLANEOUS
For the year ended October 31, 1995, there were (i) no material changes in
the Fund's investment objectives or policies, (ii) no changes to the Fund's
charter or by-laws, and (iii) no material changes in the principal risk factors
associated with investment in the Fund. Mr. R. Dalton Sim continues to serve as
President and Trustee of the Fund and Mr. Barry Kurokawa continues to have
primary responsibility for the day-to-day management of the Fund's portfolio.
Mr. Kurokawa joined INVESCO Trust Company ("ITC") in early 1992 and became
a Senior Vice President of ITC in 1994. In addition to Mr. Kurokawa's
responsibilities as portfolio manager of the Fund, he also manages
31
<PAGE>
The INVESCO Strategic Health Sciences Portfolio. Mr. Kurokawa has been an
officer of The Global Health Sciences Fund since he joined INVESCO.
Mr. Kurokawa received his BS degree from California State University, Los
Angeles in 1980, and earned his MBA in Finance from Loyola Marymount University
in 1984. He began his investment management career in 1984 with the Bank of
California as a research analyst. He was eventually given additional
responsibilities as portfolio manager to one of the bank's commingled common
trust funds. In 1987, Mr. Kurokawa joined Trust Company of the West in Los
Angeles as a senior research analyst with analytical responsibilities in the
health care and railroad industries.
32
<PAGE>
THE GLOBAL HEALTH SCIENCES FUND
- -------------------------------------------------------------------------------
Charles W. Brady Chairman of the Board of Trustees
R. Dalton Sim President and Trustee
Barry Kurokawa Vice President
Fred A. Deering Trustee
A.D. Frazier, Jr. Trustee
Dan J. Hesser Trustee
John W. McIntyre Trustee
Larry Soll, Ph.D. Trustee
Glen A. Payne Secretary
Ronald L. Grooms Treasurer, Chief Financial and Accounting Officer
C. William Maher Assistant Treasurer
INVESTMENT ADVISER
- -------------------------------------------------------------------------------
INVESCO Trust Company
7800 East Union Avenue
Suite 800
Denver, Colorado 80237
ADMINISTRATOR
- -------------------------------------------------------------------------------
Mitchell Hutchins Asset Management Inc.
1285 Avenue of the Americas
New York, New York 10019
CUSTODIAN
- -------------------------------------------------------------------------------
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
SHAREHOLDER SERVICING AGENT
- -------------------------------------------------------------------------------
Boston Financial Data Services, Inc.
2 Heritage Drive
North Quincy, Massachusetts 02171
INDEPENDENT ACCOUNTANTS
- -------------------------------------------------------------------------------
Price Waterhouse LLP
950 Seventeenth Street
Denver, Colorado 80202
COUNSEL
- -------------------------------------------------------------------------------
Kirkpatrick & Lockhart
1800 M Street, N.W.
South Lobby, 9th Floor
Washington, D.C. 20036
To receive information on the Dividend Reinvestment Plan, call toll-free:
1-800-451-6788
To obtain current Net Asset Values, call toll-free: 1-800-528-8765
This report, including the financial statements herein, is sent to the
shareholders of the Fund for their information. It is not a prospectus, circular
or representation intended for use in the purchase or sale of shares of the Fund
or of any securities mentioned in this report.
[RECYCLE EMBLEM]
Text Printed On Recycled Paper
