The Global Health Sciences Fund Annual Report 1996
INVESCO
The Global Health Sciences Fund is an aggressive growth closed-end fund that
focuses on health care, a global field of unlimited potential growth. The Fund
is managed by INVESCO, which historically has been an industry leader in
investment management.
Through the selective allocation of holdings in the subsectors of
pharmaceuticals, medical devices and supplies, biotechnology, and health care
delivery, INVESCO seeks returns that exceed those of the broader market. In
addition, the Fund's broad investment charter allows investments in private
companies that represent the next generation in health care technology,
companies that may have the potential to complete an initial public offering and
deliver new-product announcements. Thus, while past performance is no guarantee
of future results, the Fund is designed for long-term net asset value growth.
The Global Health Sciences Fund's total assets under management were over $455
million as of October 31, 1996.
Contents
1 Performance Highlights
2 Portfolio Manager's Report
5 Health Care: A Growth Investment
13 Financial Report
<PAGE>
<TABLE>
<CAPTION>
Performance Highlights
For the 12 Months Ended October 31
--------------------------------------------
1996 1995 1994
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value-Total Return 20.10% 49.52% 3.82%
Share Price-Total Return 15.25% 47.50% (11.49%)
Total Distributions $0.00 $0.00 $0.20
Total Net Assets-
End of Period (Millions) $455.8 $379.5 $253.8
Ratio of Expenses to
Average Net Assets 1.21% 1.33% 1.41%
Portfolio Turnover Ratio 91% 105% 121%
Average Commission Rate Paid $0.0822 - -
- ---------------------------------------------------------------------------------------------
Past performance is no guarantee of future results.
</TABLE>
Graph:
This bar graph illustrates the net asset value per share increase in 1996
compared to the prior four years (1992-1995).
Graph:
This bar graph illustrates the stock price per share increse in 1996 compared
to the prior four years (1992-1995).
<PAGE>
Portfolio Manager's Report
Dear Shareholder:
At the end of 1995, we were proud to have provided our investors with
returns that beat the broad markets by a wide margin. We were extremely pleased
with the performance of The Global Health Sciences Fund in what was an explosive
year for the health care industry.
But we cautioned investors that a similar return shouldn't be expected
for 1996, which showed signs of being a more "conventional" year for health care
issues, at least by the standards of recent years. For some investors, that
might have been interpreted as a signal of ho-hum results.
Although 1996 wasn't 1995, it was hardly a disappointing year. While
past performance is no guarantee of future results, the Fund's net asset value
rose 20.10%, and the share price went up 15.25%.
Past numbers, while providing no guarantee of being repeated in the
future, can give reason for some optimism: For the last three years, the average
annual increase in the Fund's net asset value was 23.1%, and the total increase
over that period was 86.43%. The stock price has risen 50.5% over those three
years. Looking at the more recent appreciation in health care industry stocks,
$10,000 invested in shares of the Fund at the end of calendar 1994 would have
been worth $17,215 on October 31, 1996.
Also, our 1996 increase in net asset value was better than all but
eight of our 22 competitor health care funds, according to Lipper Analytical
Services, Inc.
While there are no assurances of continued solid performance in 1997,
several factors bode well for the Fund, both in general trends that will
influence the entire health care industry and in developments that mesh nicely
with specific characteristics of the Fund:
POLITICAL CONCERNS HAVE ABATED.
Some of our holdings suffered in the two or three months prior to the
Presidential election, as analysts began to fear a Democratic takeover of one or
both houses of Congress. Right or wrong, they wanted Republicans in charge of
business regulation and of oversight of the Food and Drug Administration.
The post-election boost in health care stocks (after our fiscal year
ended) reflected the analysts' sigh of relief, and we hope to profit from the
improved legislative environment in 1997. Additionally, the current balance in
Congress, together with a battle-scarred White House, is unlikely to produce
anything more than minimal reform of Medicare and Medicaid. And if Medicare is
reformed, we can expect the biggest pinch to come on reimbursements to provider
companies--a sector in which the Fund is presently underweighted.
THE MARKET COULD RETURN TO SMALL-CAPS.
To the minor extent that the Fund underperformed the broader market, the gap
could be attributed to our investments in small- and mid-cap companies. The
broader market index is based on large-caps, which did a bit better in 1996. We
think the signs in 1997 are favorable for the smaller issues to participate more
fully in the current market appreciation.
We like companies that still have their most dramatic growth ahead of
them. We also like exciting companies that are still private, with the
opportunity to go public, introduce an innovative new product, or both. In 1996
alone, the Fund benefited from 10 initial public offerings (IPOs). While past
performance is no guarantee of future results, their average return for the
<PAGE>
year was 131.9%. Since the Fund's inception in 1992, more than 30 of the private
companies held by the Fund have completed IPOs, and the average annualized rate
of return from date of investment to the end of 1996 on all the Fund's
investments in private companies has been approximately 18%.
Graph:
This line graph compares the net asset value and share price value of a
$10,000 investment in The Global Health Sciences Fund to the value of a
$10,000 investment in the S&P 500 Health Care Composite Index, from
12/31/91 through 1/31/95.
CONDITIONS FOR GROWTH IN HEALTH CARE ARE STRONG.
The simplistic explanation here is that people continue to age, they continue to
need health care, and more people around the world are able to pay for it.
But a fuller explanation is required.
Start with the economy. After a record sixth consecutive year of
expansion, the U.S. economy is beginning to show some signs of slowing. As that
happens, investors may rotate away from cyclical stocks that bend and weave with
the movement of the economy. Instead, they may gravitate toward the stocks of
companies in more stable growth industries. Health care is a stereotypical
example of such an industry. What's more, investors know that health care is not
just another boring blue chip--it also holds out the carrot of discovery, the
introduction of the next billion-dollar health care product.
Look at worldwide demographics. We're an aging population.
Proportionately, the senior population will be growing to record numbers,
accompanied by increased dependence on medical care and therapies.
Additionally, today's increasingly informed consumer will be tomorrow's
patient. Particularly if the government puts more financial responsibility on
the patient, that patient will be more insistent on quality health care. He or
she will demand the best that emerges from the pharmaceutical industry's
research and development.
Together, the increased needs of an older patient profile and the
emergence of better informed consumers may help make health care companies more
innovative and responsive--and potentially even better investments.
Also, as part of that growing efficiency, information management
systems that track complete patient histories and outcomes for health care
providers--a field in which we have significant investments--will finally evolve
into a necessary component of the health care equation.
Finally, the pace of expansion of the health care market beyond the
United States is increasing. As developing countries begin to emerge,
particularly in the populous Pacific Rim, experience has shown that one of their
first societal demands is for a higher standard of health care. The companies in
our portfolio are poised to respond.
Briefly, in the order of our holdings, here's how the Fund did in our
four subsectors in 1996, and a little bit of what we foresee for 1997:
PHARMACEUTICALS
While it was a good year for health care stocks, it was outstanding for the
industry's best performing sector, pharmaceuticals. And, again, while past
performance is no guarantee of future results, there is potential for similar
success in 1997. This past year, companies rode historically high volume gains
on the combined waves of new products, increased prescribing of existing
products, and the return of some pricing strength. In response, we've almost
<PAGE>
doubled our pharmaceutical holdings. Imminent new products for diabetes and high
cholesterol prompted us to add Warner-Lambert Co, which is now the Fund's
largest holding. We've left generics, and will soon be out of drug delivery
systems.
Graph:
This graph compares the percent of The Global Health Sciences Fund's
total net assets held in various subsectors (biotechnology, Health Care
Delivery, Medical Devices and Supplies, Pharmaceuticals, and cash) in
1996 to 1995.
MEDICAL DEVICES AND SUPPLIES
Although this subsector was a big part of our success in 1995, we knew the run
couldn't repeat itself in 1996. Essentially, the 1995 performance was a rebound
from the "health care reform" depression of 1994, and it couldn't be duplicated.
As a result, we liquidated positions in this sector and applied the proceeds in
pharmaceuticals. However, we're still very positive about the segment and will
continue to focus on companies like Medtronic Inc that have favorable
new-product prospects.
BIOTECHNOLOGY
We slowly increased our weighting in biotechnology this year, even though it was
once again a choppy year for stock prices. The Holy Grail is still out
there--the breakthrough product that will truly turn the corner for what are
destined to be the therapies of the next century.
The underlying fundamentals are very positive, more companies are
turning a profit, and some major new-product announcements in the first quarter
should buoy the whole sector. But it's still an opportunistic waiting game.
HEALTH CARE DELIVERY
This subsector was a minefield in 1996, so we took a very conservative approach.
That won't change in 1997. We're still excited about HBO & Co, a top-10 holding
for the Fund, which provides full-accountability computer systems to hospitals
and physician groups. And while HMOs have been underperformers, an exception has
been Oxford Health Plans, which we continue to hold. Because we think concerns
about reimbursement could create some opportunities, we may look at some small
hospital companies in 1997.
We trust you've been as pleased and enthused as we have about our
successes in the health care industry. We hope you also recognize that we
weren't perfect. Overall, I'd give us a "B" because we didn't exactly nail
sector allocation. The maximum return this year would have gone to a fund
totally weighted in pharmaceuticals. We are not willing to be that
one-dimensional. What got us close to an "A" was our stock picking.
Sincerely,
/s/ John R. Schroer
- -------------------
John R. Schroer
Vice President,
INVESCO Trust Company
Manager, The Global Health Sciences Fund
October 31, 1996
<PAGE>
Health Care: A Growth Investment
As it has for years, health care remains a fundamentally solid growth
investment. The Global Health Sciences Fund positions its investors to
potentially profit from that rising trend.
Maturing Consumers, Emerging Needs Spell Prescription for Success
One measure of a successful business is when the marketplace says of
your product, "You can't live without it."
It's possible to live without health care, but not for long. Life
without health care wouldn't be life as we know it, as millions of people in the
developed nations expect it, and as millions more in emerging countries demand
it.
Viewed through the prisms of history and the future, there may be no
more solid a market segment than health care. People have always sought it;
people always will. The shared secret is that continually improving health care
enables us to live better, and to live longer. An American born in 1920 could
expect to live to the age of 54. By 1965 life expectancy had risen to 70, by
1994 to 75--every four years, life expectancy increases another year.
And there's robust commerce in the business of helping us live better
and longer: Total 1996 health care expenditures in the U.S. are expected to
reach $1.1 trillion, or 14.5% of the Gross Domestic Product--more than doubling
that proportion since 1970. Growth is expected to stabilize between now and
2005, but it will still probably average about 8% a year.
As an investment, health care creates a perverse truism: The greatest
opportunity lies where there is the greatest suffering and pain. The industry is
keenly aware of what are, economically, the top eight uncured diseases--heart
disease, cancer, Alzheimer's disease, diabetes, arthritis, depression, stroke,
and osteoporosis. Together, they cost U.S. society $550 billion every year in
both treatment costs and lost productivity. That massive market is just one
reason why the U.S. pharmaceutical industry invested 19% of its sales--or $15.8
billion--in research and development in 1996.
Tomorrow's cures mean an even more energized market, and they add to
the increasing demand for health care that comes from emerging nations. History
shows that as standards of living increase in developing nations, one of the
first demands made by their citizens is for more and better health care.
Explosive industrial and population growth, particularly in the Far East, is
expanding the call for medicines, hospitals, and other services.
Not only are there more health care consumers every year, but,
proportionately, more are older--and most health care dollars are spent in the
last years of our lives.
Today, 13% of the U.S. population is 65 and above, and they account for
34% of the country's health care expenditures. By the time "baby boomers" reach
their 70s and 80s, the proportion of seniors in our population will have jumped
to 20%. Between 1990 and 2010, it is estimated that the 85 and older age group
will double.
A billowing group of demanding and better informed consumers. A greater
need for latter-year care. Plus, the tremendous spikes in demand that come with
new cures and therapies. Together, they spell a prescription for aggressive,
long-term investment growth.
<PAGE>
Graph:
This bar graph illustrates health care as a percentage of the United
States Gross Domestic Product in 1995.
The Global Health
Sciences Fund:
Rapid Reactions,
Cautious Commitments
Following careful study, you've decided to invest in the health care
industry. Wise choice. History reflects a rather steady--and sometimes
meteoric--growth in the segment, and demographics promise an expanding stream of
eager consumers.
So, the next questions are: Why INVESCO? Why The Global Health Sciences
Fund?
Our Fund is part of one of the world's largest investment management
firms. And managing investments is all INVESCO does. There are no other
activities to divert the firm from its central mission: satisfying the investor.
We come from a heritage of success, one that spans several generations
of investors. It has been a heritage that demands a disciplined and calculated
search for ways to achieve above-average returns with below-average risk.
Although past performance is never a guarantee of future results, we're proud of
our ability to beat the market repeatedly.
So why The Global Health Sciences Fund?
First, we are a fund that is confident in the growth potential of the
health care industry. The Fund invests at least 80% of its assets in the
industry, focusing on four subsectors. They are: pharmaceuticals, medical
devices and supplies, biotechnology, and health care delivery--principally
hospitals and managed care systems. We can invest up to 25% of our assets in
private placements or venture capital projects.
The remainder of our assets may be invested in companies that are
related to health care, but not principally engaged in it. And, typically, we
maintain a small cash position.
Graph:
This bar graph compares the net asset value of The Global Health
Sciences Fund to the health care peer group funds composite (closed-end health
care sector funds and open-end health care sector funds.)
We can be characterized as an aggressive growth fund. Although our
overall goal is long-term growth of our net asset value, we are opportunistic in
the near term. That means we're willing to take some calculated risks. We take
those risks only after cautious consideration of the potential rewards, and we
take them with the minimum exposure needed to truly seize the opportunity. But
they're still risks. And with those risks come short-term fluctuations in Fund
value.
We can also be called nimble. We're unwilling to make an investment,
stick it away in our pouch with little subsequent consideration, and hope it
eventually does as we had planned. Instead, we have no reluctance in moving in
and out of positions quickly to capitalize on market trends and individual
company developments. Our aggressive flexibility has been the single biggest
factor in our success during recent years.
<PAGE>
You might also say that we're just a bit driven. We're happy with that.
We're determined to not make rash mistakes. We spend a lot of time in the field,
evaluating companies, kicking the tires. And yet we're just as determined to be
value-added, and to not miss any major opportunities.
Some of the companies that we invest in want their managers to be
10-year people, to worry only about the long term. That's fine, we worry about
the long term, too. But we can also think of ourselves as 10-minute people--not
blind to near-term changes in fundamentals.
As to what we look for, we seek companies that have expanding global
opportunities. We seek companies that are on the edge of technological
innovations, that offer low-cost solutions and services. And, we seek companies
that might be the targets or beneficiaries of industry consolidation.
Finally, we're a closed-end fund, one of the few that invests
specifically in health care. That means our investment pool is steady; our
investment strategy is not complicated by the detrimental effects of cash flow
issues faced by more traditional open-end funds. The knowledge that our
investment decisions aren't influenced by everyday operating concerns may
provide the long-term investor with a higher degree of comfort and confidence.
Again, there are no guarantees. When investing, the past makes no
promises for the future. However, we feel that our past success justifies our
investment strategies and philosophies. But we still go out to prove it again
every day, every year--10 minutes at a time.
Graph:
This bar graph shows the increase in the value of The Global Health
Sciences Fund's private placements turned into IPOs for 1994-1996.
Financial Report
Index
13 Ten Largest Common Stock Holdings
14 Statement of Investment Securities
19 Statement of Assets and Liabilities
20 Statement of Operations
21 Statement of Cash Flows
22 Statement of Changes in Net Assets
22 Notes to Financial Statements
25 Financial Highlights
26 Report of Independent Accountants
27 Other Information
29 Trustees and Officers
29 Shareholder Information
<PAGE>
Ten Largest Common Stock Holdings
The Global Health Sciences Fund
October 31, 1996
- --------------------------------------------------------------------------------
Description Value Percent of Net Assets
- --------------------------------------------------------------------------------
Warner-Lambert Co $16,224,375 3.6%
American Home Products 15,925,000 3.5
Pfizer Inc 15,474,250 3.4
HBO & Co 14,550,250 3.2
Waters Corp 14,260,000 3.1
Merck & Co 13,898,438 3.0
Lilly (Eli) & Co 13,042,500 2.9
Medtronic Inc 12,875,000 2.8
Bristol-Myers Squibb 12,690,000 2.8
SmithKline Beecham PLC ADR
Representing Ord A Shrs 12,024,000 2.6
- --------------------------------------------------------------------------------
Total $140,963,813 30.9%
================================================================================
Composition of holdings is subject to change.
<PAGE>
Statement of Investment Securities
The Global Health Sciences Fund
October 31, 1996
- --------------------------------------------------------------------------------
Shares or Principal
Description Amount Value
- --------------------------------------------------------------------------------
Common Stocks & Warrants 83.45%
Biotechnology 13.43%
- --------------------------------------------------------------------------------
Alexion Pharmaceuticals*~ 100,000 $1,000,000
Alexion Pharmaceuticals*^~ 335,526 2,703,945
Alexion Pharmaceuticals Warrants
(Exp 1997)*^@~ 31,250 0
Amgen Inc* 135,000 8,277,187
Arris Pharmaceutical* 232,000 2,871,000
Cadus Pharmaceutical*^~ 729,395 4,595,189
Centocor Inc* 53,600 1,574,500
Creative BioMolecules* 535,000 4,614,375
Ecogen Technologies I*^~ 60 792,000
Gilead Sciences* 200,000 4,675,000
ID Biomedical* 640,000 2,640,000
INCYTE Pharmaceuticals* 250,000 10,125,000
MedClone Inc Warrants (Exp 1999)*^@ 209,300 0
Pharmos Corp*~ 603,312 791,847
Sequana Therapeutics* 112,000 1,792,000
Synaptic Pharmaceuticals* 125,000 1,312,500
Titan Pharmaceuticals*^~ 488,215 4,442,757
Unisyn Technologies*^~ 20,754 20,754
Unisyn Technologies Warrants
(Exp 2001)*^@~ 333,773 0
Vertex Pharmaceuticals* 131,000 4,355,750
Vical Inc* 200,000 2,675,000
Xenometrix Inc*^~ 261,007 2,055,430
------------
61,314,234
------------
Health Care Delivery 14.01%
- --------------------------------------------------------------------------------
Advanced Health*^ 612,999 7,355,988
HBO & Co 242,000 14,550,250
Humana Inc* 350,000 6,387,500
Medical Associates of America*^~ 502,935 1
Omnicare Inc 400,000 10,900,000
Oxford Health Plans* 224,000 10,192,000
PhyCor Inc* 136,875 4,243,125
Quintiles Transnational* 60,000 3,945,000
RoTech Medical* 400,000 6,400,000
------------
63,973,864
------------
Medical Devices & Supplies 26.70%
- --------------------------------------------------------------------------------
ATS Medical* 166,666 1,166,662
ATS Medical Warrants (Exp 1997)*^@ 166,666 0
Allegiance Corp* 38,000 712,500
<PAGE>
Biocompatibles International PLC* 160,000 1,393,910
Biocompatibles International PLC*^ 960,000 7,108,943
Biocompatibles International PLC Warrants
(Exp 1996)* 160,000 141,996
Boston Scientific* 120,000 6,525,000
Cambridge Heart*~ 36,000 400,500
Cambridge Heart*^~ 650,000 5,785,000
Cardiometrics Inc* 200,000 825,000
Cardiovascular Diagnostics* 49,500 222,750
Clarus Medical Systems Warrants
(Exp 2000)*^@~ 2,224 0
Diametrics Medical* 326,221 1,264,106
Electroscope Inc*^~ 380,000 2,261,000
IDEC Pharmaceuticals* 200,000 4,325,000
Imatron Inc Warrants (Exp 1996)*^ 400,000 987,500
Johnson & Johnson 230,000 11,327,500
KeraVision Inc* 206,185 3,195,867
Matritech Inc* 414,900 4,097,137
Medtronic Inc 200,000 12,875,000
Metra Biosystems*^ 210,356 1,088,592
OrbTek Inc Warrants (Exp 2000)*^@ 50,000 0
Protocol Systems*~ 572,500 6,154,375
St Jude Medical* 110,000 4,345,000
SEQUUS Pharmaceuticals* 275,000 3,867,188
Sofamor/Danek Group* 345,000 9,487,500
STERIS Corp* 250,000 9,437,500
Total Renal Care Holdings* 177,700 6,930,300
Waters Corp* 460,000 14,260,000
Xillix Technologies*~ 711,538 1,697,838
------------
121,883,664
------------
Pharmaceuticals 29.31%
- --------------------------------------------------------------------------------
American Home Products 260,000 15,925,000
Bristol-Myers Squibb 120,000 12,690,000
CIMA Labs* 333,333 2,499,998
Crown Laboratories*^~ 699,958 520,594
Cubist Pharmaceuticals* 300,000 2,062,500
Fuisz Technologies Ltd*^ 368,631 2,656,551
Lilly (Eli) & Co 185,000 13,042,500
Merck & Co 187,500 13,898,438
PAREXEL International* 142,100 6,962,900
Pfizer Inc 187,000 15,474,250
Rhone-Poulenc Rorer 136,200 9,142,425
Sandoz AG Registered Shrs* 9,200 10,678,630
SmithKline Beecham PLC ADR
Representing Ord A Shrs 192,000 12,024,000
Warner-Lambert Co 255,000 16,224,375
------------
133,802,161
------------
Total Common Stocks & Warrants
(Cost $299,798,622) 380,973,923
- --------------------------------------------------------------------------------
<PAGE>
Preferred Stocks 4.47%
Biotechnology 0.67%
- --------------------------------------------------------------------------------
Ingenex Inc, Series B Pfd*^~ 103,055 600,000
MedClone Inc, Series G Conv Pfd*^ 872,096 2,367
Osiris Therapeutics, Series C Conv Pfd*^ 352,941 1,199,999
Unisyn Technologies
Series A Conv Pfd*^~ 758,258 758,258
Series B Pfd*^~ 499,500 499,500
------------
3,060,124
------------
Health Care Delivery 1.38%
- --------------------------------------------------------------------------------
Multum Information Services,
Series B Conv Pfd*^~ 1,000,000 2,570,000
Physicians Online
Series A Conv Pfd*^ 361,500 3,220,965
Series C Conv Pfd*^ 55,558 500,022
------------
6,290,987
------------
Medical Devices & Supplies 2.42%
- --------------------------------------------------------------------------------
Adeza Biomedical, Series II Conv Pfd*^~ 416,667 1,000,000
Clarus Medical Systems
Series I Conv Pfd*^~ 106,664 533,320
Series II Conv Pfd*^~ 77,239 386,195
InterVentional Technologies,
Series F Pfd*^ 250,000 2,125,000
Janus Biomedical, Series A Conv Pfd*^ 400,000 1,000,000
Norian Corp, Series D Pfd*^~ 267,857 1,500,001
OrbTek Inc, Series A Conv Pfd*^ 714,286 1,500,001
SOMNUS Medical Technologies,
Series B Pfd*^~ 1,000,000 3,000,000
------------
11,044,517
------------
Total Preferred Stocks
(Cost $17,941,302) 20,395,628
- --------------------------------------------------------------------------------
Fixed Income Securities 0.60%
Health Care Delivery 0.00%
- --------------------------------------------------------------------------------
Medical Associates of America
Conv Sr Notes, Zero Coupon,
2/28/1999*^>~ 1,689,904 100
------------
Medical Devices & Supplies 0.60%
- --------------------------------------------------------------------------------
OrbTek Inc, Conv Promissory Notes, 10.000%
6/30/2000^ 500,000 500,000
11/22/2000^ 1,000,000 1,000,000
11/24/2000^+ 1,000,000 1,000,000
<PAGE>
OrbTek Inc, Secured Promissory Notes
Zero Coupon, 11/24/2000* 250,000 250,000
------------
2,750,000
------------
Total Fixed Income Securities
(Cost $4,439,904) 2,750,100
- --------------------------------------------------------------------------------
Other Securities 0.57%
Pharmaceuticals 0.57%
- --------------------------------------------------------------------------------
Spiros Development Units*^~
(Each unit consists of 1 callable
shr of cmn stock and 1 Series S
wrnt to buy 2.40 shrs of Dura
Phamaceuticals cmn stock)
(Cost $2,000,010) 66,667 2,617,480
- --------------------------------------------------------------------------------
Short-Term Investments 10.91%
- --------------------------------------------------------------------------------
Corporate Bonds 0.00%
Biotechnology 0.00%
- --------------------------------------------------------------------------------
MedClone Inc, Promissory Notes, 10.000%
6/30/1996^** 55,260 1
12/31/1996^ 55,260 1
------------
(Cost $110,520) 2
------------
Commercial Paper 10.91%
Finance Related 10.91%
- --------------------------------------------------------------------------------
American Express Credit, 5.250%,
11/4/1996 35,682,000 35,682,000
Associates Corp of North America,
5.650%, 11/1/1996 14,125,000 14,125,000
------------
Total Commercial Paper
(Cost $49,807,000) 49,807,000
------------
Total Short-Term Investments
(Cost $49,917,520) 49,807,002
- --------------------------------------------------------------------------------
Total Investment Securities At Value 100.00%
- --------------------------------------------------------------------------------
(Cost $374,097,358)
(Cost for Income Tax Purposes
$374,098,296) 456,544,133
================================================================================
* Security is non-income producing.
@ Security has no market value at October 31, 1996.
<PAGE>
~ Security is an affiliated company (See Note 5).
> Security is a defaulted security with respect to cumulative interest payments
of $59,147 at October 31, 1996. The security has been devalued to $100.
+ Security is a payment-in-kind (PIK) bond. PIK bonds may make interest
payments in additional securities.
** Security is a defaulted security with respect to cumulative interest payments
of $1,367 at October 31, 1996. The security has been devalued to $1.
^ The following are restricted securities at October 31, 1996:
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 0.22
Advanced Health 1/27/1995 1,548,590 7,355,988(b) 1.61
Alexion Pharmaceuticals 12/23/1994 1,000,000 1,578,945(a) 0.34
6/15/1993-
12/23/1994 1,000,000 1,125,000(d) 0.25
Alexion Pharmaceuticals
Warrants (Exp 1997) 6/15/1993-
3/16/1995 0 0 0.00
Biocompatibles
International PLC 3/5/1993-
5/23/1996 1,547,592 7,108,943(c) 1.56
Cadus Pharmaceutical 7/24/1996 1,000,000 4,595,189(d) 1.01
Cambridge Heart 9/29/1993 1,300,000 5,785,000(b) 1.27
Clarus Medical Systems
Series I Conv Pfd 12/23/1992 533,320 533,320 0.12
Series II Conv Pfd 12/23/1992-
2/9/1996 386,195 386,195 0.08
Warrants (Exp 2000) 12/23/1992 0 0 0.00
Crown Laboratories 8/20/1993 1,049,947 520,594(c) 0.11
Ecogen Technologies I 11/16/1992-
1/28/1994 684,000 792,000 0.17
Electroscope Inc 4/27/1993-
3/21/1996 990,000 2,261,000(c) 0.50
Fuisz Technologies Ltd 2/28/1992-
8/11/1994 1,999,996 2,656,551(c) 0.58
<PAGE>
Imatron Inc Warrants
(Exp 1996) 9/11/1992 400,000 987,500 0.22
Ingenex Inc, Series B
Pfd 9/27/1994 600,000 600,000 0.13%
InterVentional
Technologies, Series F
Pfd 10/19/1992 2,000,000 2,125,000 0.47
Janus Biomedical,
Series A Conv Pfd 3/2/1994 1,000,000 1,000,000 0.22
MedClone Inc
Promissory Notes,
10.000% 6/30/1996 12/6/1994-
6/29/1995 55,260 1 0.00
12/31/1996 12/6/1994-
6/29/1995 55,260 1 0.00
Series G Conv Pfd 10/21/1993-
7/15/1994 1,500,005 2,367 0.00
Warrants (Exp 1999) 7/15/1994 0 0 0.00
Medical Associates of
America 2/24/1992-
8/31/1992 530,491 1 0.00
Medical Associates of
America
Conv Sr Notes, Zero
Coupon, 2/28/1999 2/24/1992-
2/28/1994 1,689,904 100 0.00
Metra Biosystems 1/11/1994 1,300,000 1,088,592(d) 0.24
Multum Information
Services, Series B
Pfd 3/25/1993 1,000,000 2,570,000 0.56
Norian Corp, Series D
Pfd 8/5/1992 1,500,001 1,500,001 0.33
OrbTek Inc
Conv Promissory Notes,
10.000%
6/30/2000 6/30/1995 500,000 500,000 0.11
11/22/2000 11/24/1995 1,000,000 1,000,000 0.22
11/24/2000 11/24/1995-
4/29/1996 1,000,000 1,000,000 0.22
Series A Conv Pfd 5/12/1994 1,500,001 1,500,001 0.33
Warrants (Exp 2000) 10/4/1996 0 0 0.00
Osiris Therapeutics,
Series C Conv Pfd 5/24/1994-
12/23/1994 1,199,999 1,199,999 0.26
Physicians Online
Series A Conv Pfd 8/30/1993 964,000 3,220,965 0.71
Series C Conv Pfd 2/29/1996 500,022 500,022 0.11
SOMNUS Medical
Technologies,
Series B Pfd 9/11/1996 3,000,000 3,000,000 0.66
<PAGE>
Spiros Development Units 12/29/1995 2,000,010 2,617,480 0.57
Titan Pharmaceuticals 7/19/1993 2,000,000 4,442,757(b) 0.97
Unisyn Technologies 2/28/1994 999,961 20,754 0.00
Unisyn Technologies
Series A Conv Pfd 12/27/1994 758,258 758,258 0.17
Series B Pfd 2/6/1996 499,500 499,500 0.11
Warrants (Exp 2001) 7/27/1994 0 0 0.00
Xenometrix Inc 7/20/1992-
2/21/1996 2,099,978 2,055,430(a) 0.45
--------------------------------------------
$43,692,290 $67,887,454 14.88%
=============================================================================================
</TABLE>
(a) - Fair value represents 75% of the security's publicly traded value.
(b) - Fair value represents 80% of the security's publicly traded value.
(c) - Fair value represents 85% of the security's publicly traded value.
(d) - Fair value represents 90% of the security's publicly traded value.
See Notes to Financial Statements
<PAGE>
Statement of Assets and Liabilities
The Global Health Sciences Fund
October 31, 1996
- --------------------------------------------------------------------------------
Assets
- --------------------------------------------------------------------------------
Investment Securities at Value (Cost $374,097,358) $456,544,133
Cash 862,845
Receivables:
Investment Securities Sold 1,519,550
Dividends and Interest 407,504
Organization Costs 1,592
Prepaid Expenses and Other Assets 7,896
-------------
Total Assets 459,343,520
- --------------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------------
Payable for Investment Securities Purchased 3,346,703
Accrued Expenses and Other Payables 154,525
-------------
Total Liabilities 3,501,228
- --------------------------------------------------------------------------------
Net Assets at Value $455,842,292
================================================================================
Net Assets
- --------------------------------------------------------------------------------
Paid-in Capital* $281,673,975
Accumulated Undistributed Net Investment Income 56,982
Accumulated Undistributed Net Realized Gain on
Investment Securities and Foreign
Currency Transactions 91,664,791
Net Appreciation of Investment Securities
and Foreign Currency Transactions 82,446,544
-------------
Net Assets at Value $455,842,292
================================================================================
Net Asset Value per Share $22.23
================================================================================
* The Fund has an unlimited number of authorized shares of common stock, par
value of $0.01 per share, of which 20,507,200 were outstanding at October
31, 1996.
See Notes to Financial Statements
<PAGE>
Statement of Operations
The Global Health Sciences Fund
Year Ended October 31, 1996
- --------------------------------------------------------------------------------
Investment Income
- --------------------------------------------------------------------------------
Income
Dividends $1,677,216
Interest 1,901,644
Foreign Taxes Withheld (77,966)
-------------
Total Income 3,500,894
- --------------------------------------------------------------------------------
Expenses
Investment Advisory Fees 4,517,293
Administrative Fees 429,948
Custodian Fees and Expenses 131,806
NYSE Listing Fee 32,355
Organization Expenses 6,972
Professional Fees and Expenses 81,030
Reports to Shareholders 156,643
Transfer Agent Fees 37,164
Trustees' Fees and Expenses 77,359
Other Expenses 12,512
-------------
Net Expenses 5,483,082
- --------------------------------------------------------------------------------
Net Investment Loss (1,982,188)
- --------------------------------------------------------------------------------
Realized And Unrealized Gain (Loss)
On Investment Securities
- --------------------------------------------------------------------------------
Net Realized Gain on Investment Securities
and Foreign Currency Transactions 97,041,210
Change in Net Depreciation of Investment
Securities and Foreign Currency Transactions (18,719,794)
-------------
Net Gain On Investment Securities 78,321,416
- --------------------------------------------------------------------------------
Net Increase in Net Assets from Operations $76,339,228
================================================================================
See Notes to Financial Statements
<PAGE>
Statement of Cash Flows
The Global Health Sciences Fund
For the Year Ended October 31, 1996
- --------------------------------------------------------------------------------
Increase (Decrease) in Cash
- --------------------------------------------------------------------------------
Cash Flows From Operating Activities:
Dividends and Interest Received, Net of
Foreign Withholding Taxes $3,236,887
Expenses Paid (5,100,905)
Purchases Net of Sales of Short-Term
Portfolio Investments (29,043,971)
Purchases of Long-Term Portfolio Investments (388,188,786)
Sales of Long-Term Portfolio Investments 419,966,737
Other (7,133)
-------------
Net Cash Flows From Operating Activities 862,829
-------------
Net Increase in Cash 862,829
Cash at Beginning of Year 16
-------------
Cash at End of Year $862,845
================================================================================
Reconciliation of Net Increase in Net Assets from Operations to Net Cash Flows
From Operating Activities
- --------------------------------------------------------------------------------
Net Increase in Net Assets from Operations $76,339,228
-------------
Increase in Investments 6,185,218
Net Realized Gain (97,041,210)
Increase in Depreciation of Investment Securities 18,719,794
Increase in Receivable for Investment Securities Sold 2,294,083
Decrease in Payable for Investment Securities Purchased (4,936,714)
Increase in Dividends and Interest Receivable (322,526)
Decrease in Prepaid Expenses and Other Assets 7,133
Increase in Accrued Expenses and Other Payables (382,177)
-------------
Total Adjustments (75,476,399)
-------------
Net Cash Flows From Operating Activities $862,829
================================================================================
See Notes to Financial Statements
<PAGE>
Statement of Changes in Net Assets
The Global Health Sciences Fund
Year Ended October 31
- --------------------------------------------------------------------------------
1996 1995
- --------------------------------------------------------------------------------
Operations
- --------------------------------------------------------------------------------
Net Investment Loss $(1,982,188) $(2,188,534)
Net Realized Gain on Investment
Securities and Foreign Currency
Transactions 97,041,210 46,749,534
Change in Net Appreciation
(Depreciation) of Investment
Securities and Foreign Currency
Transactions (18,719,794) 81,107,756
------------------------------------
Total Increase In Net Assets 76,339,228 125,668,756
Beginning of Period 379,503,064 253,834,308
------------------------------------
End of Period (Including Accumulated
Undistributed Net Investment Income
of $56,982 and $0, respectively) $455,842,292 $379,503,064
================================================================================
See Notes to Financial Statements
<PAGE>
Notes to Financial Statements
The Global Health Sciences Fund
NOTE 1 - Organization And Significant Accounting Policies. The Global Health
Sciences Fund (the "Fund") was organized as a Massachusetts Business Trust on
November 18, 1991 and commenced investment operations on January 24, 1992. The
investment objective of the Fund is to seek capital appreciation through
investments in the health sciences related business sectors. The Fund is
registered under the Investment Company Act of 1940 (the "Act") as a
diversified, closed-end management investment company.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.
A. Security Valuation - Equity securities traded on national
securities exchanges or in the over-the-counter market are valued at the last
sales price in the market where such securities are primarily traded. If last
sales prices are not available, securities are valued at the highest closing bid
price obtained from one or more dealers making a market for such securities or
by a pricing service approved by the Fund's board of trustees.
Debt securities are valued at evaluated bid prices as determined by a
pricing service approved by the Fund's board of trustees. If evaluated bid
prices are not available, debt securities are valued by averaging the bid prices
obtained from one or more dealers making a market for such securities.
Foreign securities are valued at the closing price on the principal stock
exchange on which they are traded. In the event that closing prices are not
available for foreign securities, prices will be obtained from the principal
stock exchange at or prior to the close of the New York Stock Exchange. Foreign
currency exchange rates are determined daily prior to the close of the New York
Stock Exchange.
If market quotations or pricing service valuations are not readily
available, securities are valued at fair value as determined in good faith by
the Fund's board of trustees. Restricted securities are valued 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 at the time of purchase, or market
value if maturity is greater than 60 days.
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. Certain dividends from foreign securities will be
recorded as soon as the Fund is informed of the dividend if such information is
obtained subsequent to the ex dividend date. Interest income, which may be
comprised of stated coupon rate, market discount and original issue discount, is
recorded on the accrual basis. Discounts on debt securities purchased are
amortized over the life of the respective security as adjustments to interest
income. Cost is determined on the specific identification basis.
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
<PAGE>
from future political or economic conditions and/or possible impositions of
adverse foreign governmental laws or currency exchange restrictions. Net
realized and unrealized gain or loss from investments includes fluctuations from
currency exchange rates and fluctuations in market value.
Restricted securities held by the Fund may not be sold except in exempt
transactions or in a public offering registered under the Securities Act of
1933. The risk of investing in such securities is generally greater than the
risk of investing in the securities of widely held, publicly traded companies.
Lack of a secondary market and resale restrictions may result in the inability
of the Fund to sell a security at a fair price and may substantially delay the
sale of the security which the Fund seeks to sell. In addition, these securities
may exhibit greater price volatility than securities for which secondary markets
exist. The Fund has demand registration rights for certain restricted securities
held at October 31, 1996, 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 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.
Net capital loss carryovers utilized in 1996 amounted to $3,103,499. To
the extent future capital gains are offset by capital loss carryovers, 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
witholding taxes. Dividend and interest income is shown gross of foreign
witholding taxes in the accompanying financial statements.
D. Dividends And Distributions To Shareholders - Dividends and
distributions to shareholders are recorded by the Fund on the ex
dividend/distribution date. The Fund distributes net realized capital gains, if
any, to its shareholders at least annually, if not offset by capital loss
carryovers. Income distributions and capital gain distributions are determined
in accordance with income tax regulations which may differ from generally
accepted accounting principles. These differences are primarily due to differing
treatments for foreign currency transactions, non-taxable dividends, net
operating losses and expired capital loss carryforwards. For the year ended
October 31, 1996, the Fund reclassified $268,043 from accumulated undistributed
net realized gain on investment securities and foreign currency transactions to
paid-in capital and reclassified $2,039,170 from accumulated undistributed net
realized gain on investment securities and foreign currency transactions to
accumulated undistributed net investment income. Net investment income, net
realized gains and net assets were not affected. On November 25, 1996, the Fund
declared a long-term capital gain of $3.8925 and a short-term capital gain of
$0.5802 per share.
NOTE 2 - Investment Advisory And Other Agreements. INVESCO Trust Company
("ITC") serves as the Fund's investment adviser. As compensation for its
services to the Fund, ITC 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 1.00% of ending weekly net assets.
<PAGE>
Under the terms of the Administrative Agreement with the former
administrator, certain administrative services were provided to the Fund for
fees based upon an annual rate of average net assets ranging from 0.20% to
0.10%. As of May 1, 1996, INVESCO Funds Group, Inc. ("IFG") became the
administrator for the Fund. The Fund will pay IFG an annual fee of $250,000 to
provide administrative, accounting and clerical services. The fee is accrued
daily and paid monthly.
NOTE 3 - Purchases And Sales Of Investment Securities. For the year ended
October 31, 1996, the aggregate cost of purchases and proceeds from sales of
investment securities (excluding all U.S. Government securities and short-term
securities) were $382,392,072 and $417,923,462, respectively.
There were no purchases or sales of U.S. Government securities.
NOTE 4 - Appreciation And Depreciation. At October 31, 1996, the gross
appreciation of securities in which there was an excess of value over tax cost
amounted to $95,503,189 and the gross depreciation of securities in which there
was an excess of tax cost over value amounted to $13,057,352, resulting in net
appreciation of $82,445,837.
NOTE 5 - Transactions With Affiliates And Affiliated Companies. For the year
ended October 31, 1996, PaineWebber Incorporated (an affiliate of the former
administrator) earned $19,426 in commissions for brokerage transactions.
Certain of the Fund's officers and trustees are also officers and
directors of ITC or IFG.
An affiliated company represents ownership by the Fund of at least 5% of
the voting securities of the issuer during the period, as defined in the Act. A
summary of the transactions with affiliates during the year ended October 31,
1996, in which the issuer was an affiliate of the Fund, is as follows:
<PAGE>
<TABLE>
<CAPTION>
Purchases Sales Realized
----------------------- ----------------------- Gain(Loss) on Value
Affiliate Shares Cost Shares Cost Investments at 10/31/96
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Adeza Biomedical Series II Conv Pfd - - - - - $1,000,000
Alexion Pharmaceuticals - - - - - 3,703,945
Alexion Pharmaceuticals Warrants - - - - - 0
Cadus Pharmaceutical - - - - - 4,595,189
Cambridge Heart 38,000 $342,000 2,000 $18,000 $5,250 6,185,500
Clarus Medical Systems
Series I Conv Pfd- - - - - - 533,320
Series II Conv Pfd 55,000 275,000 - - - 386,195
Warrants - - - - - 0
Crown Laboratories - - 26,500 39,750 (4,206) 520,594
Ecogen Technologies I - - - - - 792,000
Electroscope Inc - - - - - 2,261,000
Ingenex Inc Series B Pfd - - - - - 600,000
Medical Associates of America - - - - - 1
Medical Associates of America
Conv Sr Notes
Zero Coupon, 2/28/1999 - - - - - 100
Multum Information Service
Series B Conv Pfd - - - - - 2,570,000
Norian Corp Series D Pfd - - - - - 1,500,001
Pharmos Corp - - - - - 791,847
Protocol Systems 42,500 442,188 - - - 6,154,375
SOMNUS Medical Technologies
Series B Pfd 1,000,000 3,000,000 - - - 3,000,000
Spiros Development Units 66,667 2,000,010 - - - 2,617,480
Titan Pharmaceuticals - - - - - 4,442,757
Unisyn Technologies - - - - - 20,754
Unisyn Technologies
Series A Conv Pfd - - - - - 758,258
Series B Pfd 499,500 499,500 - - - 499,500
Warrants - - - - - 0
Xenometrix Inc - - - - - 2,055,430
Xillix Technologies - - - - - 1,697,838
- ---------------------------------------------------------------------------------------------------------------------------
$46,686,084
===========================================================================================================================
No dividend income was received from any affiliated companies.
</TABLE>
<PAGE>
<TABLE>
Financial Highlights
The Global Health Sciences Fund
(For a Fund Share Outstanding Throughout Each Period)
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Year Ended October 31 Period Ended
------------------------------------------------------ October 31
1996 1995 1994 1993 1992^
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Data
- ---------------------------------------------------------------------------------------------------------------------------
Net Asset Value -
Beginning of Period $18.506 $12.378 $12.121 $12.643 $13.950
---------------------------------------------------------------------
Income From Investment Operations
Net Investment Income (Loss) (0.097) (0.107) (0.085) 0.205 0.071
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) 3.821 6.235 0.542 (0.652) (1.345)
---------------------------------------------------------------------
Total from Investment Operations 3.724 6.128 0.457 (0.447) (1.274)
- ---------------------------------------------------------------------------------------------------------------------------
Less Distributions
Dividends from Net Investment Income 0.000 0.000 0.200 0.075 0.000
Offering Costs Charged to Paid-In Capital 0.000 0.000 0.000 0.000 0.033
---------------------------------------------------------------------
Total Distributions 0.000 0.000 0.200 0.075 0.033
- ---------------------------------------------------------------------------------------------------------------------------
Net Asset Value -
End of Period $22.230 $18.506 $12.378 $12.121 $12.643
=====================================================================
Share Price -End of Period $17.000 $14.750 $10.000 $11.500 $11.500
=====================================================================
Total Return > 15.25% 47.50% (11.49%) 0.67% (17.56%)*
- ---------------------------------------------------------------------------------------------------------------------------
Ratios
Net Assets - End of Period
($000 Omitted) $455,842 $379,503 $253,834 $248,564 $259,279
Ratio of Expenses to Average Net Assets 1.21% 1.33% 1.41% 1.39% 1.35%~
Ratio of Net Investment Income (Loss)
to Average Net Assets (0.44%) (0.72%) (0.70%) 1.74% 0.72%~
Portfolio Turnover Rate 91% 105% 121% 226% 215%*
Average Commission Rate Paid^^ $0.0822 - - - -
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
^ From January 24, 1992, commencement of operations, to October 31, 1992.
> 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.
* Based on operations for the period shown and, accordingly, are not
representative of a full year.
~ Annualized
^^ The average commission rate paid is the total brokerage commissions paid on
the applicable purchases and sales of securities for the period divided by
the total number of related shares purchasd or sold which is required to be
disclosed for fiscal years beginning September 1, 1995 and thereafter.
<PAGE>
Report of Independent Accountants
To the Shareholders and Board of Trustees of The Global Health Sciences
Fund. In our opinion, the accompanying statement of assets and liabilities,
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, 1996, 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 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, 1996 by
correspondence with the custodian and a broker and the application of
alternative auditing procedures for unsettled security transactions, provide a
reasonable basis for the opinion expressed above.
At October 31, 1996, the financial statements include securities valued at
$67,887,454 (14.88 percent of net assets), whose values have been estimated by
the Board of Trustees in the absence of readily ascertainable market values. We
have reviewed the procedures used by the Board of Trustees in arriving at their
estimate of value of such securities 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 2, 1996
<PAGE>
<TABLE>
Other Information
The Global Health Sciences Fund
Unaudited
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Dividends and Capital Gains Distribution History
- ---------------------------------------------------------------------------------------------------------------------------
Net Investment Long-Term Short-Term
Income Capital Gains Capital Gains
Ex Date Payable Date (per share) (per share) (per share)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
December 24, 1992 January 15, 1993 $0.075 - -
December 23, 1993 January 14, 1994 $0.200 - -
November 29, 1996 December 23, 1996 - $3.8925 $0.5802
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
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.
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.
<PAGE>
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
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 30, 1996.
Shareholders voted to re-elect Charles A. Brady, Fred A. Deering and A.D.
Frazier, Jr. 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 three Trustees:
Charles A. Brady For: 15,806,775
Withheld Authority: 325,946
Fred A. Deering For: 15,819,159
Withheld Authority: 313,562
A.D. Frazier, Jr. For: 15,802,630
Withheld Authority: 330,091
2. Ratification of Appointment of Price Waterhouse LLP as the Fund's
Independent Accountants:
For: 15,979,826
Against: 55,611
Abstain: 97,285
In addition to Messrs. Brady, Deering and Frazier, the following persons serve
as Trustees of the Fund: Mr. Hubert L. Harris, Jr., Mr. Dan J. Hesser, Mr. John
W. McIntyre and Dr. Larry Soll.
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MISCELLANEOUS
For the year ended October 31, 1996, 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. Hubert L. Harris, Jr. was selected
to serve as President and Trustee of the Fund, and Mr. John Schroer assumed
primary responsibility for the day-to-day management of the Fund's portfolio.
Mr. Schroer joined INVESCO Trust Company ("ITC") in 1992 and became a
Senior Vice President of ITC in 1996. In addition to Mr. Schroer's
responsibilities as portfolio manager of the Fund, he also manages the INVESCO
Strategic Health Sciences Fund and the INVESCO Emerging Growth Fund. Mr. Schroer
has been an officer of The Global Health Sciences Fund since January 1996.
Mr. Schroer received his B.S. and M.B.A. degrees from the University of
Wisconsin-Madison. He began his investment management career in 1990 with the
Trust Company of the West as an investment analyst. He was eventually given
additional responsibilities by Trust Company of the West in Los Angeles as
Assistant Vice President with analytical responsibilities in the health care
industry.
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Trustees and Officers
Trustees
Charles W. Brady
Chairman of the Board of Trustees
Hubert L. Harris, Jr.
President and Trustee
Fred A. Deering
Trustee
A.D. Frazier, Jr.
Trustee
Dan J. Hesser
Trustee
John W. McIntyre
Trustee
Larry Soll, Ph.D.
Trustee
Officers
John R. Schroer
Vice President
Glen A. Payne
Secretary
Ronald L. Grooms
Treasurer, Chief Financial and Accounting Officer
Shareholder Information
Investment Adviser
INVESCO Trust Company
7800 East Union Avenue
Suite 1100
Denver, Colorado 80237
Administrator
INVESCO Funds Groups, Inc.
7800 East Union Avenue
Suite 800
Denver, Colorado 80237
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Custodian
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Shareholder Servicing Agent
Boston Equiserve, Inc.
150 Royall Street
Mail Stop 45-02-62
Canton, Massachusetts 02021
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
For information about The Global Health Sciences Fund or current net asset
values, please call toll-free 1-800-528-8765
For questions on dividend reinvestment, please call toll-free 1-800-426-5523
