INVESCO
Global Health
Sciences Fund
Annual Report
1997
<PAGE>
Highlights
For the 12 Months Ended October 31
----------------------------------
1997 1996 1995
- ---------------------------------------------------------------------------
Net Asset Value--Total Return 18.60% 20.10% 49.52%
Share Price--Total Return 32.98% 15.25% 47.50%
Total Distributions Paid $ 4.473 $ 0.00 $ 0.00
Total Net Assets--End of Period (Millions) $ 526.2 $ 455.8 $379.5
Ratio of Expenses to Average Net Assets 1.22%* 1.21% 1.33%
Portfolio Turnover Ratio 145% 91% 105%
Average Commission Rate Paid $0.0555 $ 0.0822 --
- ---------------------------------------------------------------------------
Past performance is no guarantee of future results.
*Ratio is based on Total Expenses of the Fund, which is before any expense
offset arrangements.
Chart:
This bar graph illustrates the net asset value per share increase/decrease
over the past five years.
Chart:
This bar graph illustrates the stock price per share increase in 1997
compared to the prior four years (1993-1996).
<PAGE>
INVESCO Global Health Sciences Fund is an aggressive growth closed-end fund that
focuses on health care, a global industry with unlimited growth potential. The
Fund is managed by INVESCO, which is an industry leader in investment
management.
The Fund is managed by INVESCO through the selective allocation of holdings in
the subsectors of pharmaceuticals, medical devices and supplies, biotechnology,
and health care delivery, and seeks returns that exceed those of the broader
market. The Fund's broad investment charter allows investments in private
companies that represent the next generation in health care technology. These
companies 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.
INVESCO Global Health Sciences Fund's total net assets under management were
more than $526 million as of October 31, 1997.
Health Care:
A Solid Growth Investment
Chart:
National Health Care Expenditures 1997: this graph shows the percentage of
the INVESCO Global Health Sciences Fund's total net assets held in various
subsectors (hospital care, 35%; physician care, 20%; other 20%; drugs and
Other non-DME, 8%; nursing home care, 8%; dental services, 5%; home health
care, 3%, vision and other DME, 1%. Health Care as a Percent of Gross
Domestic Product, 14.8%.
Chart:
Aging of the Population: this graph shows the percentage of the population
of the United States, Europe and Japan that is over the age of 60 as of
1995 and will be over the age of 60 in the years 2000, 2005, 2010 and 2020.
Chart:
Pharmaceutical Trends & New Chemical Entity Approvals: this graph shows
the relationship between the growth in total prescriptions and price
increase to the number of new chemical entities approved over the last
7 years (1997 estimated).
Chat:
Health Care Costs Weigh Heaviest on the Oldest: this graph shows the
expenditures of each age group in the United States as a percentage of
total expenditures and in dollars.
<PAGE>
For the fiscal-year ended October 31, 1997, the Fund had a total return of
18.60%, based on net asset value, and a return of 32.98%, based on market value.
During this period, the net asset value return lagged the average open-end fund
return of 27.70% in the Lipper Health/Biotechnology category. However, one of
the unique aspects of closed-end funds is that in periods of underperformance on
a net asset value basis, the Fund still has the potential to outperform the
index on a market-price basis. This was the case for the one-year ended October
31, 1997, as the Fund's market price return of 32.98% outperformed the Lipper
Health/Biotechnology category. Of course, past performance is not a guarantee
of future results. Lipper Analytical Services, Inc., is an independent mutual
fund analyst.
For the three years ended October 31, 1997, the Fund had an average annual
return of 28.66%, based on net asset value, and 31.24%, based on market price.
Both of these returns significantly outperformed the average open-end fund
return of 24.55% for the Lipper Health/Biotechnology category.
<PAGE>
1997 PERFORMANCE REPORT
Dear Shareholder:
1997 has been a gratifying year for stock investors. Broad market averages
are approaching a third consecutive year of double-digit returns, consumer
confidence is running at historically high levels, the economy has been
expanding for 79 months, inflation measured at the consumer level is almost
non-existent, and interest rates remain low. Within this economic environment,
corporate earnings have thrived, as downsizing and corporate restructuring --
along with improved worker productivity -- helped make U.S. companies the most
efficient in the world. In fact, the operating earnings of the S&P 500 companies
have increased at a double-digit rate for an unprecedented fifth consecutive
year.
With all the good economic news, the financial markets have produced
euphoric results over the last 12 months. These strong returns, however, were
accompanied by increased volatility. In the early spring, fears of inflation and
an overheating economy caused the Federal Reserve Broad to increase the Fed
Funds' rate by 25 basis points -- producing a sharp pullback in the equity
markets. In August, renewed inflation fears as well as concerns about corporate
earnings again dampened investors' returns. In both cases, the markets quickly
recovered and continued their upward trend.
Graph: This graph compares the net asset value and share price value of a
$10,000 investment in the INVESCO Global Health Sciences Fund to the
value of a $10,000 investment in the S&P Health Care Composite Index
for the period from inception (01/31/92) through 10/31/97.
However, in the fall, U.S. equity markets experienced their first
correction -- a decline in value of more than 10% from their highs -- in more
than seven years. On October 27, the Dow Jones Industrial Average plunged 554.26
points (the largest point decline in history, but twelfth in percentage terms)
as fears of slowing economies in the Asia/Pacific Rim region reignited worries
about corporate earnings and the value of the domestic markets. However, the Dow
recovered almost half of its losses the following day. We believe that investors
need to recognize that, in times of volatility, emotions sway markets more than
fundamentals. Fears of a global recession and an international currency
meltdown, which were raised by many after the October market drop, have failed
to materialize and the market has already rebounded.
Furthermore, the U.S. economy remains globally dominant and fundamentally
sound. Granted, an economic slowdown in the Far East may reduce corporate
earnings for selected multinational companies, but we do not believe that will
derail the expansion here at home. Continued low interest rates and almost
non-existent inflation bode well for the domestic economy.
Another positive is that, over the last year, we have witnessed a rotation
in market leadership away from large-capitalization stocks to a better-balanced
market with strong returns being posted across the capitalization spectrum.
Consequently, the underlying fundamentals of the health of the economy and
financial markets appear strong, although volatility is likely to continue.
<PAGE>
In this environment of low inflation and strong economic growth, health
care stocks have produced strong returns. Earlier this year, as mentioned in the
semiannual report, investors' nervousness about interest rates and the
sustainability of corporate profits placed a premium on liquidity and stability
of earnings. This caused market leadership to narrow, resulting in a two-tier
health care market in which market-leading, large-capitalization pharmaceutical
companies outperformed smaller health care companies. However, in the early
summer, leadership rotated to a better-balanced market in which most health care
stocks, regardless of capitalization levels, participated in the broad market's
climb.
The Fund continues to focus a significant portion of the portfolio on
pharmaceutical companies. These companies are benefiting from an improving
regulatory environment and strong new product pipelines. Pharmaceuticals should
remain the dominant theme in the portfolio, but the Fund remains exposed to
faster-growing, small- and mid-cap health care companies.
Underlying Fundamentals of the Health Care Industry
We believe that the health care industry will be a major participant of
growth of the world's economies in years to come. Back when ancient Romans ruled
the civilized world, they had an approximate life expectancy of 22 years. In
1900, a U.S. female had a life expectancy of approximately 47 years. Today,
American citizens may live well into their mid-seventies, and in 50 years, it
may be common for people to live well past 100. As global birth rates decline
and life expectancy is increased, a greater proportion of the world's population
will be over 60. In fact, the oldest baby boomer in the United States just
turned 50 this year. Over 34 million people in the United States are presently
over 65 years old.
Graph: This graph compares the percent of the INVESCO 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 1997.
These changing demographics will have a profound influence on the health
care market. Once individuals reach age 65, studies show that they are three to
four times more likely to use health care services (prescriptions, hospitals,
medical devices, etc.). With an aging global population, increased demand for
the health care industry is likely, and the maturing population should influence
the health care sector well into the 21st century. Another potential positive
influence on the health care sector is the increasing need for health care in
emerging and developing countries. Many of these countries have inadequate
health care systems that are in drastic need of improvement. This should cause
increased spending on health care relative to each country's Gross Domestic
Product, and have a positive impact on the health care sector.
Finally, technology in the health care sector has been growing at an
exponential rate. This growth has created potential market opportunities in
areas that were not imaginable 10 to 20 years ago. Thus, the health care sector
is redefining its parameters, and expanding its reach in new areas as well as
traditional areas.
<PAGE>
Outlook for Health Care Subsectors
Pharmaceuticals: We believe that market-leading, large-cap pharmaceutical
stocks have a bright future. An improving regulatory environment has shortened
the review time needed by the Federal Drug Administration (FDA) in their
analysis of new drugs. This has dramatically cut the approval time for new
drugs, and improved the profitability of large-cap pharmaceuticals, since new
drugs typically drive revenue and earnings growth for pharmaceutical companies.
If the FDA can reach its goal of approving 90% of all new drug applications
within a year, it could have a dramatic impact on the industry.
Given their strong fundamentals, we continue to favor large-cap
pharmaceutical companies. Our largest holding as of October 31, 1997,
Warner-Lambert Co., experienced significant price appreciation as two new drugs,
Lipitor and Rezulin, were well received by the market. Presently, over 50% of
the Fund's portfolio is allocated to pharmaceuticals, and we plan to remain
heavily weighted in this area.
Medical Devices and Supplies: An area that has produced strong returns for
the Fund in the last six months has been the medical devices and supplies
subsector. Companies like Guidant Corp. and Sofamor/Danek Group have
significantly enhanced the Fund's returns. Guidant Corp. is a market-leading
company in the design, development, and manufacturing of products for use in
cardiac rhythm management, angioplasty devices, coronary artery disease
intervention, and other forms of cardiac surgery. Sofamor/Danek Group develops
implant devices used in the surgical treatment of spinal conditions. Its primary
products include support rods and locking bolts, spinal rods, hooks, and
traction devices, and a spinal plate and screws used in the treatment of
cervical disorders.
Biotechnology: For most of the year, biotechnology stocks underperformed
the health care market. Recently, however, this group has shown signs of renewed
life, and some of the stocks produced strong returns for the Fund. IDEC
Pharmaceuticals and Trimeris Inc. are examples of two biotechnology companies
which enhanced performance. IDEC Pharmaceuticals designs and develops
immunotherapies for the treatment of various cancers, inflammation, and
autoimmune diseases. The company's lead products are in the treatment of
non-Hodgkin's B-cell lymphomas. Trimeris was purchased as a private placement
and is mentioned in a following section on private placements begining on page
8.
We remain positive on the long-term fundamentals of the biotech industry.
Technology is creating the wonder drugs of tomorrow. However, because of a lack
of earning's history associated with this industry, these stocks may experience
severe volatility over shorter periods of time. Consequently, stock selectivity
will remain crucial for the Fund.
Health Care Delivery: Health care delivery companies were clearly the most
disappointing subsector in the health care industry over the last 12 months. The
inability of health maintenance organizations (HMOs) to control costs has turned
us somewhat negative on the short-term prospects of the industry. This is
partially the result of Oxford Health Plans' disappointing earnings.
<PAGE>
Looking Forward
Low inflation and strong economic growth should provide a positive backdrop
for health care companies. Within this environment, we will continue to focus a
substantial portion of the Fund's assets on pharmaceuticals, and selectively
increase the Fund's exposure to private placements. Overall, the fundamentals of
the health care sector remain strong; and, for the patient investor, these
industries have the potential to produce dynamic long-term returns.
Sincerely,
/s/ John R. Schroer
- -------------------
John R. Schroer
Senior Vice President,
INVESCO Trust Company
Vice President and Portfolio Manager
INVESCO Global Health Sciences Fund
October 31, 1997
<PAGE>
HEALTH CARE: A GROWTH INVESTMENT
<PAGE>
INVESTING IN PRIVATE PLACEMENTS
Because of the Fund's closed-capital structure, it is able to invest up to
25% of its assets in private placements (restricted or illiquid securities).
Typically, these investments represent young companies with the potential to
make important, commercially-viable contributions to the health care system. The
Fund and its shareholders may benefit financially from a company's Initial
Public Offering (IPO), a takeover, or some other liquidity event. By investing
in private placements, the Fund enhances its potential returns by identifying
promising new opportunities, through in-depth research, before the general
market has the opportunity to invest in them. Over the three-year period ended
October 31, 1997, the Fund's restricted and illiquid securities produced an
average annualized return of 36.98% on a gross return basis. Of course, past
performance is no guarantee of future results.
Importantly, these investments provide valuable diversification for the
overall portfolio by allowing Fund management to balance mature
large-capitalization companies with developing small-cap private companies. This
creates a portfolio that is diversified across company life-cycles and market
capitalization.
Investing in private placements not only provides the potential for strong
returns, it also allows us to participate in technology on the leading edge of
the health care industry. Examining and evaluating advanced health care
technology, before it becomes public, enhances our ability to identify future
trends within the health care industry.
Analyzing private placements, however, is a long and complex process. These
investments, while offering the potential for significant returns, are long-term
investments. Many times, rewards are not realized until the fourth and fifth
year of the investment. Because of their comparatively risky nature, as well as
the long-term capital commitment, we employ a stringent, disciplined screening
process.
If a private issue passes our initial screening process, it is then
evaluated at a more in-depth level. We analyze the underlying technology and its
market potential. This includes extensive discussions with their competitors,
independent doctors, scientists, and researchers. From these independent
sources, we attempt to determine the merits and performance of their product and
its potential impact on the market. If our analysis supports the company's
claims, we move into the valuation process, which begins by defning a potential
market value for the company compared to its competitors and industry. This
leads to an assigned value for the company, used as a base for negotiations with
management. It is crucial that we reach an acceptable price because, once the
deal is signed, we are "married" to the company until an IPO or other liquidity
event.
Two private placements that we are presently excited about are SOMNUS
Medical Technologies and Trimeris, Inc.
<PAGE>
SOMNUS Medical Technologies Inc.
SOMNUS created a first-of-its-kind medical device for habitual snoring,
pictured here. Recently approved by the FDA, the device allows the chronic
patient a cost-effective, minimally invasive outpatient therapy by reducing the
soft tissue in the upper airway. The procedure employing this new device can be
done in a doctor's office in 30 minutes. While habitual snoring may not be a
life-threatening event, it affects approximately 40 million Americans -- a huge
potential market. We believe SOMNUS is in the unique position of offering an
inexpensive, non-invasive answer to the chronic snorer. This may allow the
company to potentially dominate this market and build a highly valuable
franchise. Of course, as with most research and development companies there is
considerable investment risk.
In addition, SOMNUS will work to gain FDA approval to treat Obstructive
Sleep Apena (OSA). OSA effects approximately 20 million Americans, 6.4 million
who have moderate to severe symptoms. OSA is a significant medical disorder that
has been linked to stroke, hypertension, cardiac arrhythmia, and other
life-threatening illnesses. SOMNUS is running clinical trials which could
provide the scientific data necessary to support FDA approval for the use of its
devices in the treatment of OSA.
Trimeris, Inc.
Trimeris, Inc., is a biopharmaceutical company engaged in the discovery and
development of therapeutic agents that inhibit viral fusion with host cells, a
novel mechanism in the battle against viral infection. The company's lead
product, T-20, is targeted for use in AIDS -- which is a leading cause of death
in the United States for men and women between the ages of 25 and 44. In its
initial clinical trial, T-20 significantly reduced virus levels with no
drug-related adverse effects or dose-limiting toxicities. Importantly, its
mechanism is completely novel relative to the drug therapies currently available
to AIDS patients. The goal of T-20 is to provide AIDS patients and their doctors
an alternative to traditional treatments, which have had adverse side effects
for the patient.
Trimeris also plans to expand the therapeutic uses of its agents with the
initiation of clinical trials for a fusion inhibitor of RSV (respiratory
syncytial virus) infection, the main cause of pediatric bronchiolitis and
pneumania. Development programs have been initiated for influenza, hepatitis B &
C, and Epstein-Barr virus. The company's long-term value should come from its
broad technology platform, which provides a powerful tool for the discovery of
therapeutics to address most major viruses.
<PAGE>
Biocompatibles International PLC
Our disciplined, long-term approach to investing in private placements can
produce dynamic returns. Of course, past performance is no guarantee of future
results, and when investing in riskier securities, one success may be mitigated
by numerous losses. However, it may only take a limited number of successes to
produce substantial rewards for the Fund.
An example of a successful private placement investment which enhanced the
Fund's returns was Biocompatibles International PLC. This company is a developer
of novel coatings and materials which provide biocompatibilty in the production
of medical devices. Their products are used in contact lenses, disposable
devices, and implants used in the health care industry.
In March of 1993, the Fund made a $1.6 million investment in Biocompatibles
International PLC through a round of private financing. The company completed
its Initial Public Offering in April 1995, and when the company's shares became
freely tradable in May 1997, the Fund sold its entire position. This resulted in
a realized gain of over $23 million for the Fund -- over a 1400% return on our
investment. (Of course, past performance is not a guarantee of future results.)
On October 31, 11.8% of the portfolio is invested in restricted or illiquid
securities; this weighting is under our goal of carrying 17% to 18% of the
portfolio in private placements. Our underweight position is primarily a
by-product of the extended bull market as many of our private placement
companies successfully completed their IPOs over the last two years, and are no
longer carried on the Fund's books as restricted or illiquid securities.
BOARD ACTION ENHANCING SHAREHOLDER VALUE
Fund's Discount For the fiscal year ended October 31, 1997, the Fund's
discount has ranged from a high of 23.68% on November 1, 1996, to a low of
14.33% on March 13, 1997. As of October 31, 1997, the discount was 18.53%.
The Fund has had a persistent dicount for quite some time. Because of this,
the Fund's Board of Trustees has spent an extensive amount of time evaluating
possible strategies to narrow the discount. On October 6, 1997, the board
approved the implementation of a fixed-distribution policy. This policy, if
permitted by an exemptive order of the Securities and Exchange Commission, would
require the Fund to pay out quarterly dividends at a rate of 2.5% of NAV --
totaling 10% annually.
Based on available research, it was concluded that managed-distribution
policies are generally well-received by investors, and have significantly aided
other closed-end funds in narrowing excessive discount levels.
<PAGE>
Implementation of the policy is contingent upon receipt of the requested
Securities and Exchange Commission exemptive order. This order would permit the
Fund to use realized long-term capital gains when making quarterly
distributions. If permitted, distributions may result in a return of capital to
shareholders if the guaranteed distribution exceeds the Fund's net investment
income plus realized short- and long-term capital gains.
Capital Gains
On October 6, 1997, the Fund's Board of Trustees authorized the Fund to pay
out the capital gains distribution, which may reflect capital gains realized by
the Fund in fiscal year 1998, in optional stock or cash. Fund shareholders who
do not elect to receive the distribution in cash will automatically be paid
their distributions in GHS shares at a price equal to the closing market price
as determined by the New York Stock Exchange on the payable date. All fractional
shares resulting from the distribution will be settled in cash. Shareholders may
request to be paid in cash, instead of shares, by contacting their broker, bank,
or nominee that holds their shares in "street name." A shareholder may also
request cash by completing an authorization card for the disbursing agent (State
Street Bank and Trust Co., 1-800-426-5523).
Participants in the Fund's Dividend Reinvestment Plan who do not elect to
receive the distribution in cash will receive additional shares of the Fund
pursuant to the operation of the plan. Under the plan, shares received by plan
participants, as part of the capital gains distribution, will be purchased in
the open market.
<PAGE>
Q&A
Q: What is a closed-end fund?
A: Closed-end funds have a fixed number of shares and usually trade on a
major stock exchange. Unlike open-end mutual funds, closed-end funds do not
issue and redeem shares on a continuous basis. Instead, a closed-end fund issues
stock at its Initial Public Offering which represents a claim against its
underlying assets. Thus, closed-end funds have two prices: their stock price and
net asset value (NAV). The stock price of a closed-end fund is influenced by
investor demands and perceptions of the underlying asset pool. The net asset
value of a closed-end fund is determined by the performance of the securities
held in the portfolio.
Shares of INVESCO Global Health Sciences Fund trade on the New York Stock
Exchange under ticker symbol "GHS." As with most stocks on any major exchange,
investors need to contact an investment professional (a stock broker or
financial consultant) to place a buy or sell order.
Q: Is the Fund no-load?
A: Because closed-end funds trade as a security on major exchanges, they are
technically considered no-load. However, investors usually will have to pay a
commission or transaction fee to their broker for the purchase or sale of shares
of a closed-end fund.
Q: What are the advantages of closed-end funds?
A: Unlike open-end funds, portfolio managers of closed-end funds need only
to manage the assets in the portfolio, not the cash inflows or outflows. This
allows closed-end fund managers to take a longer-term investment approach when
managing the portfolio.
Second, by having a closed-end capital structure, Fund management is able
to invest a larger amount of the Fund's assets in less liquid investments, which
historically have greater potential for returns. INVESCO Global Health Sciences
Fund may invest up to 25% of its assets in illiquid securities, commonly called
private placements. These types of investments allow the Fund to invest in
technology that is on the cutting edge of the health care industry before it is
discovered by the broader market. While the potential risk of such investments
is higher, so are the long-term opportunities.
Q: What is being done to close the Fund's discount?
A: We realize that, for some shareholders, the persistent discount
associated with the Fund may be troublesome. Therefore, on October 6, 1997, the
Fund's Board of Trustees approved the implementation of a fixed-distribution
policy with required quarterly payments equaling a 10% annual distribution. This
action is the result of an extensive ongoing analysis by the Board of Trustees
and Fund management to identify strategies which may be effective in narrowing
persistent discounts. (Please refer to page 10 of this report for more
information.)
<PAGE>
Q: Why do closed-end funds trade at a discount or premium?
A: Closed-end funds have two prices: stock price and net asset value. Because of
the unique structure of closed-end funds, a stock may trade at a value greater
than the net asset value per share; this is called a premium. On the other hand,
a stock may trade at a value less than the net asset value per share -- a
discount. Currently, over 80% of closed-end equity funds trade at a discount to
their net asset value per share.
Q: Are discounts a negative for investors?
A: Much has been written about the persistent discount of closed-end equity
funds. Yet, for some investors, a discount can create an opportunity to buy
assets for less than their market price. For other investors, a persistent
discount is frustrating as they feel that some of their potential returns are
offset by large discounts. But for the long-term shareholder, investment returns
are driven by the performance of the securities in the portfolio, rather than a
premium or discount.
<PAGE>
FINANCIAL REPORT
TEN LARGEST COMMON STOCK HOLDINGS
INVESCO Global Health Sciences Fund
October 31, 1997
- --------------------------------------------------------------------------------
Percent of
Description Value Net Assets
- --------------------------------------------------------------------------------
Warner-Lambert Co $ 43,070,800 8.2%
Pfizer Inc 32,813,850 6.2
Bristol-Myers Squibb 30,186,000 5.8
SmithKline Beecham PLC Sponsored ADR
Representing Ord A Shrs 26,384,250 5.0
Guidant Corp 25,300,000 4.8
Schering AG 18,008,976 3.4
Schering-Plough Corp 17,379,375 3.3
Akzo Nobel 15,864,894 3.0
HBO & Co 14,685,600 2.8
Lilly (Eli) & Co 14,445,000 2.8
- --------------------------------------------------------------------------------
Total $ 238,138,745 45.3%
================================================================================
Composition of holdings is subject to change.
<PAGE>
INDEX
13 Ten Largest Common
Stock Holdings
14 Statement of Investment
Securities
20 Statement of Assets
and Liabilities
21 Statement of Operations
22 Statement of Cash Flows
23 Statement of Changes
in Net Assets
24 Notes to Financial Statements
27 Financial Highlights
28 Report of Independent Accountants
29 Other Information
31 Trustees and Officers
31 Shareholder Information
<PAGE>
STATEMENT OF INVESTMENT SECURITIES
INVESCO Global Health Sciences Fund
October 31, 1997
- --------------------------------------------------------------------------------
Shares or
Principal
Description Amount Value
- --------------------------------------------------------------------------------
Common Stocks & Warrants 87.82%~
Biotechnology 8.18%
- --------------------------------------------------------------------------------
Alexion Pharmaceuticals*~ 466,776 $ 5,484,617
Cadus Pharmaceutical*~ 729,395 8,205,694
Creative BioMolecules* 200,000 1,843,760
Ecogen Technologies I*^~ 60 1
Genentech Inc* 135,000 7,838,438
INCYTE Pharmaceuticals* 97,500 7,848,750
MedClone Trust*^~@ 216,608 0
PathoGenesis Corp* 91,900 3,308,400
Sepracor Inc* 60,000 2,152,500
Synaptic Pharmaceuticals* 125,000 1,578,125
Titan Pharmaceuticals*^ 488,215 2,308,342
Trimeris Inc* 136,274 1,754,528
Unisyn Technologies*^~ 20,754 7,264
Unisyn Technologies Warrants (Exp 2001)*^~@ 333,773 0
Xenometrix Inc*^~ 261,007 352,359
----------
42,682,778
----------
Health Care Delivery 13.57%
- --------------------------------------------------------------------------------
Advanced Health*^~ 406,549 6,448,884
Bergen Brunswig Class A* 190,000 7,611,875
Cerner Corp* 58,000 1,406,500
Concentra Managed Care* 27,180 886,748
Coventry Corp* 380,800 5,307,400
HBO & Co 337,600 14,685,600
McKesson Corp 90,000 9,658,125
MedPartners Inc* 200,000 5,087,500
PacifiCare Health Systems Class B* 127,500 8,255,625
Quorum Health Group* 54,100 1,311,925
Transition Systems* 125,000 2,531,250
United Healthcare 165,000 7,641,563
----------
70,832,995
----------
<PAGE>
Medical Devices & Supplies 15.25%
- --------------------------------------------------------------------------------
ATS Medical Warrants (Exp 1997)*^@ 166,666 0
Cambridge Heart*^~ 495,963 4,017,300
Clarus Medical Systems Warrants (Exp 2000)*^~@ 2,224 0
Electroscope Inc*^~ 380,000 646,000
Emisphere Technologies* 254,200 4,925,125
Guidant Corp 440,000 25,300,000
IDEC Pharmaceuticals* 90,400 3,446,500
IDEXX Laboratories* 162,800 2,584,450
Johnson & Johnson 82,000 4,704,750
Lynx Therapeutics*^~ 350,000 4,016,250
Medtronic Inc 175,000 7,612,500
OrbTek Inc*^ 88,385 1
OrbTek Inc Warrants (Exp 2001)*^@ 250,000 0
Perkin-Elmer Corp 98,500 6,156,250
Sofamor/Danek Group* 160,000 11,020,000
VidaMed Inc*^~ 1,052,632 5,210,528
VidaMed Inc Warrants (Exp 2000)*^~@ 263,158 0
----------
79,639,654
----------
Pharmaceuticals 50.82%
- --------------------------------------------------------------------------------
Abbott Laboratories 175,000 10,729,687
Akzo Nobel NV ++ 90,000 15,864,894
American Home Products 95,000 7,041,875
Bristol-Myers Squibb 344,000 30,186,000
CIMA Labs* 333,333 1,979,165
Forest Laboratories 125,000 5,781,250
ICN Pharmaceuticals 230,000 11,068,750
Kos Pharmaceuticals* 120,000 4,290,000
Lilly (Eli) & Co 216,000 14,445,000
MedImmune Inc* 137,400 5,478,825
Merck & Co 146,000 13,030,500
Novartis AG++ 4,200 6,595,959
Pfizer Inc 463,800 32,813,850
Schering AG++ 185,500 18,008,976
Schering-Plough Corp 310,000 17,379,375
SmithKline Beecham PLC Sponsored ADR
Representing Ord A Shrs 554,000 26,384,250
Warner Chilcott Laboratories Sponsored ADR
Representing Ord Shrs* 84,400 1,192,150
Warner-Lambert Co< 300,800 43,070,800
-----------
265,341,306
-----------
Total Common Stocks & Warrants (Cost $341,145,318) 458,496,733
- --------------------------------------------------------------------------------
<PAGE>
Preferred Stocks 6.45%
Biotechnology 2.31%
- --------------------------------------------------------------------------------
Exelixis Pharmaceuticals, Series C Pfd*^~ 1,125,000 2,250,000
Genomica Corp, Series A Pfd*^ 2,490,075 1,500,000
GenoPlex Inc, Series A Pfd*^ 200,000 200,000
Ingenex Inc, Series B Pfd*^ 103,055 600,000
MedClone Trust, Series G Conv Pfd*^~ 872,096 113,372
Ontogeny Inc, Series E Pfd*^~ 1,000,000 2,500,000
Osiris Therapeutics, Series C Conv Pfd*^ 352,941 1,199,999
Trimeris Inc, Series D Pfd*^ 313,726 3,029,417
Unisyn Technologies
Series A Conv Pfd*^~ 758,258 265,390
Series B Pfd*^~ 499,500 174,825
Series C Pfd*^~ 696,710 243,849
----------
12,076,852
----------
Health Care Delivery 1.56%
- --------------------------------------------------------------------------------
Caresoft Inc, Series A Pfd*^~ 540,541 $ 1,000,001
Multum Information Services
Series B Pfd*^~ 1,000,000 2,570,000
Series E Pfd*^~ 250,294 851,000
Physicians Online
Series A Pfd*^~ 361,500 3,220,965
Series C Conv Pfd*^~ 55,558 500,022
-----------
8,141,988
-----------
Medical Devices & Supplies 2.58%
- --------------------------------------------------------------------------------
Adeza Biomedical, Series II Conv Pfd*^~ 416,667 1,216,667
Clarus Medical Systems
Series I Pfd*^~ 106,664 533,320
Series II Pfd*^~ 77,239 386,196
InterVentional Technologies, Series F Pfd*^ 250,000 2,125,000
Janus Biomedical, Series A Conv Pfd*^~ 400,000 1,000,000
Nanogen Inc, Series C Pfd*^ 625,000 2,500,000
Norian Corp, Series D Pfd*^ 267,857 1,500,001
OrbTek Inc, Series A Conv Pfd*^ 714,286 1
SOMNUS Medical Technologies, Series B Pfd*^~ 1,000,000 4,200,000
-----------
13,461,185
-----------
Total Preferred Stocks (Cost $31,613,191) 33,680,025
- --------------------------------------------------------------------------------
<PAGE>
Fixed Income Securities 0.14%
Medical Devices & Supplies 0.14%
- --------------------------------------------------------------------------------
OrbTek Inc, Conv Promissory Notes, 10.000%
6/30/2000*^+ $500,000 133,332
11/22/2000*^+ $1,000,000 266,667
OrbTek Inc, Conv Promissory Notes
Zero Coupon, 11/24/2000*^+ $250,000 66,667
OrbTek Inc, Secured Conv Promissory Notes
10.000%, 11/24/2000*^+ $1,000,000 266,667
-----------
Total Fixed Income Securities (Cost $2,750,000) 733,333
- --------------------------------------------------------------------------------
Other Securities 0.91%
Medical Devices & Supplies 0.09%
- --------------------------------------------------------------------------------
Axogen Ltd, Units*
(Each unit consists of one cmn shr of Axogen
and one wrnt to purchase ELAN representing one ADR 11,400 444,600
-----------
Pharmaceuticals 0.82%
- --------------------------------------------------------------------------------
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 Pharmaceuticals cmn stock) 66,667 4,282,488
-----------
Total Other Securities (Cost $2,205,210) 4,727,088
- --------------------------------------------------------------------------------
Short-Term Investments 4.68%
- --------------------------------------------------------------------------------
Corporate Bonds 0.05%
Medical Devices & Supplies 0.05%
- --------------------------------------------------------------------------------
OrbTek Inc, Conv Promissory Notes
Zero Coupon, 12/31/1997*^+ (Cost $1,000,000) $1,000,000 $ 266,667
- --------------------------------------------------------------------------------
Commercial Paper 4.63%
Finance Related 4.63%
- --------------------------------------------------------------------------------
American General Finance, 5.703%, 11/3/1997
(Cost $24,190,00) $24,190,000 24,190,000
- --------------------------------------------------------------------------------
Total Short-Term Investments (Cost $25,190,000) 24,456,667
- --------------------------------------------------------------------------------
Total Investment Securities at Value 100.00%
- --------------------------------------------------------------------------------
(Cost $402,903,719)
(Cost for Income Tax Purposes $403,201,223) $522,093,846
================================================================================
<PAGE>
* Security is non-income producing.
~ Security is an affiliated company (See Notes).
< Security has been designated as collateral for short sell.
@ Security has no market value at October 31, 1997.
++ Security has been designated as collateral for forward foreign currency
contracts.
+ Security is a payment-in-kind (PIK) bond. PIK bonds may make interest
payments in additional securities.
^ The following are restricted securities at October 31, 1997:
<TABLE>
<CAPTION>
Schedule of Restricted or Illiquid Securities
- -----------------------------------------------------------------------------------------------------------
Acquisition Acquisition Fair Value as a
Description Date(s) Cost Fair Value % of 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 1,216,667 0.23
Advanced Health 8/30/1993-
1/27/1995 1,548,590 6,448,884(c) 1.23
Cambridge Heart 9/29/1993 1,300,000 4,017,300(c) 0.76
Caresoft, Series A Pfd Inc 7/21/1997 1,000,001 1,000,001 0.19
Clarus Medical Systems
Series I Pfd 12/23/1992 533,320 533,320 0.10
Series II Pfd 11/9/1994-
2/9/1995 386,196 386,196 0.07
Warrants (Exp 2000) 11/16/1994 0 0 0.00
Ecogen Technologies I 11/16/1992-
1/28/1994 684,000 1 0.00
Electroscope Inc 4/27/1993-
3/21/1996 990,000 646,000(b) 0.12
Exelixis Pharmaceuticals, Series C Pfd 4/9/1997 2,250,000 2,250,000 0.43
Genomica Corp, Series A Pfd 10/6/1997 1,500,000 1,500,000 0.28
GenoPlex Inc, Series A Pfd 9/15/1997 200,000 200,000 0.04
Ingenex Inc, Series B Pfd 9/27/1994 600,000 600,000 0.11
InterVentional Technologies
Series F Pfd 10/19/1992 2,000,000 2,125,000 0.40
Janus Biomedical, Series A Conv Pfd 3/2/1994 1,000,000 1,000,000 0.19
Lynx Therapeutics 10/1/1997 3,500,000 4,016,250 0.76
<PAGE>
Date Fair Value as a
Security Name Acquired Cost Fair Value % of Net Assets
- ----------------------------------------------------------------------------------------------------------
MedClone Trust 9/30/1997 $ 151,965 $ 0 0.00%
MedClone Trust, Series G Conv Pfd 10/21/1993-
7/20/1994 1,500,005 113,372 0.02
Multum Information Services
Series B Pfd 3/26/1993 1,000,000 2,570,000 0.49
Series E Pfd 6/16/1997 851,000 851,000 0.16
Nanogen Inc, Series C Pfd 12/19/1996 2,500,000 2,500,000 0.48
Norian Corp, Series D Pfd 8/5/1992 1,500,001 1,500,001 0.29
Ontogeny Inc, Series E Pfd 3/13/1997 2,500,000 2,500,000 0.48
OrbTek Inc 1/9/1997 216,849 1 0.00
OrbTek Inc
Conv Promissory Notes, 10.000%
6/30/2000 6/30/1995 500,000 133,332 0.03
11/22/2000 11/24/1995 1,000,000 266,667 0.05
Conv Promissory Notes, Zero Coupon
12/31/1997 2/14/1997 1,000,000 266,667 0.05
11/24/2000 10/4/1996 250,000 66,667 0.01
Secured Conv Promissory Notes, 10.000%
11/24/2000 4/29/1996 1,000,000 266,667 0.05
Series A Conv Pfd 5/13/1994-
2/9/1995 1,500,001 1 0.00
Warrants (Exp 2001) 10/4/1996-
2/14/1997 0 0 0.00
Osiris Therapeutics, Series C Conv Pdf 5/26/1994 1,199,999 1,199,999 0.23
Physicians Online
Series A Pfd 8/31/1993 964,000 3,220,965 0.61
Series C Pfd 2/29/1996 500,022 500,022 0.10
SOMNUS Medical Technologies
Series B Pfd 9/11/1996 3,000,000 4,200,000(a) 0.80
Spiros Development Units 12/29/1995 2,000,010 4,282,488 0.81
Titan Pharmaceuticals 7/19/1993 2,000,000 2,308,342(b) 0.44
Trimeris Inc, Series D Pfd 6/27/1997 2,000,000 3,029,417(a) 0.58
Unisyn Technologies 2/28/1994 999,961 7,264 0.00
Unisyn Technologies
Series A Conv Pfd 7/27/1994 758,258 265,390 0.05
Series B Pfd 2/6/1996 499,500 174,825 0.03
Series C Pfd 4/25/1997 870,888 243,849 0.05
Warrants (Exp 2001) 7/27/1994 0 0 0.00
VidaMed Inc 9/22/1997 5,000,002 5,210,258 0.99
VidaMed Inc Warrants (Exp 2000) 9/22/1997 0 0 0.00
Xenometrix Inc 7/28/1992-
12/2/1994 2,099,978 352,359 0.07
-------------------------------------------------
$55,854,546 $61,969,442 11.78%
===========================================================================================================
</TABLE>
(a) Fair value represents 75% of the security's publicly traded value.
(b) Fair value represents 85% of the security's publicly traded value.
(c) Fair value represents 90% of the security's publicly traded value.
<PAGE>
FORWARD FOREIGN CURRENCY CONTRACTS
INVESCO Global Health Sciences Fund
Open at October 31, 1997:
- --------------------------------------------------------------------------------
Currency Currency Unrealized
Currency/Value Date Units Sold Value (US$) Loss
- --------------------------------------------------------------------------------
German Mark (2/9/1998) 17,000,000 $ 9,800,204 $ (56,583)
Netherlands Guilder (11/20/1997) 25,000,000 10,842,660 (1,016,961)
Swiss Franc (2/9/1998) 6,000,000 4,207,567 (61,680)
-------------------------
$24,850,431 $(1,135,224)
================================================================================
SHORT SELL
INVESCO Global Health Sciences Fund
Open at October 31, 1997:
Current
Market Unrealized
Security Shares Proceeds Value Appreciation
- --------------------------------------------------------------------------------
Neoprobe Corp 85,000 $900,130 $850,000 $50,130
============================================
See Notes to Financial Statements
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
INVESCO Global Health Sciences Fund
October 31, 1997
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Assets
- -------------------------------------------------------------------------------------------
<S> <C>
Investment Securities at Value (Cost $402,903,719) $522,093,846
Receivables:
Investment Securities Sold 7,498,584
Dividends and Interest 467,907
Prepaid Expenses 32,120
------------
Total Assets 530,092,457
- -------------------------------------------------------------------------------------------
Liabilities
- -------------------------------------------------------------------------------------------
Payables:
Custodian 1,239,669
Investment Securities Purchased 605,215
Securities Sold Short 850,000
Depreciation on Forward Foreign Currency Contracts 1,135,224
Accrued Expenses 47,741
------------
Total Liabilities 3,877,849
- -------------------------------------------------------------------------------------------
Net Assets at Value $526,214,608
===========================================================================================
Net Assets
- -------------------------------------------------------------------------------------------
Paid-in Capital* $343,467,696
Accumulated Undistributed Net Realized Gain on
Investment Securities and Foreign Currency Transactions 64,638,994
Net Appreciation of Investment Securities and Foreign Currency Transactions 118,107,918
------------
Net Assets at Value $526,214,608
- -------------------------------------------------------------------------------------------
Net Asset Value per Share $21.25
===========================================================================================
</TABLE>
* The Fund has an unlimited number of authorized shares of common stock, par
value of $0.01 per share, of which 24,762,567 were outstanding at October 31,
1997.
See Notes to Financial Statements
<PAGE>
STATEMENT OF OPERATIONS
INVESCO Global Health Sciences Fund
Year Ended October 31, 1997
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Investment Income
- ---------------------------------------------------------------------------------------------------
<S> <C>
Income
Dividends $ 4,048,905
Interest 1,368,751
Foreign Taxes Withheld (167,719)
-------------
Total Income 5,249,937
- ---------------------------------------------------------------------------------------------------
Expenses
Investment Advisory Fees 4,880,120
Administrative Fees 250,000
Custodian Fees and Expenses 173,005
NYSE Listing Fee 52,743
Organization Expenses 1,592
Professional Fees and Expenses 277,975
Transfer Agent Fees 38,527
Trustees' Fees and Expenses 61,598
Reports to Shareholders 192,009
Other Expenses 36,262
-------------
Total Expenses 5,963,831
Fees and Expenses Paid Indirectly (15,778)
-------------
Net Expenses 5,948,053
- ---------------------------------------------------------------------------------------------------
Net Investment Loss (698,116)
- ---------------------------------------------------------------------------------------------------
Realized And Unrealized Gain (Loss) On Investment Securities
- ---------------------------------------------------------------------------------------------------
Net Realized Gain on Investment Securities and Foreign Currency Transactions 64,895,920
Change in Net Appreciation of Investment Securities and Foreign Currency Transactions 35,661,374
-------------
Net Gain On Investment Securities 100,557,294
- ---------------------------------------------------------------------------------------------------
Net Increase in Net Assets from Operations $ 99,859,178
===================================================================================================
</TABLE>
See Notes to Financial Statements
<PAGE>
STATEMENT OF CASH FLOWS
INVESCO Global Health Sciences Fund
For the Year Ended October 31, 1997
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash
- ---------------------------------------------------------------------------------------------------
<S> <C>
Cash Flows From Operating Activities:
Dividends and Interest Received, Net of Foreign Withholding Taxes $ 5,135,966
Expenses Paid (5,808,961)
Purchases Net of Sales of Short-Term Portfolio Investments 24,579,634
Purchases of Long-Term Portfolio Investments (678,277,526)
Sales of Long-Term Portfolio Investments 683,767,957
Proceeds of Securities Sold Short (900,130)
Increase in Depreciation of Forward Foreign Currency Contracts (1,135,224)
Other 22,632
-------------
Net Cash Flows From Operating Activities 27,384,348
-------------
Cash Flows Used for Financing Activities:
Distributions Paid to Common Shareholders (29,486,862)
-------------
Net Decrease in Cash (2,102,514)
Cash at Beginning of Year 862,845
-------------
Cash at End of Year $ (1,239,669)
- ---------------------------------------------------------------------------------------------------
Reconciliation of Net Increase in Net Assets from
Operations to Net Cash Flows from Operating Activities
- ---------------------------------------------------------------------------------------------------
Net Increase in Net Assets from Operations $ 99,859,178
-------------
Decrease in Investments 36,110,497
Net Realized Gain (64,895,920)
Increase in Appreciation of Investment Securities (35,661,374)
Increase in Receivable for Investment Securities Sold (5,979,034)
Decrease in Payable for Investment Securities Purchase (2,741,488)
Increase in Depreciation of Forward Foreign Currency Contracts (1,135,224)
Increase in Dividends and Interest Receivable (60,403)
Increase in Prepaid Expenses and Other Assets (22,632)
Increase in Accrued Expenses and Other Payables 1,910,748
--------------
Total Adjustments (72,474,830)
--------------
Net Cash Flows From Operating Activities $ 27,384,348
===================================================================================================
</TABLE>
See Notes to Financial Statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
INVESCO Global Health Sciences Fund
Year Ended October 31
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1997 1996
Operations
Net Investment Loss $ (698,116) $ (1,982,188)
Net Realized Gain on Investment Securities and Foreign Currency Transactions 64,895,920 97,041,210
Change in Net Appreciation (Depreciation) of
Investment Securities and Foreign Currency Transactions 35,661,374 (18,719,794)
----------------------------
Net Increase in Net Assets from Operations 99,859,178 76,339,228
- -------------------------------------------------------------------------------------------------------------
Distributions To Shareholders
Net Realized Gain on Investment Securities and Foreign Currency Transations (91,697,472) 0
----------------------------
Fund Share Transactions
Reinvestment of Distributions 62,210,610 0
----------------------------
Total Increase in Net Assets 70,372,316 76,339,228
- -------------------------------------------------------------------------------------------------------------
Beginning of Period 455,842,292 379,503,064
----------------------------
End of Period (Including Accumulated Undistributed Net Investment
Income of $0 and $56,982, respectively) $526,214,608 $ 455,842,292
=============================================================================================================
Fund Share Transactions
- -------------------------------------------------------------------------------------------------------------
Shares Issued from Reinvestment of Distributions and Net Increase in Fund Shares 4,255,367 0
=============================================================================================================
</TABLE>
See Notes to Financial Statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
INVESCO 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. Effective April 30, 1997, the Fund changed its name to INVESCO
Global Health Sciences Fund. 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.
Assets and liabilities initially expressed in terms of foreign currencies
are translated into U.S. dollars at the prevailing market rates as quoted by one
or more banks or dealers on the date of valuation. The cost of securities is
translated into U.S. dollars at the rates of exchange prevailing when such
securities are acquired. Income and expenses are translated into U.S. dollars at
the rates of exchange prevailing when accrued.
<PAGE>
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, original issue discount and
amortized premium, is recorded on the accrual basis. Discounts and premiums on
debt securities purchased are amortized over the life of the respective
securities 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 foreign issuers located in a specific country. Such
concentrations may subject the Fund to additional risks resulting from future
political or economic conditions and/or possible impositions of adverse foreign
governmental laws or currency exchange restrictions. Net realized and unrealized
gain or loss from investment securities includes fluctuations from currency
exchange rates and fluctuations in market value.
The Fund's use of short-term forward foreign currency contracts may subject
it to certain risks as a result of unanticipated movements in foreign exchange
rates. The Fund does not hold short-term forward foreign currency contracts for
trading purposes. The Fund may hold foreign currency in anticipation of settling
foreign security transactions and not for investment purposes.
The net position of such forward contracts is presented in the Statement of
Assets and Liabilities and may have additional elements of risk which may not
necessarily be reflected.
The Fund's use of short sell instuments may involve certain risks as a
result of unanticipated movements in the market. Although the potential for gain
is limited to the difference between the price at which the Fund sold the
security short and the cost of borrowing the security, its potential for loss
could be unlimited because there is no limit to the replacement cost of the
borrowed security.
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, 1997, 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.
<PAGE>
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.
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 market discounts, amortized premiums, foreign currency
transactions, nontaxable dividends, net operating losses and expired capital
loss carryforwards. For the year ended October 31, 1997, the Fund reclassified
$31,742 from paid-in capital to accumulated undistributed net realized gain on
investments, reclassified $384,147 from paid-in capital to accumulated
undistributed net investment income and reclassified $255,987 from accumulated
undistributed net realized gain on investments to accumulated undistributed net
investment income. On November 7, 1997, the Fund declared a long-term capital
gain of $2.8470 per share.
E. Expenses -- Under an agreement between the Fund and the Fund's
Custodian, agreed upon Custodian Fees and Expenses are reduced by credits
granted by the Custodian from any temporarily uninvested cash. Such credits are
included in Fees and Expenses paid indirectly in the Statement of Operations.
F. 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
security sold short and is presented in the Statement of Asset and Liabilities.
At October 31, 1997, the Fund had outstanding short sells. Short sells are
fully collateralized by other securities which are notated in the Statement of
Investment Securities and such collateral is in the possession of the Fund's
Custodian. The collateral is evaluated daily to ensure its market value exeeds
the current value of the short sell.
<PAGE>
G. Forward Foreign Currency Contracts -- The Fund enters into short-term forward
foreign currency contracts in connection with planned purchases or sales of
securities as a hedge against fluctuations in foreign exchange rates pending the
settlement of transactions in foreign securities. A forward foreign currency
contract is an agreement between contracting parties to exchange an amount of
currency at some future time at an agreed upon rate. These contracts are
marked-to-market daily and the related appreciation or depreciation of the
contracts is presented in the Statement of Assets and Liabilities.
At October 31, 1997, the Fund had outstanding forward foreign currency
contracts. Unrealized gain or loss on forward foreign currency contracts is
calculated daily as the difference between the contract exchange rate and the
closing forward rate applied to the face amount of the contract.
Forward foreign currency contracts held by the Fund are fully
collateralized by other securities which are notated in the Statement of
Investment Securities and such collateral is in the possession of the Fund's
custodian. The collateral is evaluated daily to ensure its market value exceeds
the current market value of the forward foreign currency contract.
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.
In accordance with an Administrative Agreement, the Fund pays INVESCO Funds
Group, Inc. ("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, 1997, the aggregate cost of purchases and proceeds from sales of
investment securities (excluding all U.S. Government securities and short-term
securities) were $675,536,038 and $688,846,861, respectively.
There were no purchases or sales of U.S. Government securities.
NOTE 4 -- Appreciation And Depreciation. At October 31, 1997, the gross
appreciation of securities in which there was an excess of value over tax cost
amounted to $138,803,432 and the gross depreciation of securities in which there
was an excess of tax cost over value amounted to $19,910,809, resulting in net
appreciation of $118,892,623.
NOTE 5 -- Transactions With Affiliates And Affiliated Companies.
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 during the year ended October 31, 1997, in which the
issuer was an affiliate of the Fund, is as follows on the next page:
<PAGE>
<TABLE>
<CAPTION>
Realized
Gain on
Purchases Sales Investment Value
----------------- ---------------
Affiliate Shares Cost Shares Cost Securities at 10/31/97
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Adeza Biomedical
Series II Conv Pfd -- -- -- -- -- $ 1,216,667
Advanced Health -- -- 206,450 $ 23,101 $4,271,645 6,448,884
Alexion Pharmaceuticals 31,250 $ 234,375 -- -- -- 5,484,617
Alexion Pharmaceuticals Warrants -- -- 31,250 0 0 0
Cadus Pharmaceutical -- -- -- -- -- 8,205,694
Cambridge Heart -- -- 190,237 632,074 809,188 4,017,300
Caresoft Inc, Series A Pfd 540,541 1,000,001 -- -- -- 1,000,001
Clarus Medical Systems
Series I Pfd -- -- -- -- -- 533,320
Series II Pfd -- -- -- -- -- 386,196
Warrants -- -- -- -- -- 0
Ecogen Technologies I -- -- -- -- -- 1
Electroscope Inc -- -- -- -- -- 646,000
Exelixis Pharmaceuticals
Series C Pfd 1,125,000 2,250,000 -- -- -- 2,250,000
Janus Biomedical
Series A Conv Pfd -- -- -- -- -- 1,000,000
Lynx Therapeutics 350,000 3,500,000 -- -- -- 4,016,250
MedClone Trust
Series G Conv Pfd -- -- -- -- -- 113,372
Warrants -- -- 209,300 0 0 0
Multum Information Services
Series B Pfd -- -- -- -- -- 2,570,000
Series E Pfd 250,294 851,000 -- -- -- 851,000
Ontogeny Inc, Series E Pfd 1,000,000 2,500,000 -- -- -- 2,500,000
Physicians Online
Series A Pfd -- -- -- -- -- 3,220,965
Series C Pfd -- -- -- -- -- 500,022
SOMNUS Medical Technologies
Series B Pfd -- -- -- -- -- 4,200,000
Spiros Development Units -- -- -- -- -- 4,282,488
Unisyn Technologies -- -- -- -- -- 7,264
Unisyn Technologies
Series A Conv Pfd -- -- -- -- -- 265,390
Series B Pfd -- -- -- -- -- 174,825
Series C Pfd 696,710 870,888 -- -- -- 243,849
Warrants -- -- -- -- -- 0
Vidamed Inc 1,052,632 5,000,002 -- -- -- 5,210,528
Vidamed Inc Warrants 263,158 0 -- -- -- 0
Xenometrix Inc -- -- -- -- -- 352,359
- -------------------------------------------------------------------------------------------------------
$59,696,992
=======================================================================================================
</TABLE>
No dividend income was received from any affliated companies.
<PAGE>
FINANCIAL HIGHLIGHTS
INVESCO Global Health Sciences Fund
(For a Fund Share Outstanding Throughout Each Period)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Year Ended October 31
-------------------------------------------------------
1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per Share Data
- ------------------------------------------------------------------------------------------------------
Net Asset Value--Beginning of Period $22.230 $18.506 $12.378 $12.121 $12.643
-------------------------------------------------------
Income From Investment Operations
Net Investment Income (Loss) (0.071) (0.097) (0.107) (0.085) 0.205
Net Gains or (Losses) on Securities
(Both Realized and Unrealized) 3.564 3.821 6.235 0.542 (0.652)
-------------------------------------------------------
Total from Investment Operations 3.493 3.724 6.128 0.457 (0.447)
- ------------------------------------------------------------------------------------------------------
Less Distributions
Dividends from Net Investment Income 0.000 0.000 0.000 0.200 0.075
Distributions from Capital Gains 4.473 0.000 0.000 0.000 0.000
-------------------------------------------------------
Total Distribution 4.473 0.000 0.000 0.200 0.075
- ------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $21.250 $22.230 $18.506 $12.378 $12.121
======================================================================================================
Share Price, End of Period $17.313 $17.000 $14.750 $10.000 $11.500
======================================================================================================
Total Return> 32.98% 15.25% 47.50% (11.49%) 0.67%
- -------------------------------------------------------------------------------------------------------
Ratios
Net Assets--End of Period ($000 Omitted) $526,215 $455,842 $379,503 $253,834 $248,564
Ratio of Expenses to Average Net Assets 1.22%@ 1.21% 1.33% 1.41% 1.39%
Ratio of Net Investment
Income (Loss) to Average Net Assets (0.15%) (0.44%) (0.72%) (0.70%) 1.74%
Portfolio Turnover Rate 145% 91% 105% 121% 226%
Average Commission Rate Paid^^ $0.0555 $0.0822 -- -- --
- ------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
> 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.
@ Ratio is based on Total Expenses of the Fund, which is before any expense
offset arrangements.
^^ The average commission rate paid is the total brokerage commissions paid
on applicable purchases and sales of securities for the period divided by the
total number of related shares purchased or sold which is required to be
disclosed for fiscal years beginning September 1, 1995 and thereafter.
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Trustees and Shareholders of
INVESCO 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
INVESCO Global Health Sciences Fund (formerly The Global Health Sciences Fund,
hereafter referred to as the "Fund") at October 31, 1997, 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 five years in the period then ended, 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, 1997 by
correspondence with the custodian and brokers and the application of alternative
auditing procedures where securities purchased had not been received, provide a
reasonable basis for the opinion expressed above.
As disclosed in the statement of investment securities and the accompanying
schedule of restricted or illiquid securities, securities valued at $61,969,442
(11.78 percent of net assets), have been estimated by the Board of Trustees in
the absence of readily ascertainable market values. 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.
Price Waterhouse LLP
Denver, Colorado
December 9, 1997
<PAGE>
OTHER INFORMATION
INVESCO Global Health Sciences Fund
Unaudited
- --------------------------------------------------------------------------------
Dividends and Capital Gains Distribution History
- --------------------------------------------------------------------------------
Net Investment Long-Term Short-Term
Income Capital Gain Capital Gains
Ex Date Payable Date (per share) (per share) (per share)
- --------------------------------------------------------------------------------
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
November 14, 1997 December 19, 1997 -- $2.8470 --
- --------------------------------------------------------------------------------
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") in cash, non-participants in the Plan
will receive cash and participants in the Plan will receive the equivalent in
Shares. Whenever the Fund declares Dividends in additional unissued but
authorized shares ("Newly Issued Shares") non-participants in the Plan will
receive Newly Issued Shares and participants in the Plan will receive shares. In
either instance, the shares received by Plan participants will be acquired by
the Agent for the participant's account, depending upon the circumstances
described below, either (i) through receipt of 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.
<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.
Assuming that the Securities and Exchange Commission (SEC) grants the Fund
the necessary exemptive relief, the Plan will be amended so that Open-Market
Purchases will be made only in the event that the Fund declares an income
dividend or a capital gain or other distribution payable only in cash.
Contingent upon SEC action, the amendment is expected to take effect in early
1998.
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.
<PAGE>
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 February 3, 1997.
Shareholders voted to approve a new investment advisory agreement substantially
similar in form and terms to the existing agreement between the Fund and INVESCO
Trust Company, re-elect Hubert L. Harris, Jr. and John W. McIntyre as Trustees
and ratify the appointment of Price Waterhouse LLP as the Fund's independent
accountants. The resulting vote count for each proposal is listed below:
1. Approval of new Advisory Agreement:
For: 12,689,322
Against: 599,031
Abstain: 223,727
Broker Non-Vote: 3,079,259
2. Election of two Trustees:
Hubert L. Harris, Jr. For: 16,001,523
Withheld Authority 589,817
John W. McIntyre For: 16,022,140
Withheld Authority 569,200
3. Ratification of Appointment of Price Waterhouse LLP as the
Fund's Independent Accountants:
For: 16,188,965
Against: 229,683
Abstain: 172,690
In addition to Messrs. Harris and McIntyre, the following persons serve as
Trustees of the Fund: Mr. Fred A. Deering and Dr. Larry Soll.
Miscellaneous
For the year ended October 31, 1997, 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 Chairman of the Board of Trustees and Mr. Dan J. Hesser was selected
to serve as President and Chief Operating Officer of the Fund. Messrs. Hesser,
Charles W. Brady and A.D. Frazier, Jr. resigned as Fund Trustees.
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. 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.
<PAGE>
- --------------------------------------------------------------------------------
TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------
Trustees Officers
Hubert L. Harris, Jr. Dan J. Hesser
Chairman of the Board of Trustees President and
Chief Operating Officer
Fred A. Deering
Trustee John R. Schroer
Vice President
John W. McIntyre
Trustee Glen A. Payne
Secretary
Larry Soll, Ph.D.
Trustee Ronald L. Grooms
Treasurer, Principal Financial
and Accounting Officer
- --------------------------------------------------------------------------------
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
Investment Adviser
INVESCO Trust Company
7800 East Union Avenue
Suite 1100
Denver, Colorado 80237
Administrator
INVESCO Funds Group, Inc.
7800 East Union Avenue
Suite 800
Denver, Colorado 80237
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
<PAGE>
Independent Accountants
Price Waterhouse LLP
950 Seventeenth Street
Suite 2500
Denver, Colorado 80202
Counsel
Kirkpatrick & Lockhart
1800 M Street, N.W.
South Lobby, 9th Floor
Washington, D.C. 20036
For information about INVESCO 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
Design: Arnold Saks Associates
<PAGE>
INVESCO Global Health Sciences Fund
INVESCO Trust Company
7800 East Union Avenue
Suite 1100
Denver, Colorado 80237
