AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 7, 1999
1933 ACT FILE NO. 33-
1940 ACT FILE NO. 811-6476
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-2
[X] REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[ ] Pre-Effective Amendment No.
[ ] Post-Effective Amendment No.
AND
[X] REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[X] Amendment No. 1
INVESCO GLOBAL HEALTH SCIENCES FUND
7800 EAST UNION AVENUE
DENVER, COLORADO 80237
1-303-930-6300
Glen A. Payne, Esq.
General Counsel
INVESCO Funds Group, Inc.
7800 E. Union Avenue, Suite 800
Denver, Colorado 80237
COPIES TO:
Thomas A. Hale Clifford J. Alexander
Skadden, Arps, Slate, Kirkpatrick & Lockhart LLP
Meagher & Flom (Illinois) 1800 Massachusetts Avenue
333 Wacker Drive, Suite 2100 Second Floor
Chicago, Illinois 60606 Washington, DC 20036
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after the
effective date of this Registration Statement.
If any securities being registered on this form will be offered on a
delayed or continuous basis in reliance on Rule 415 under the Securities Act of
1933, other than securities offered in connection with a dividend reinvestment
plan, check the following box. [ ]
<PAGE>
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE AMOUNT OF
TITLE OF SECURITIES AMOUNT BEING OFFERING PRICE OFFERING REGISTRATION
BEING REGISTERED REGISTERED(1) PER UNIT(2) PRICE(2) FEE(2)
- --------------------------------------------------------------------------------
Shares of
Beneficial Interest
Issuable Upon
Exercise of Rights 1 million $19 3/16 $19,187,500 $5334.13
to Subscribe for shares
Such Shares
- --------------------------------------------------------------------------------
(1) Includes [ ] total shares of beneficial interest to cover an increase
by the Registrant of 25% of the number of shares of beneficial interest
subject to subscriptions.
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) under the Securities Act of 1933 on the basis of
the average of the high and low sales prices for the Fund's shares reported
on the New York Stock Exchange on April 1, 1999.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SECTION 8(a), MAY DETERMINE.
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INVESCO GLOBAL HEALTH SCIENCES FUND
CROSS-REFERENCE SHEET
PART A
ITEM
NO. CAPTION LOCATION IN PROSPECTUS
- --- ------- ----------------------
1. Outside Front Cover Front Cover Page.
2. Inside Front and Outside Back Cover Front Cover Page.
Page
3. Fee Table and Synopsis Prospectus Summary; and Fee
Table.
4. Financial Highlights Financial Highlights.
5. Plan of Distribution Front Cover Page; Prospectus
Summary; The Offer; Dividends
and Other Distributions; and
Dividend Reinvestment and
Cash Purchase Plan.
6. Selling Shareholders Not Applicable.
7. Use of Proceeds Prospectus Summary; and Use
of Proceeds.
8. General Description of the Registrant Front Cover Page; Prospectus
Summary; Financial Highlights
- Portfolio Characteristics
and Composition; Trading and
Net Asset Value Information;
The Fund; The Offer;
Description of Shares of
Beneficial Interest;
Investment Objective and
Policies; Risk Factors and
Special Considerations;
Investment Restrictions; and
Special Investment Practices.
9. Management Prospectus Summary;
Management of the Fund; and
Custodian, Transfer Agent,
Dividend Disbursing Agent,
and Registrar.
10. Capital Stock, Long-Term Debt, and Front Cover Page; Description
Other Securities of Shares of Beneficial
Interest; Dividends and Other
Distributions; Dividend
Reinvestment and Cash Purchase
Plan; and Federal Taxation Of
The Fund And Its Shareholders.
11. Defaults and Arrears on Senior Not Applicable.
Securities
12. Legal Proceedings Not Applicable.
13. Table of Contents of the Statement of Table of Contents of
Additional Information Statement of Additional
Information.
PART B
ITEM LOCATION IN STATEMENT OF
NO. CAPTION ADDITIONAL INFORMATION
- --- ------- ----------------------
14. Cover Page Cover Page.
15. Table of Contents Table of Contents.
16. General Information and History General Information.
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ITEM LOCATION IN STATEMENT OF
NO. CAPTION ADDITIONAL INFORMATION
- --- ------- ----------------------
17. Investment Objective and Policies Additional Information About
Its Investment Objective and
Policies; Investment
Restrictions.
18. Management Management.
19. Control Persons and Principal Holders Ownership of Shares; and
of Securities Prospectus: Description of
Shares of Beneficial
Interest.
20. Investment Advisory and Other Services Management; Financial
Statements; Prospectus:
Management of the Fund;
Prospectus: Custodian,
Transfer Agent, Dividend
Disbursing Agent, and
Registrar; and Prospectus:
Independent Accountants.
21. Brokerage Allocation and Other Portfolio Transactions;
Practices Prospectus: Portfolio
Trading; and Prospectus:
Special Investment Practices.
22. Tax Status Taxation.
23. Financial Statements Financial Statements.
PART C
Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C of this Registration Statement.
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SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED , 1999
INVESCO GLOBAL HEALTH SCIENCES FUND
[ ] SHARES OF BENEFICIAL INTEREST
ISSUABLE UPON EXERCISE OF RIGHTS
TO SUBSCRIBE FOR SUCH SHARES
INVESCO Global Health Sciences Fund (the "Fund") is issuing non-transferable
rights ("Rights") to those shareholders that are shareholders of record ("Record
Date Shareholders") as of the close of business on [ 1999] (the "Record Date").
These Rights will allow Record Date Shareholders to subscribe for shares of
beneficial interest of the Fund ("Shares"). Record Date Shareholders will
receive one Right for every [X#] outstanding Shares they own on the Record Date.
For every one Right that Record Date Shareholders receive, they may buy one new
Share. If they own less than [X#] outstanding Shares, they will be entitled to
one Right to buy one Share. Also, Record Date Shareholders who exercise all of
their Rights may request to subscribe for the Shares not acquired by other
Record Date Shareholders in this Rights offering (the "Offer" or this
"Offering"), subject to the limitations discussed in this prospectus (the
"Prospectus"). The Fund may increase the number of Shares that may be subscribed
for in this Offering by up to 25% of the Shares offered in the Primary
Subscription (defined below), or up to an additional [ ] Shares, for an
aggregate total of [ ] Shares, to honor such requests for additional
Shares. The Offer will expire at 5:00 P.M., Eastern Time, on [ 1999], unless it
is extended as described in this Prospectus (the "Expiration Date").
The Rights are non-transferable and therefore may not be transferred or sold.
The Rights will not be admitted for trading on the New York Stock Exchange (the
"NYSE") or any other stock exchange. The currently outstanding Shares are
listed, and the Shares issued in this Offering will be listed, on the NYSE under
the symbol "GHS." On [ 1999], the last reported net asset value ("NAV") per
Share was $[ . ] and the last reported sales price of a Share on the NYSE was
$[ ].
THE PURCHASE PRICE PER SHARE (THE "SUBSCRIPTION PRICE") WILL BE [XX%] OF THE
LOWER OF: (1) THE AVERAGE OF THE LAST REPORTED SALES PRICE PER SHARE ON THE NYSE
ON THE EXPIRATION DATE AND ON THE PRECEDING FOUR BUSINESS DAYS; OR (2) THE LAST
REPORTED NAV PER SHARE ON THE EXPIRATION DATE.
---------------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC" OR "COMMISSION")
NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE
SECURITIES OR DETERMINED THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------------------------------------
PER SHARE TOTAL
Estimated Subscription Price
Sales Load
Proceeds to the Fund
The estimated subscription price in the table above (the "Estimated
Subscription Price") is estimated on the basis of [XX%] of the [NAV per
("Proceeds") Share/last sale price per Share on the NYSE] on [ , 1999]. The
proceeds to the Fund assumes all [ ] Shares are purchased at the
Estimated Subscription Price. If the Fund increases the number of Shares
subject to subscription by 25% as described above, the Proceeds to the Fund
would be $[ ].
<PAGE>
The Fund is a diversified closed-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"). The
Fund's investment objective is to seek capital appreciation by investing
substantially all of its assets in equity and related securities of U.S. and
foreign companies principally engaged in the development or distribution of
products or services relating to the health sciences. INVESCO Funds Group, Inc.
(the "Investment Manager" or "INVESCO"), an indirect wholly owned subsidiary of
AMVESCAP PLC, serves as investment adviser to the Fund.
Record Date Shareholders who do not exercise their Rights should expect that
they will, at the completion of the Offer, own a smaller proportional interest
in the Fund than they would if they exercised their Rights. In addition, because
the Subscription Price per Share will be less than the NAV per Share on the
Expiration Date, they will experience an immediate dilution, which could be
significant, of the aggregate NAV of their Shares. This dilution will
disproportionately affect Record Date Shareholders who do not exercise their
Rights in full. The Fund cannot state precisely the extent of this dilution at
this time because the Fund does not know what the NAV per Share will be when the
Offer expires, what the Subscription Price will be, the extent of the Fund's
expenses that will be incurred or what proportion of the Rights will be
exercised. See "Risk Factors and Special Considerations--Dilution."
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing. Investors are advised to
read and retain it for future reference. A Statement of Additional Information
(the "SAI") dated [ ] containing additional information about the Fund has been
filed with the SEC and is incorporated by reference in its entirety into this
Prospectus. A copy of the SAI, the table of contents of which appears on page 52
of this Prospectus, may be obtained without charge by calling the Fund at
1-800-528-8765 or by contacting the Fund at 7800 E. Union Avenue, Suite 800,
Denver, Colorado 80237. A copy of the SAI also may be obtained from the SEC's
website at http://www.sec.gov in addition to other material incorporated herein
by reference and other information regarding registrants that file with the SEC
electronically.
---------------------------
PAINEWEBBER INCORPORATED
---------------------------
THE DATE OF THIS PROSPECTUS IS [ ], 1999.
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PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS SOME INFORMATION THAT IS DESCRIBED MORE FULLY
ELSEWHERE IN THIS PROSPECTUS. IT MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS
IMPORTANT TO YOU. TO UNDERSTAND THE OFFER FULLY, YOU SHOULD READ THE ENTIRE
DOCUMENT CAREFULLY, INCLUDING THE RISK FACTORS UNDER THE HEADING "RISK FACTORS
AND SPECIAL CONSIDERATIONS."
PURPOSE OF THE OFFER The Board of Trustees of the Fund (the "Board of
Trustees" or the "Board") has determined that it
would be in the best interests of the Fund and its
existing shareholders to increase the Fund's assets
so that it may be in a better position to take
advantage of investment opportunities and increase
the diversification of its portfolio fully while
achieving other net benefits to the Fund.
In reaching its decision to approve the Offer, the
Board of Trustees considered, among other things,
advice by the Investment Manager that the
availability of new assets would enable the Fund to
pursue attractive investments without selling
portfolio securities. In addition, the Board of
Trustees considered that a rights offering could
result in more liquidity for the Shares, would give
shareholders the opportunity to purchase Shares at a
price below market value per Share and/or NAV per
Share, and might increase the level of market
interest in the Fund. The Board also believes that
this Offer may result in a nominal decrease in the
Fund's operating expense ratio. This is because the
Fund's fixed costs can be spread over a larger asset
base. In addition, the Fund and the Investment
Manager recently agreed to add a breakpoint to the
investment management agreement for assets in excess
of $500 million. At the Fund's current asset size,
substantially all of the proceeds of the Offer would
be managed at this lower fee, which would have the
effect of lowering the Fund's overall expense ratio.
In determining that the Offer was in the best
interests of the Fund and its shareholders, the Board
of Trustees retained PaineWebber Incorporated (the
"Dealer Manager") to provide the Fund with financial
advisory and marketing services relating to the
Offer, including the structure, timing and terms of
the Offer. In addition to the foregoing, the Board of
Trustees considered, among other things, the benefits
and drawbacks of conducting a non-transferable versus
a transferable rights offering, the possible impact
of the Offer on market price volatility, its dilutive
effect, its effect on non-exercising shareholders,
the effect on the Fund if the Offer is
under-subscribed, and the experience of the Dealer
Manager in conducting rights offerings.
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<TABLE>
<CAPTION>
<S> <C> <C>
IMPORTANT TERMS OF THE OFFER Total number of Shares offered: [ ]*
Number of non-transferable One Right for every [X#]
Rights issued to each Record Date Shares owned on the Record
Shareholder: Date
Subscription ratio: One Share for every one
Right
Subscription Price: [XX%] of the lower of
(1) the average of
the last reported
sales price per Share
on the NYSE on the
Expiration Date and
on the preceding four
business days** or
(2) the NAV per Share
on the Expiration Date
Expiration Date: The Offer will expire
at 5:00 P.M. Eastern
time on [ ], 1999,
unless the Offer is
extended to a date no
later than [ ], 1999
* Includes [ ] Shares that the Fund may issue to cover over-
subscription requests.
** "Business Day" means a day on which the NYSE is open for trading
and which is not a Saturday or Sunday or a holiday, including New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Columbus Day,
Thanksgiving Day, Christmas Day or any other day on which banks in
New York City are authorized or obligated by law or executive order
to close.
OVER-SUBSCRIPTION PRIVILEGE Record Date Shareholders who fully exercise all of the Rights issued
to them are entitled to request to subscribe for those Shares offered
hereby that were not bought by other Record Date Shareholders. If
enough Shares are available, all such requests will be honored in
full. If such requests for Shares exceed the Shares available, the
Fund may, at the discretion of the Board of Trustees, issue Shares up
to an additional 25% of the Shares available pursuant to the Offer (up
to an additional [ ] Shares) in order to cover such requests.
Regardless of whether the Fund issues such additional Shares, and to
the extent Shares are not available to honor all requests, the
available Shares will be allocated PRO RATA among those who
over-subscribe based on the number of Rights originally issued to them
by the Fund.
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<PAGE>
IMPORTANT DATES TO REMEMBER EVENT DATE
----- ----
Record Date [ ]
Subscription Period [ ]*
Expiration Date and Pricing Date [ ]*
Subscription Certificates and Payment [ ]*
for Shares Due**
Notice of Guaranteed Delivery Due [ ]*
Payment for Guarantees of Delivery Due [ ]*
Confirmation Mailed to Participants [ ]*
Final Payment for Shares*** [ ]*
* Unless the Offer is extended.
**A Record Date Shareholder exercising Rights must deliver by the
Expiration Date either (i) a Subscription Certificate (defined below)
and payment for Shares or (ii) a Notice of Guaranteed Delivery
(defined below).
***Additional amount due (in the event the Subscription Price exceeds
the Estimated Subscription Price).
NON-TRANSFERABILITY OF RIGHTS The Rights are non-transferable and, therefore, may not be purchased
or sold. The Rights will not be listed for trading on the NYSE or any
other securities exchange. However, the Shares to be issued pursuant
to the Offer will be listed for trading on the NYSE, subject to
notice of issuance.
METHOD OF EXERCISING Except as described below, subscription certificates evidencing the
RIGHTS Rights (the "Subscription Certificates") will be sent to Record Date
Shareholders or their nominees. If a Record Date Shareholder wishes
to exercise Rights, the shareholder may do so in the following ways:
(1) Record Date Shareholders or their nominees should complete and
sign the Subscription Certificate. Mail it in the envelope provided
or deliver the completed and signed Subscription Certificate with
payment in full to EquiServe, Inc. at the address indicated on the
Subscription Certificate. A completed and signed Subscription
Certificate and payment must be received by the Expiration Date; or
(2) Contact your broker, banker or trust company, which can arrange,
3
<PAGE>
on your behalf, to guarantee delivery by the close of business on the
third Business Day after the Expiration Date, payment and delivery
of a properly completed and executed Subscription Certificate
pursuant to a notice of guaranteed delivery ("Notice of Guaranteed
Delivery"). A fee may be charged for this service. The Notice of
Guaranteed Delivery must be received on or before the Expiration
Date.
OFFERING FEES AND EXPENSES The Fund has agreed to pay the Dealer Manager a fee ("Dealer Manager
Fee") for its financial advisory and marketing services equal to
[1.25%] of the aggregate Subscription Price for each Share issued
pursuant to the Offer, and the Fund has also agreed to pay
broker-dealers, including the Dealer Manager, fees for their
solicitation efforts ("Solicitation Fees") of 2.50% of the
Subscription Price per Share for each Share issued pursuant to the
Offer. Solicitation Fees will be paid to the broker-dealer designated
on the applicable portion of the Subscription Certificate or, in the
absence of any such designation, to the Dealer Manager. Other
offering expenses incurred by the Fund are estimated at [$ ],
which includes up to [$ ] that may be paid to the Dealer Manager as
partial reimbursement for its expenses relating to the Offer.
FOREIGN RESTRICTIONS Record Date Shareholders whose record addresses are outside the
United States will receive written notice of the Offer; however,
Subscription Certificates will not be mailed to such shareholders.
The Rights to which those Subscription Certificates relate will be
held by the subscription agent for such foreign Record Date
Shareholders' accounts until instructions are received in writing
with payment to exercise the Rights. If no such instructions are
received by the Expiration Date, such Rights will expire. See
"Subscription Agent."
USE OF PROCEEDS If [ ] Shares are sold a the Estimated Subscription Price
of $____ per Share, net proceeds of the Offer are estimated to be
approximately $________, after deducting estimated expenses payable
by the Fund, including the fees and expenses of the Dealer Manager
and other offering expenses that in total are estimated to be
$_______. If the Fund increases the number of Shares subject to
subscription by up to 25%, or [ ] Shares, in order to satisfy
over-subscription requests, the additional net proceeds will be
approximately $________.
The Investment Manager has advised the Fund that it anticipates that
the net proceeds will be invested in accordance with its investment
objective and the policies set forth under "Investment Objective and
Policies" within three months from the date of this Prospectus (but
in no event later than six months from the date of this Prospectus),
depending on market conditions and the availability of appropriate
securities. Pending such investment, the proceeds will be invested in
certain high quality short-term debt instruments, or in certain other
4
<PAGE>
investments (including, potentially, futures contracts on the
Standard & Poor's 500 Composite Stock Price Index ("S&P 500 futures")
as described herein under "Investment Objective and Policies--Special
Investment Practices--Hedging."
INFORMATION AGENT Please direct all questions or inquiries relating to the Offer to the
Fund's information agent as follows:
SHAREHOLDER COMMUNICATIONS CORP.
17 STATE STREET
NEW YORK, NY 10004
(800) 618-7826
BROKERS AND BANKS, PLEASE CALL (800) 877-8579 EXT. 113
Shareholders may also contact their broker or nominee for information.
INFORMATION REGARDING THE The Fund is a diversified, closed-end management investment company
FUND registered under the 1940 Act. It is managed by INVESCO. The Fund was
organized as a Massachusetts business trust on November 18, 1991 and
commenced investment operations on January 24, 1992. The Fund is
aggressively managed for growth. It seeks to achieve its objective by
investing its assets in a broad range of health care related
equities, such as market-leading pharmaceutical companies, medical
devices manufacturers and suppliers, biotech companies, health care
delivery companies, and various private placement investments. The
Fund may further focus its investments in certain of these sectors.
For example, at the date of this Prospectus, approximately 60% of the
Fund's portfolio is invested in equity securities of large
pharmaceutical companies. The Fund may purchase and sell options on
equities. See "The Fund" and "Investment Objective and Policies." For
information regarding the Fund's portfolio characteristics and
composition as of April 30, 1999, see "Portfolio Characteristics and
Composition."
INFORMATION REGARDING THE INVESCO has served as the Fund's investment adviser since February
MANAGER 4, 1998. INVESCO determines the composition of the Fund's portfolio,
places all orders for the purchase and sale of securities and for
other transactions, and oversees the settlement of the Fund's
securities and other portfolio transactions. INVESCO also provides
administrative services to the Fund. These include, among other
things, providing officers and office space, preparing or assisting
in preparing materials for shareholders and regulatory bodies and
overseeing the provision to the Fund of custodial and accounting
services.
As compensation for its services to the Fund, INVESCO receives an
investment management fee that accrues daily at the applicable rate
and is paid monthly. On February 3, 1998, the Board of Trustees and
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<PAGE>
INVESCO agreed to add a breakpoint to the investment management fee,
such that the Fund pays INVESCO a fee at the annual rate of 1.00% on
ending daily net assets up to and including $500 million, and 0.90%
on ending daily net assets in excess of $500 million. Additionally,
in accordance with an administrative agreement, the Fund pays INVESCO
a monthly fee at the annual rate of 0.10% on ending daily net assets
for administrative services. Prior to February 4, 1998, INVESCO Trust
Company ("ITC"), then a wholly-owned subsidiary of INVESCO, served
as the Fund's investment adviser.
RISK FACTORS AND SPECIAL The following summarizes some of the matters that you should
CONSIDERATIONS consider before investing in the Fund through this Offer. Please see
"Risk Factors and Special Considerations" of this Prospectus for a
more complete discussion of these matters.
DILUTION. Record Date Shareholders will experience an immediate
dilution of the aggregate NAV of their Shares as a result of the
Offer. This is because the Subscription Price per Share will be less
than the NAV per Share on the Expiration Date, the Fund will incur
expenses in connection with the Offer, and the number of Shares
outstanding after the Offer will increase in a greater percentage
than the increase in the size of the Fund's assets. This dilution
will affect those shareholders more that do not exercise their Rights
in full. In addition, if shareholders do not fully exercise their
Rights, they should expect that they will, as a result of and at the
completion of the Offer, own a smaller proportional interest in the
Fund than would otherwise be the case. Although it is not possible to
state precisely the amount of any dilution, because it is not known
at this time what the NAV per Share will be on the Expiration Date or
what proportion of the Rights will be exercised, or what the
Subscription Price will be, such dilution could be significant. For a
more detailed discussion about dilution, please see "Risk Factors and
Special Considerations--Dilution."
HEALTH SCIENCE COMPANIES. Investment in the securities of companies
principally engaged in the development, production or distribution of
products or services relating to the health sciences ("Health Science
Companies") entails special considerations and risks. Among these is
the risk that many Health Science Companies may be subject to, and
possibly adversely affected by, some of the same trends relating to
the demand for health-related products and services and the same
regulatory, economic and political factors. Certain health science
industries and Health Science Companies are characterized by a single
product focus, rapidly changing technology or extensive government
regulation. Many of these activities are funded or subsidized by
federal and state governments; consequently, withdrawal or
curtailment of this support could have an adverse impact on the
profitability, and market prices, of such companies. Changes in
government regulation could also have an adverse impact. Further,
continuing technological advances may mean rapid obsolescence of
6
<PAGE>
products and services. These regulatory and research developments may
result in abrupt fluctuations in securities values of Health Science
Companies. Unanticipated problems may arise in connection with the
development of new products or technologies, and many such efforts
may ultimately be unsuccessful. In addition, testing or marketing
products or technologies may require obtaining government approvals,
which may be lengthy, expensive processes with uncertain outcomes. As
a result of these and other factors, smaller developing Health
Science Companies may require additional capital investments, which
may dilute the interests of existing investors, such as the Fund. See
"Risk Factors-Health Science Companies."
INVESTMENTS IN UNSEASONED COMPANIES. The Fund may invest in the
securities of smaller, less seasoned companies. These investments may
present greater opportunities for growth but also involve greater
risks than those customarily associated with investments in
securities of more established companies. Some of the Health Science
Companies in which the Fund may invest will be start-up companies
that may have insubstantial operational or earnings history or may
have limited products, markets, financial resources or management
depth. Some may also be emerging companies at the research and
development stage with no products or technologies to market or
approved for marketing. Securities of emerging Health Science
Companies may lack an active secondary market and may be subject to
more abrupt or erratic price movements than securities of larger,
more established companies or stock market averages in general.
Competitors of certain Health Science Companies, which may or may not
be Health Science Companies, may have substantially greater financial
resources than many of the companies in which the Fund may invest.
See "Risk Factors-Investments in Unseasoned Companies" and "Risk
Factors-Illiquid Investments."
SUBSTANTIAL COMPETITION. Intense competition exists within and among
certain health science industries, including competition to obtain
and sustain proprietary technology protection. Health Science
Companies may be highly dependent on the strength of a patent to
maintain revenues and market share. The complex nature of the
technologies involved can lead to patent disputes, including
litigation that could result in a company losing an exclusive right
to a patent. See "Risk Factors-Substantial Competition."
PRODUCT LIABILITY EXPOSURE. Certain Health Science Companies and
related companies in which the Fund may invest will be exposed to
potential liability risks that are inherent in testing,
manufacturing, marketing and selling human therapeutic and diagnostic
products. See "Risk Factors-Product Liability Exposure."
FOREIGN SECURITIES. The Fund will invest in securities of foreign
issuers and securities traded in foreign markets ("Foreign
7
<PAGE>
Securities"). Investing in Foreign Securities involves considerations
and risks not typically associated with investing in securities of
U.S. issuers in U.S. markets. Foreign Securities of many non-U.S.
companies may be less liquid and their prices more volatile than
securities of comparable U.S. companies. Foreign stock exchanges and
brokers are generally subject to less governmental supervision and
regulation than U.S. exchanges and brokers, and commissions on
foreign stock exchanges are generally higher than negotiated
commissions in the United States. Foreign accounting, auditing and
financial reporting standards differ from U.S. standards, and less
information may be available than to investors investing in
securities of U.S. companies. In addition, with respect to some
foreign countries, there is the possibility of nationalization,
expropriation or confiscatory taxation. Income earned in a foreign
nation may be subject to taxation (including withholding taxes on
interest and dividends), or other taxes may be imposed with respect
to investments in Foreign Securities. Other risks associated with
investments in Foreign Securities include limitations on the removal
of securities, property or other assets of the Fund, difficulties in
pursing legal remedies and obtaining judgments in foreign courts,
political or social instability and diplomatic developments that
could adversely affect the Fund's investments in companies located in
foreign countries.
CURRENCY RISK. The Fund may receive a portion of its income and gains
in currencies other than U.S. dollars, although the Fund will make
dividends and other distributions in U.S. dollars. A reduction in the
value of such foreign currencies relative to the U.S. dollar prior to
conversion into U.S. dollars would adversely affect the Fund's NAV
and net investment income and capital gains, if any, to be
distributed to shareholders of the Fund. See "Risk Factors-Currency
Risk."
ILLIQUID INVESTMENTS. The Fund may invest up to 25% of its total
assets in securities for which there is no readily available
secondary market. Therefore, the Fund's ability to sell such
securities at a fair price may be impaired or delayed. In addition,
these securities may exhibit greater price volatility than securities
for which a secondary market exists. Since its inception, the Fund
has consistently made such investments. See "Risk Factors-Illiquid
Investments."
JUNK BONDS AND UNRATED DEBT SECURITIES. The Fund may invest up to 10%
of its total assets, in the aggregate, in non-convertible debt
securities of Health Science Companies and related companies. These
securities and other investments in such companies may include
securities that have been rated as low as C in the rating categories
established by Standard & Poor's, a division of The McGraw-Hill
Companies, Inc. ("Standard & Poor's"), and Moody's Investors Service,
Inc. ("Moody's") or may be unrated if deemed to be of comparable
credit quality by the Investment Manager. These securities, which are
commonly referred to as "junk bonds," are regarded, on balance, as
8
<PAGE>
predominantly speculative in terms of the ability of the issuer to
pay interest or repay principal in accordance with the terms of the
obligation and accordingly involve more credit risk than securities
rated in the higher rating categories. Such debt securities are
dependent upon favorable business, financial or economic conditions,
may be subordinated to senior debt and can be regarded as having
extremely poor prospects of ever attaining any real investment
standing. The prices of these securities are generally more volatile
than the prices of higher rated debt securities. See "Risk
Factors--Junk Bonds and Unrated Debt Securities." Such securities may
be illiquid. See "Risk Factors--Illiquid Investments."
SPECIAL INVESTMENT PRACTICES. The Fund may make short sales, which
are transactions in which the Fund sells a security it does not own
in anticipation of an expected decline in the market value of that
security. However, the Fund will incur a loss if the price of the
security increases between the date of the short sale and the date on
which the Fund purchases the security to close its short position.
See "Investment Objective and Policies--Special Investment
Practices--Short Sales."
The Fund may also engage in certain currency and other hedging
transactions, purchase securities on a when-issued or a delayed
delivery basis, enter into repurchase agreements, lend its portfolio
securities and borrow money to repurchase or make tender offers for
its Shares or for temporary purposes. These transactions involve
certain risks and may result in losses to the Fund. See "Investment
Objective and Policies--Special Investment Practices," "Investment
Restrictions," and "Description of Shares of Beneficial
Interest--Tender Offer or Repurchase of Shares."
NET ASSET VALUE DISCOUNT. Shares of closed-end investment companies
frequently trade at a discount from their NAV: (that is, the market
price per share is less than the value per share of the net assets).
This characteristic is a risk separate and distinct from the risk
that the Fund's NAV will decrease as a result of its investment
activities and may be greater for investors expecting to sell their
Shares relatively soon after completion of this Offering. It should
be noted, however, that shares of some closed-end management
investment companies (commonly referred to as "closed-end funds"),
including the Fund, have traded at premiums to NAV. The Fund cannot
predict whether the Shares will trade at, above or below NAV. See
"Risk Factors--Net Asset Value Discount."
ANTI-TAKEOVER PROVISIONS OF THE FUND'S DECLARATION OF TRUST AND
BY-LAWS. The Fund's Declaration of Trust as amended on December 5,
1991 ("Declaration of Trust") and By-Laws and any amendments thereto
("By-Laws") (together, the "Charter Documents") have certain
"anti-takeover" provisions that could have the effect of limiting (i)
9
<PAGE>
the ability of other entities or persons to acquire control of the
Fund, (ii) the Fund's freedom to engage in certain transactions, and
(iii) the ability of the Board or the Fund's shareholders to amend
the Charter Documents or to effect changes in the Fund's management.
Such provisions also may dissuade third parties from making offers to
purchase Shares at a premium over market price. See "Description of
Shares of Beneficial Interest-Certain Anti-Takeover Provisions of the
Declaration of Trust and By-Laws."
YEAR 2000. INVESCO has committed substantial resources and made
significant progress toward making sure its computer systems will
continue to operate smoothly through the year 2000 and expects that
its business partners also will be prepared for the year 2000. While
INVESCO does not anticipate interruptions in its business, investors
should be aware of the possible risks. As is widely known, there is a
chance that some computer systems may not function after December 31,
1999 because they fail to recognize dates in the year 2000 and
beyond. If a system at INVESCO or one of its business partners should
fail, it could adversely affect the Fund. In addition, the markets
for, or values of, securities in which the Fund invests could be
affected by computer failures on or after January 1, 2000. While
INVESCO cannot make assurances that this will not happen, it
continues to thoroughly analyze the securities it invests in,
including the possible effects of the year 2000 computer problems on
a company or the market the security trades in. See "Risk Factors and
Special Considerations - Year 2000."
You should carefully consider your ability to assume the foregoing
risks before making an investment in the Fund. An investment in
Shares is not appropriate for all investors.
10
</TABLE>
<PAGE>
FEE TABLE
The following tables are intended to assist investors in understanding the
various costs and expenses that an investor in this Offering will bear, directly
or indirectly.
SHAREHOLDER TRANSACTION EXPENSES
Sales Load (as a percentage of Subscription Price)(1)..................[3.75%]
Dividend Reinvestment and Cash Purchase Plan Fees(2)......................None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF NET ASSETS ATTRIBUTABLE TO
SHARES)(3)
Management and Administrative Fees(4)................................... 0.99%
Interest Payments on Borrowed Funds .................................... None
Other Expenses.......................................................... 0.22%
Total Annual Fund Expenses.............................................. 1.21%
- ---------------
(1) The Fund has agreed to pay the Dealer Manager a Dealer Manager Fee for its
financial advisory and marketing services equal to [1.25%] of the aggregate
Subscription Price for each Share issued pursuant to the Offer, and the Fund has
also agreed to pay broker-dealers, including the Dealer Manager, Solicitation
Fees for their solicitation efforts of 2.50% of the Subscription Price per Share
for each Share issued pursuant to the Offer. Solicitation Fees will be paid to
the broker-dealer designated on the applicable portion of the Subscription
Certificate or, in the absence of any such designation, to the Dealer Manager.
Other offering expenses incurred by the Fund are estimated at [$ ], which
includes up to [$ ] that may be paid to the Dealer Manager as partial
reimbursement for its expenses relating to the Offer. These fees and expenses
will be borne by the Fund and indirectly by all of the Fund's shareholders,
including those shareholders who do not exercise their Rights.
(2) The Fund, its transfer agent, and the dividend dispensing agent or its
delegate impose no fee for participation in the Dividend Reinvestment and Cash
Purchase Plan ("Reinvestment Plan"). Each participant in the Reinvestment Plan
will pay a PRO RATA share of brokerage commissions incurred in connection with
open-market purchases of Shares under the Reinvestment Plan.
(3) Amounts are estimated for the Fund's current fiscal year after giving effect
to anticipated net proceeds of the Offer, assuming that all of the Rights are
exercised and that the Fund incurs the estimated [$ ] of offering
expenses.
(4) The Fund pays the Investment Manager an annualized management fee,
calculated daily and paid monthly, in the amount of 1.00% on the first $500
million of ending daily net assets and 0.90% on ending daily net assets in
excess of $500 million. The Fund also pays the Investment Manager an annualized
administrative fee, calculated and paid monthly, in the amount of 0.10% of
ending daily net assets.
11
<PAGE>
EXAMPLE
The following Example demonstrates the projected dollar amount of total
cumulative expense that would be incurred over various periods with respect to a
hypothetical investment in the Fund through this Offering. These amounts are
based upon payment by the Fund of operating expenses at the levels set forth in
the above table.
An investor would directly or 1 Year 3 Years 5 Years 10 Years
indirectly pay the following ------ ------- ------- --------
expenses on a $1,000
investment in the Fund,
assuming a 5% annual return
throughout the relevant
period and reinvestment of $12.30 $38.40 $66.50 $146.60
all dividends and other
distributions at NAV:
THE FOREGOING FEE TABLE AND EXAMPLE ARE INTENDED TO ASSIST INVESTORS IN
UNDERSTANDING THE COSTS AND EXPENSES THAT AN INVESTOR IN THE FUND WILL BEAR
DIRECTLY OR INDIRECTLY.
The Example set forth above assumes reinvestment of all dividends and other
distributions at NAV, payment of a [3.75%] sales load and an annual expense
ratio of 1.21%. The table above and the assumption in the Example of a 5% annual
return are required by SEC regulations applicable to all management investment
companies. In addition, while the Example assumes reinvestment of all dividends
and other distributions at NAV, participants in the Reinvestment Plan may
receive Shares purchased or issued at a price or value different from NAV. See
"Dividends and Other Distributions; Dividend Reinvestment and Cash Purchase
Plan."
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES, AND
THE FUND'S ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
12
<PAGE>
FINANCIAL HIGHLIGHTS
The table below sets forth certain specified information for a Share outstanding
throughout each period presented. Except for the period from November 1, 1998
through April 30, 1999, the financial highlights for each period presented have
been audited by PricewaterhouseCoopers LLP, the Fund's independent accountants,
whose unqualified report is included in the Fund's October 31, 1998 Annual
Report and is incorporated by reference in the SAI. The financial highlights
should be read in conjunction with the financial statements and notes thereto
included in the Fund's October 31, 1998 Annual Report, which is available
without charge by calling the Fund at 1-800-528-8765 or by contacting the Fund
at 7800 E. Union Avenue, Suite 800, Denver, Colorado 80237.
Six Month Period
Ended April 30, 1999 Year Ended October 31
-------------------- ---------------------
(unaudited) 1998(e) 1997 1996
----------- ---- ---- ----
PER SHARE DATA
Net Asset Value - Beginning of [$X.XXX] $21.250 $22.230 $18.506
Period
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income (Loss) [$X.XXX] 0.000 (0.071) (0.097)
Net Gains or (Losses) on
Securities (Both Realized and [$X.XXX] 3.755 3.564 3.821
Unrealized)
- --------------------------------------------------------------------------------
TOTAL FROM INVESTMENT
OPERATIONS [$X.XXX] $3.755 $3.493 $3.724
- --------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from Net Investment [$X.XXX] 0.000 0.000 0.000
Income
Distributions from Net Capital [$X.XXX] 3.925 4.473 0.000
Gains
- --------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS [$X.XXX] $3.925 $4.473 $0.000
- --------------------------------------------------------------------------------
Net Asset Value - End of Period [$X.XXX] $21.080 $21.250 $22.230
- --------------------------------------------------------------------------------
Share Market Price, End of $19.500 $17.313 $17.000
Period
TOTAL INVESTMENT RETURN(a) [X.XX%](b) 40.29% 32.98% 15.25%
RATIOS
Net Assets - End of Period [$XXX,XXX] $586,263 $526,215 $455,842
($000 Omitted)
Ratio of Expenses to Average [X.XX%](c), (d) 1.21%(c) 1.22%(c) 1.21%
Net Assets
Ratio of Net Investment Income
(Loss) to Average Net Assets [X.XX%](d) (0.17%) (0.15%) (0.44%)
Portfolio Turnover Rate [X.XX%](b) 87% 145% 91%
FOOTNOTES ON FOLLOWING PAGE
13
<PAGE>
Year Ended October 31
---------------------
Period Ended
1995 1994 1993 October 31, 1992
---- ---- ---- ----------------
PER SHARE DATA
Net Asset Value - Beginning of $12.378 $12.121 $12.643 $13.950
Period
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income (Loss) (0.107) (0.085) 0.205 0.071
Net Gains or (Losses) on
Securities (Both Realized and 6.235 0.542 (0.652) (1.345)
Unrealized)
- --------------------------------------------------------------------------------
TOTAL FROM INVESTMENT
OPERATIONS $6.128 $0.457 ($0.447) ($01.274)
- --------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends from Net Investment 0.000 0.200 0.075 0.000
Income
Distributions from Net Capital 0.000 0.000 0.000 0.033
Gains
- --------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS $0.000 $0.200 $0.075 $0.033
- --------------------------------------------------------------------------------
Net Asset Value - End of Period $18.506 $12.378 $12.121 $12.643
- --------------------------------------------------------------------------------
Share Price, End of Period $14.750 $10.000 $11.500 $11.500
TOTAL INVESTMENT RETURN(a) 47.50% (11.49%) 0.67% (17.568%)(b)
RATIOS
Net Assets - End of Period $379,503 $253,834 $248,564 $259,279
($000 Omitted)
Ratio of Expenses to Average 1.33% 1.41% 1.39% 1.35%(d)
Net Assets
Ratio of Net Investment Income
(Loss) to Average Net Assets (0.72%) (0.70%) 1.74% 0.72%(d)
Portfolio Turnover Rate 105% 121% 226% 215%(b)
(a) Total investment return is calculated assuming a purchase of Shares 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 other distributions, if any,
are assumed, for purposes of this calculation, to be reinvested at prices
obtained under the Reinvestment Plan. Total investment return does not reflect
sales charges or brokerage commissions.
(b) Based on operations for the period shown and, accordingly, are not
representative of a full year.
(c) Ratio is based on total expenses of the Fund, which are before any expense
offset arrangements.
(d) Annualized.
(e) INVESCO has served as the Fund's investment adviser since February 4, 1998.
Prior to February 4, 1998, ITC, then a wholly owned subsidiary of INVESCO,
served as the Fund's investment adviser.
14
<PAGE>
PORTFOLIO CHARACTERISTICS AND COMPOSITION
The following tables set forth certain information with respect to the
characteristics and the composition of the Fund's investment portfolio as of
April 30, 1999. Portfolio composition and weightings are subject to change.
PORTFOLIO COMPOSITION--TOP TEN HOLDINGS
DESCRIPTION VALUE % OF NET ASSETS
$ %
Total $ %
COMPOSITION OF HOLDINGS IS SUBJECT
TO CHANGE.
PORTFOLIO COMPOSITION - DESCRIPTION OF HOLDINGS
COMMON STOCKS & WARRANTS %
BIOTECHNOLOGY %
HEALTH CARE DELIVERY %
MEDICAL DEVICES & SUPPLIES %
PHARMACEUTICALS %
PREFERRED STOCKS %
BIOTECHNOLOGY %
HEALTH CARE DELIVERY %
MEDICAL DEVICES & SUPPLIES %
FIXED INCOME SECURITIES %
BIOTECHNOLOGY %
HEALTH CARE DELIVERY %
OTHER SECURITIES %
MEDICAL DEVICES & SUPPLIES %
SHORT-TERM INVESTMENTS %
CORPORATE BONDS %
BIOTECHNOLOGY %
REPURCHASE AGREEMENTS %
TOTAL INVESTMENT SECURITIES AT VALUE %
COMPOSITION OF HOLDINGS IS SUBJECT TO
CHANGE
15
<PAGE>
CAPITALIZATION AT APRIL 30, 1999
SHARES OUTSTANDING
EXCLUSIVE OF AMOUNT AMOUNT HELD BY FUND
AMOUNT HELD BY FUND FOR ITS FOR ITS OWN ACCOUNT
TITLE OF CLASS AUTHORIZED OWN ACCOUNT ACCOUNT
-------------- ---------- ----------- -------
Common Shares of
Beneficial
Interest, par value Unlimited [30,156,115] -0-
$0.01
INFORMATION REGARDING SENIOR SECURITIES
Subject to its investment restrictions, the Fund has the right to use financial
leverage to finance the repurchase of or tender offers for Shares or to pay
dividends and other distributions and may borrow for temporary purposes. The
Fund expects it may use financial leverage from time to time in the future.
Currently, however, the Fund has not determined the timing or amount of
financial leverage that it would utilize.
TRADING AND NET ASSET VALUE INFORMATION
In the past, the Shares have generally traded at a discount in relation to NAV.
Shares of closed-end investment companies, such as the Fund, frequently trade at
a discount from NAV. See "Risk Factors and Special Considerations."
The Shares are listed and traded on the NYSE under the ticker symbol "GHS." The
Rights will not be admitted for trading on the NYSE or any other stock exchange.
The average weekly trading volume of the Shares on the NYSE during the year
ended December 31, 1998 was 70,680 Shares. The following table shows for the
fiscal quarters for the two most recent fiscal years and the fiscal quarters
during the current fiscal year: (1) the high and low sale price of the Shares on
the NYSE during the quarter; (2) the high and low NAV per Share during the
quarter; and (3) the high and low premium or discount to NAV at which the Shares
were trading during the quarter.
PREMIUM/(DISCOUNT) TO
For the PRICE(1) NET ASSET VALUE(2) TO NET ASSET VALUE(3)
Quarter Ended High Low High Low High Low
- --------------------------------------------------------------------------------
January 31, 1997 $18.8750 $14.3750 $22.87 $18.03 (23.677%) (17.360%)
April 30, 1997 $17.3750 $14.5000 $20.36 $17.94 (19.666%) (14.330%)
July 31, 1997 $18.1875 $14.8750 $21.87 $18.48 (21.411%) (14.907%)
October 31, 1997 $18.6250 $16.3750 $22.87 $20.39 (21.053%) (16.027%)
January 31, 1998 $18.750 $15.9375 $21.99 $17.88 (18.137%) (7.771%)
April 30, 1998 $19.8750 $18.0000 $21.82 $20.09 (13.338%) (6.064%)
July 31, 1998 $21.0625 $18.5000 $22.74 $20.15 (10.755%) (5.938%)
October 31, 1998 $19.5000 $15.7500 $21.35 $18.74 (16.578%) (7.495%)
January 31, 1999 $20.0625 $17.6875 $21.68 $18.77 (9.199%) (2.927%)
April 30, 1999 $ $ $ $ (%) (%)
- --------------------------------------------------------------------------------
(1) NYSE
(2) INVESCO
(3) INVESCO
16
<PAGE>
Immediately prior [ ] the Fund's announcement of the Offer on [ ],
1999, and on [ ], 1999, the last reported sale price of [ ] a
Share on the NYSE was [$ ] and $_______, respectively. The Fund's NAV per
Share on [ ], 1999 and on [ ], was $_______ and $______, respectively.
See "Net Asset Value" in the SAI.
THE FUND
The Fund is a diversified closed-end investment management company registered
with the SEC. It is actively managed to seek capital appreciation. Employing an
aggressive investment philosophy, the Fund normally invests at least 80% of its
total assets in equity securities of Health Science Companies. There is no
guarantee that the Fund will meet its investment objective. See "Investment
Objective and Policies" and "Risk Factors and Special Considerations."
The Fund's objective is to seek capital appreciation by investing substantially
all of its assets in equity and related securities of U.S. and foreign Health
Science Companies. It seeks to achieve its objective by investing its assets in
a broad range of health care related equities, such as market-leading
pharmaceutical companies, medical devices manufacturers and suppliers, and
various private placement investments. The Fund may focus its investments in
these sectors. For example, at this time approximately 60% of the Fund's
portfolio is invested in stocks of pharmaceutical companies. The Fund may
purchase and sell options on equities. For information regarding the Fund's
portfolio characteristics and composition as of April 30, 1999, see "Portfolio
Characteristics and Composition."
Demographics continue to indicate growth in the health sciences industry, as
individuals live longer lives, on average, and therefore comprise a larger
proportion of the mature population today than ever before. People over 65 years
of age consume the largest proportion of health sciences products, such as
pharmaceuticals. In the United States, as persons born in the late 1940's to
early 1950's, known in the United States as the "baby boomers," advance in age,
they are likely to consume increasing amounts of chronic care drugs and other
health science products.
The health sciences industry has increased research and development expenditures
to develop new and better products. Because the U.S. Food and Drug
Administration in the 1990's has continued to expedite approval of new products,
newly-developed health products reach the market at an accelerated pace.
Simultaneously, many Health Science Companies face relatively low exposure to
patent litigation. With more new products, a shorter product-to-market period,
and reduced patent litigation risk, the health sciences industry anticipates
increased revenues and profitability.
The introduction of new technologies in the medical equipment and biotechnology
sectors has significantly contributed to growth in the hospital supply and
medical device industries. New technologies have enabled the increased
development of sophisticated devices and procedures. In addition, biotechnology
companies are offering an increasing number of new products. Trends in
demographics and potentially accelerated drug approvals could result in
significant growth in the pharmaceutical sector as well. Moreover, the
favorable outlook for the United States economy could benefit the health
sciences industry through more readily available capital for developing
proprietary products and by the increasing affluence of consumers of those
products.
Closed-end funds, such as the Fund, differ from open-end management investment
companies (commonly referred to as "mutual funds") in that closed-end funds
generally list their shares for trading on a securities exchange and do not
redeem their shares at the option of the shareholder. By comparison, mutual
funds issue securities redeemable at NAV at the option of the shareholder and
17
<PAGE>
typically engage in a continuous offering of their shares. Mutual funds are
subject to continuous asset in-flows and out-flows that can complicate portfolio
management, whereas closed-end funds generally can stay more fully invested in
securities consistent with their respective investment objectives and policies.
In addition, in comparison to open-end funds, closed-end funds have greater
flexibility in the employment of financial leverage and in the ability to make
certain types of investments, such as investments in illiquid securities.
However, shares of closed-end funds frequently trade at a discount from their
NAV.
The Fund was organized as a business trust under the laws of the Commonwealth of
Massachusetts on November 18, 1991 and has registered with the SEC under the
1940 Act. The Fund commenced investment operations on January 24, 1992 under the
name Global Health Sciences Fund. On July 1, 1997, the name of the Fund was
changed to INVESCO Global Health Sciences Fund. The Fund's principal office is
located at 7800 E. Union Avenue, Suite 800, Denver, Colorado 80237. The Fund has
contracted with INVESCO to serve as its investment adviser. INVESCO is an
investment management firm registered with the SEC under the Investment Advisers
Act of 1940, as amended.
THE OFFER
PURPOSE OF THE OFFER
As discussed below, the Board of Trustees has determined that it would be in the
best interests of the Fund and its shareholders to make the Offer. The Board
considered the proposal for the Offer at several meetings, including a meeting
at which the independent Trustees (as defined under the 1940 Act) ("Independent
Trustees") met with counsel and without management present to discuss the Offer.
The Board, including all of the Independent Trustees, unanimously approved the
Offer. In its deliberations, the Board considered a number of issues and
factors, including the potential impact of the Offer on current exercising and
non-exercising shareholders; the potential impact of the Offer on the Fund's
NAV, Share price, and trading activity; the potential dilutive impact of the
Offer on the Fund and its shareholders (in particular non-exercising
shareholders); the revenue impact of the Offer on the Investment Manager and its
affiliates; the value and quality of the services expected to be provided by the
Dealer Manager in light of the relationship between the Dealer Manager and
existing shareholders; the Dealer Manager's familiarity with the Fund and with
the Investment Manager; and the terms of the Offer compared to the terms of
similar offers conducted by other closed-end funds. The Board of Trustees
concluded that increasing the assets of the Fund would be beneficial to the Fund
and its shareholders. However, there can be no assurance that any of the
anticipated benefits discussed in this Prospectus will be realized as a result
of the Offer.
The Board determined that it would be in the best interests of the Fund and its
existing shareholders to increase the assets of the Fund available for
investment, thereby allowing the Fund to more fully take advantage of available
investment opportunities consistent with its investment objective. In reaching
its decision, the Board of Trustees was advised by the Investment Manager that
the availability of new assets would give the Fund additional investment
flexibility, as well as an enhanced ability to take advantage of what the
Investment Manager believes to be timely investment opportunities. It was noted
that, to take advantage of these opportunities without an infusion of new
capital, the Fund would be required to sell current portfolio positions that it
desired to retain, which could cause the realization of significant capital
gains by the Fund and its shareholders. The Investment Manager provided its
views to the effect that while the Fund is permitted to borrow money for
investment purposes under current market conditions, it would not be prudent to
do so, because raising additional money through the Offer would be less costly
than borrowing the same amount of money. With an increased asset base as a
18
<PAGE>
result of the Offer, the Investment Manager believes the Fund would be able to
invest in a larger universe of securities that it believes would have the
benefits described below.
The Board of Trustees considered that the Fund could potentially achieve
additional economies of scale as a result of an increase in total assets,
resulting in a nominal decrease in the Fund's operating expense ratio. In
addition, the Fund and the Investment Manager recently agreed to add a
breakpoint to the investment management agreement for assets in excess of $500
million. At the Fund's current asset size, substantially all of the proceeds of
the Offer would be managed at this lower fee, which could have the effect of
lowering the Fund's overall expense ratio. In addition, the Board of Trustees
considered that the Offering could ultimately result in a larger number of
shareholders and daily trading volume and therefore could result in an
improvement in the liquidity of the trading market for the Shares on the NYSE,
where the Shares are listed and traded. The Board of Trustees also believes that
a larger number of outstanding Shares and a larger number of beneficial owners
of Shares could increase the level of market interest in the Fund.
In addition, the Board of Trustees considered that the Offer affords existing
shareholders the opportunity to purchase additional Shares at a price that will
be below the lower of market value or NAV. The Board of Trustees also
considered the expenses of the Offer and its dilutive effect, including the
effect on non-exercising shareholders.
The Board of Trustees noted that the Investment Manager will benefit from the
Offer because its fees for investment management services are based on the
average daily net assets of the Fund. It is not possible to state precisely the
amount of additional compensation the Investment Manager will receive as a
result of the Offer, because it is not known how many Rights will be exercised
and because the proceeds of the Offer will be invested in additional portfolio
securities that may fluctuate in value. However, if all the Rights are exercised
in full, including the additional [ ] Shares by which the Fund may increase
the Offer, based on the Estimated Subscription Price of $_____, the Investment
Manager would receive additional fees for investment management services of
approximately $_____ per annum and additional fees for administrative services
of approximately $_____ per annum as a result of the increase in assets under
management.
In determining that the Offer is in the best interests of the Fund and its
shareholders, the Board of Trustees retained the Dealer Manager to provide the
Fund with financial advisory and marketing services relating to the Offer,
including the structure, timing and terms of the Offer. In addition to the
foregoing, the Board of Trustees considered, among other things, using a
variable pricing versus fixed pricing mechanism, the benefits and drawbacks of
conducting a non-transferable versus a transferable rights offering, the effect
on the Fund if the Offer is undersubscribed and the experience of the Dealer
Manager in conducting rights offerings. The Investment Manager advised the Board
that the non-transferability of the Rights may limit, but will not eliminate,
the activity of arbitrageurs.
The Fund and the Investment Manager have received an order and an amendment
thereto (collectively "Order") from the SEC permitting the Fund to make up to
four distributions of net long-term capital gains in any taxable year, so long
as the Fund maintains in effect a distribution policy calling for quarterly
distributions of a fixed percentage of its NAV (the "Quarterly Distribution
Policy"). The Fund and the Investment Manager agreed that, as a condition to
obtaining the Order, the relief granted by the Order shall terminate upon the
effective date of a registration statement under the Securities Act of 1933 for
any future public offering by the Fund of Shares. The Order will not be
terminated, however, for (among other specified reasons) a rights offering to
shareholders of the Fund if (a) Shares will be issued only within the six-week
period immediately following the record date of a quarterly dividend, (b) the
19
<PAGE>
prospectus for such rights offering makes it clear that shareholders exercising
the Rights will not be entitled to receive such dividend, and (c) the Fund has
not engaged in more than one rights offering during any given calendar year.
The Fund may, in the future and at its discretion, choose to make additional
rights offerings of Shares from time to time for a number of Shares and on terms
that may or may not be similar to this Offer. Any such future offering will be
made in accordance with the 1940 Act.
TERMS OF THE OFFER
The Fund is issuing to Record Date Shareholders non-transferable Rights
entitling the holders thereof to subscribe for an aggregate of [ ] Shares,
par value $0.01 per Share ([ ] Shares if the Fund increases the number of
Shares available by up to 25% in connection with the Over-Subscription Privilege
described below). Each Record Date Shareholder is being issued one Right for
every [X#] Shares owned on the Record Date (1-for-[X#]). The Rights entitle the
holders thereof to subscribe for one Share for every one Right held (the
"Primary Subscription"). Fractional Shares will not be issued on the exercise of
fractional Rights. Accordingly, Shares may be purchased in the Primary
Subscription only pursuant to the exercise of whole Rights. For example, if a
Record Date Shareholder owns 102 Shares, that shareholder will receive [X#]
Rights, but may only exercise [XXX#] Rights for the purchase of [XX] Shares,
with the unexercised fractional Rights expiring. However, Record Date
Shareholders holding fewer than [X#] Shares will be entitled to one Right to
subscribe for one Share pursuant to the Primary Subscription. Record Date
Shareholders may request additional Shares pursuant to the Over-Subscription
Privilege.
Rights may be exercised at any time during the subscription period, which
commences on [ ], 1999 and ends at 5:00 P.M., Eastern time, on the
Expiration Date (the "Subscription Period"). See "Expiration of the Offer." The
Rights are evidenced by Subscription Certificates that will be mailed to Record
Date Shareholders, except as discussed below under "Foreign Restrictions."
Shares not subscribed for in the Primary Subscription will be offered, by means
of the Over-Subscription Privilege, to those Record Date Shareholders who have
exercised all Rights issued to them and who wish to acquire more than the number
of whole Shares they are entitled to purchase pursuant to the exercise of their
Rights. Shares acquired pursuant to the Over-Subscription Privilege are subject
to allotment and may be subject to increase, as more fully discussed below under
"Over-Subscription Privilege." For purposes of determining the maximum number of
Shares a Record Date Shareholder may acquire pursuant to the Offer, Record Date
Shareholders whose Shares are held of record by Cede & Co. ("Cede"), as nominee
for The Depository Trust Company ("DTC"), or by any other depository or nominee,
will be deemed to be the holders of the Rights that are issued to Cede or such
other depository or nominee on their behalf.
Because fractional Shares will not be issued, Record Date Shareholders who
receive or have remaining fractional Rights will be unable to exercise such
remaining Rights for the purchase of fractional Shares and will not be entitled
to receive any cash in lieu thereof. Such shareholders may, however, request
additional Shares pursuant to the Over-Subscription Privilege.
The Board of Trustees, in consultation with the Investment Manager, has
implemented a Quarterly Distribution Policy, which entails quarterly payments of
dividends in an amount equal to 2.5% of the Fund's NAV. The first dividend to be
paid on Shares acquired on exercise of the Rights will be the first quarterly
dividend, the record date for which occurs after the issuance of the Shares.
20
<PAGE>
Assuming the Subscription Period is not extended, it is expected that the first
dividend received by shareholders acquiring Shares in the Offer will be paid on
[ , 1999].
There is no minimum number of Rights that must be exercised in order for the
Offer to close.
The record date for the Fund's most recent quarterly dividend was May 11, 1999.
Record Date Shareholders will not be entitled to receive that dividend with
respect to those Shares that they receive pursuant to the Offer.
OVER-SUBSCRIPTION PRIVILEGE
If Record Date Shareholders do not exercise all the Rights issued to them, any
Shares represented by unexercised Rights will be offered by means of the
Over-Subscription Privilege to the Record Date Shareholders who have exercised
all the Rights issued to them and who wish to subscribe for additional Shares.
Only Record Date Shareholders who exercise all the Rights issued to them may
indicate on the Subscription Certificate, which they or their nominees submit
with respect to the exercise of the Rights issued to them, how many Shares they
desire to purchase pursuant to the Over-Subscription Privilege. If sufficient
Shares remain after completion of the Primary Subscription, all
over-subscription requests will be honored in full. If sufficient Shares are not
available after completion of the Primary Subscription to honor all
over-subscription requests, the Fund may, at the discretion of the Board of
Trustees, issue up to an additional 25% of the Shares available pursuant to the
Offer (up to an additional [ ] Shares) in order to cover such
over-subscription requests. Regardless of whether the Fund issues such
additional Shares, and to the extent Shares are not available to honor all
over-subscription requests, the available Shares will be allocated among those
who over-subscribe so that the number of Shares issued to such shareholders will
generally be in proportion to the number of Shares owned by such shareholders on
the Record Date. The allocation process may involve a series of allocations in
order to assure that the total number of Shares available for over-subscription
is distributed on a PRO RATA basis.
Banks, brokers, trustees and other nominee holders of Rights will be required to
certify to the Subscription Agent (as defined below), before any
Over-Subscription Privilege may be exercised with respect to any particular
beneficial owner, as to the aggregate number of Rights exercised pursuant to the
Primary Subscription and the number of Shares subscribed for pursuant to the
Over-Subscription Privilege by such beneficial owner and that such beneficial
owner's Primary Subscription was exercised in full. Nominee Holder
Over-Subscription Forms and Beneficial Owner Certification Forms will be
distributed to banks, brokers, trustees and other nominee holders of Rights with
the Subscription Certificates.
The Fund will not offer or sell in connection with the Offer any Shares that are
not subscribed for pursuant to the Primary Subscription or the Over-Subscription
Privilege.
SUBSCRIPTION PRICE
The Subscription Price for each Share to be issued pursuant to the Offer will be
[XX%] of the lower of (1) the average of the last reported sales price per Share
on the NYSE on the Expiration Date and on the preceding four Business Days or
(2) the closing NAV per Share on the Expiration Date. For example, if the
average of the last reported sales price per Share on the NYSE on the Expiration
Date and on the four preceding Business Days is $20.00, and the closing NAV per
Share on the Expiration Date is $19.00, the Subscription Price will be [$XX.xx]
(XX% of $19.00). If, however, the average of the last reported sales price per
Share on the NYSE on the Expiration Date and on the four preceding Business Days
21
<PAGE>
is $18.00, and the closing NAV per Share on the Expiration Date is $19.00, the
Subscription Price will be [$XX.xx] (XX% of $18.00).
The Fund announced the Offer on [ ], 1999. The NAV per Share at the close of
business on [ ], 1999 (the last trading date on which the Fund publicly
reported its NAV per Share prior to the announcement) and on [ ], 1999
(the last trading date on which the Fund publicly reported its NAV per Share
prior to the date of this Prospectus) was $_____ and $_____, respectively, and
the last reported sale price per Share on the NYSE on those dates was $______
and $_______, respectively.
NON-TRANSFERABILITY OF RIGHTS
The Rights are non-transferable and, therefore, may not be purchased or sold.
The Rights will not be listed for trading on the NYSE or any other securities
exchange. However, the Shares to be issued pursuant to the Offer will be listed
for trading on the NYSE, subject to notice of issuance.
EXPIRATION OF THE OFFER
The Offer will expire at 5:00 P.M., Eastern time, on [ ], 1999, unless
extended by the Fund until 5:00 P.M., Eastern time, to a date not later than
[ ], 1999. The Rights will expire on the Expiration Date and
thereafter may not be exercised. Because the Offer expires and the Shares will
be priced on the same date, Record Date Shareholders who decide to acquire
Shares in the Primary Subscription or pursuant to the Over-Subscription
Privilege will not know the Subscription Price of the Shares when they make
their decision. Any extension of the Offer will be followed as promptly as
practicable by announcement thereof. Such announcement will be issued no later
than 9:00 A.M., Eastern time, on the next Business Day following the previously
scheduled Expiration Date. Without limiting the manner in which the Fund may
choose to make such announcement, the Fund will not, unless otherwise required
by law, have any obligation to publish, advertise or otherwise communicate any
such announcement other than by making a release to the Dow Jones News Service
or such other means of announcement as the Fund deems appropriate.
SUBSCRIPTION AGENT
The subscription agent is EquiServe, Inc. (the "Subscription Agent" or "EI"). EI
will receive for its administrative, processing, invoicing and other services as
Subscription Agent, a fee estimated to be approximately $[ ], which includes
reimbursement for all out-of-pocket expenses related to the Offer. The
Subscription Agent is also the Fund's transfer agent, dividend-paying agent and
registrar for the Shares. Questions regarding the Subscription Certificates
should be directed to (___)___-____ [(toll free)]; shareholders may also consult
their brokers or nominees.
Completed Subscription Certificates must be sent together with proper payment of
the Subscription Price for all Shares subscribed for in the Primary Subscription
and pursuant to the Over-Subscription Privilege (for Record Date Shareholders)
to EI by one of the methods described below.
Alternatively, Notice of Guaranteed Delivery may be sent by facsimile to
(___)___-____ to be received by the Subscription Agent prior to 5:00 P.M.,
Eastern time, on the Expiration Date. Facsimiles should be confirmed by
telephone at (___)___-____. The Fund will accept only properly completed and
executed Subscription Certificates actually received at any of the addresses
listed below, prior to 5:00 P.M., Eastern time, on the Expiration Date or by the
close of business on the third
22
<PAGE>
Business Day after the Expiration Date following timely receipt of a Notice of
Guaranteed Delivery. See "Payment for Shares" below.
BY FIRST CLASS MAIL: BY OVERNIGHT COURIER: BY HAND:
-------------------- --------------------- --------
EquiServe, Inc. EquiServe, Inc. EquiServe, Inc.
State Street Bank and State Street Bank and Securities Transfer and
Trust Company Trust Company Reporting Services, Inc.
Corporate Reorganization Corporate Reorganization c/o EquiServe, Inc.
P.O. Box 9573 40 Campanelli Drive 100 William Street Galleria
Boston, MA 02205-9573 Braintree, MA 02184 New York, NY 10038
U.S.A. U.S.A. U.S.A.
DELIVERY TO AN ADDRESS OTHER THAN ONE OF THE ADDRESSES
LISTED ABOVE WILL NOT CONSTITUTE VALID DELIVERY.
METHOD FOR EXERCISING RIGHTS
Rights are evidenced by Subscription Certificates that, except as described
below under "Foreign Restrictions," will be mailed to Record Date Shareholders
or, if a shareholder's Shares are held by Cede or any other depository or
nominee on their behalf, to Cede or such depository or nominee. Rights may be
exercised by completing and signing the Subscription Certificate that
accompanies this Prospectus and mailing it in the envelope provided, or
otherwise delivering the completed and signed Subscription Certificate to the
Subscription Agent, together with payment in full for the Shares at the
Estimated Subscription Price by the Expiration Date. Rights may also be
exercised by contacting your broker, banker or trust company, which can arrange,
on your behalf, to guarantee payment and delivery of a properly completed and
executed Subscription Certificate pursuant to a Notice of Guaranteed Delivery by
the close of business on the third Business Day after the Expiration Date. A fee
may be charged for this service. Because fractional Shares will not be issued,
Record Date Shareholders who receive or have remaining fractional Rights will be
unable to purchase fractional Shares on the exercise of such remaining Rights
and will not be entitled to receive any cash in lieu thereof. For example, if a
Record Date Shareholder owns 102 Shares, that shareholder will receive [X#]
Rights, but may only exercise [XXX#] Rights for the purchase of [XX] Shares,
with the unexercised fractional Rights expiring. However, Record Date
Shareholders holding fewer than [X#] Shares will be entitled to one Right to
subscribe for one Share pursuant to the Primary Subscription. Record Date
Shareholders may request additional Shares pursuant to the Over-Subscription
Privilege. Completed Subscription Certificates must be received by the
Subscription Agent prior to 5:00 P.M., Eastern time, on the Expiration Date at
one of the addresses set forth above (unless the guaranteed delivery procedures
are complied with as described below under "Payment for Shares").
SHAREHOLDERS WHO ARE RECORD OWNERS. To exercise their Rights, Record Date
Shareholders may choose between either option to exercise their Rights set forth
under "Payment for Shares" below. If time is of the essence, option (2) under
"Payment for Shares" below will permit delivery of the Subscription Certificate
and payment after the Expiration Date.
SHAREHOLDERS WHOSE SHARES ARE HELD BY A NOMINEE. Shareholders whose Shares are
held by a nominee such as a bank, broker or trustee must contact that nominee to
exercise their Rights. In that case, the nominee will complete the Subscription
Certificate on behalf of the shareholder and arrange for proper payment by one
of the methods set forth under "Payment for Shares" below.
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<PAGE>
NOMINEES. Nominees who hold Shares for the account of others should notify the
respective beneficial owners of such Shares as soon as possible to ascertain
such beneficial owners' intentions and to obtain instructions with respect to
the Rights. If the beneficial owner so instructs, the nominee should complete
the Subscription Certificate and submit it to the Subscription Agent with the
proper payment as described under "Payment for Shares" below.
Trustees of the Fund who own Shares through their deferred fee arrangement will
receive Rights and may participate in the Offering. Further information with
respect to the deferred fee arrangement may be obtained from the Fund or the
Investment Manager.
INFORMATION AGENT
Any questions or requests for assistance concerning the method of subscribing
for Shares or for additional copies of this Prospectus or Subscription
Certificates or Notices of Guaranteed Delivery may be directed to the
Information Agent at its telephone number and address listed below:
Shareholder Communications Corporation
17 State Street
New York, NY 10004
(800) 618-7826
Brokers and banks, please call (800) 877-8579 ext. 113
Record Date Shareholders may also contact their brokers or nominees for
information with respect to the Offer. The Information Agent will receive a fee
estimated to be [ ], which includes reimbursement for its out-of-pocket expenses
related to the Offer.
PAYMENT FOR SHARES
Shareholders who wish to acquire Shares in the Primary Subscription and pursuant
to the Over-Subscription Privilege may choose between the following methods of
payment:
(1) A shareholder may send the Subscription Certificate together with payment
for the Shares acquired in the Primary Subscription and any additional Shares
subscribed for pursuant to the Over-Subscription Privilege to the
Subscription Agent. Payment should be calculated on the basis of the
Estimated Subscription Price of [ ] per Share for all Shares subscribed. A
subscription will be accepted when payment, together with a properly
completed and executed Subscription Certificate, is received by the
Subscription Agent's office at one of the addresses set forth above no later
than 5:00 P.M., Eastern time, on the Expiration Date. The Subscription Agent
will deposit all checks and money orders received by it for the purchase of
Shares into a segregated interest-bearing account (the interest from which
will inure to the benefit of the Fund) pending proration and distribution of
Shares. A PAYMENT PURSUANT TO THIS METHOD MUST BE IN U.S. DOLLARS BY MONEY
ORDER OR CHECK DRAWN ON A BANK OR BRANCH LOCATED IN THE UNITED STATES, MUST
BE PAYABLE TO "INVESCO GLOBAL HEALTH SCIENCES FUND" AND MUST ACCOMPANY A
PROPERLY COMPLETED AND EXECUTED SUBSCRIPTION CERTIFICATE FOR SUCH PAYMENT TO
BE ACCEPTED. EXERCISE BY THIS METHOD IS SUBJECT TO ACTUAL COLLECTION OF
CHECKS BY 5:00 P.M., EASTERN TIME, ON THE EXPIRATION DATE. BECAUSE
UNCERTIFIED PERSONAL CHECKS MAY TAKE AT LEAST FIVE BUSINESS DAYS TO CLEAR,
24
<PAGE>
SHAREHOLDERS ARE STRONGLY URGED TO PAY, OR ARRANGE FOR PAYMENT, BY MEANS OF A
CERTIFIED OR CASHIER'S CHECK OR MONEY ORDER.
(2) Alternatively, a bank, a trust company or a NYSE member subscription will
be accepted by the Subscription Agent if, prior to 5:00 P.M., Eastern time,
on the Expiration Date, the Subscription Agent has received a Notice of
Guaranteed Delivery by facsimile or otherwise from a bank, a trust company or
a NYSE member, guaranteeing delivery of (i) payment of the Estimated
Subscription Price of [$ ] per Share for the Shares subscribed for in the
Primary Subscription and any additional Shares requested pursuant to the
Over-Subscription Privilege, and (ii) a properly completed and executed
Subscription Certificate. The Subscription Agent will not honor a Notice of
Guaranteed Delivery unless a properly completed and executed Subscription
Certificate and full payment for the Shares is received by the Subscription
Agent by the close of business on the third Business Day after the Expiration
Date ( , 1999, unless the Offer is extended (the "Protect Period")).
Within five Business Days after the end of the Protect Period ( , 1999,
unless the Offer is extended) (the "Confirmation Date"), a confirmation will be
sent by the Subscription Agent to each subscribing shareholder (or, if the
shareholder's Shares are held by Cede or any other depository or nominee on such
shareholder's behalf, to Cede or such depository or nominee), showing (i) the
number of Shares acquired in the Primary Subscription, (ii) the number of
Shares, if any, acquired pursuant to the Over-Subscription Privilege, (iii) the
Subscription Price per Share and total purchase price of the Shares, and (iv)
any additional amount payable by such shareholder to the Fund or any excess to
be refunded by the Fund to such shareholder, in each case based on the
Subscription Price. If any shareholder exercises his or her Right to acquire
Shares pursuant to the Over-Subscription Privilege, any such excess payment that
would otherwise be refunded to the shareholder will be applied by the Fund
toward payment for Shares acquired pursuant to the exercise of the
Over-Subscription Privilege. Any additional payment required from a shareholder
must be received by the Subscription Agent within ten Business Days after the
Confirmation Date ( , 1999, unless the Offer is extended). Any excess
payment to be refunded by the Fund to a shareholder will be mailed by the
Subscription Agent to such shareholder as promptly as possible. All payments by
a shareholder must be in U.S. dollars by money order or check drawn on a bank or
branch located in the United States and payable to "INVESCO GLOBAL HEALTH
SCIENCES FUND."
The Subscription Agent will deposit all checks received by it prior to the final
payment date into a segregated interest-bearing account (which interest will
inure to the benefit of the Fund) pending proration and distribution of the
Shares.
Whichever of the two methods described above is used, issuance and delivery of
certificates for the Shares purchased are subject to collection of checks and
actual payment pursuant to any Notice of Guaranteed Delivery.
RECORD DATE SHAREHOLDERS WILL HAVE NO RIGHT TO RESCIND THEIR SUBSCRIPTION AFTER
RECEIPT OF THEIR PAYMENT FOR SHARES BY THE SUBSCRIPTION AGENT, EXCEPT AS
PROVIDED BELOW UNDER "NOTICE OF NET ASSET VALUE DECLINE."
If a shareholder who acquires Shares pursuant to the Primary Subscription or the
Over-Subscription Privilege does not make payment of any additional amounts due
by the tenth Business Day after the Confirmation Date, the Fund reserves the
right to take any or all of the following actions: (i) sell such subscribed and
unpaid-for Shares to other Record Date Shareholders, (ii) apply any payment
actually received toward the purchase of the greatest whole number of Shares
25
<PAGE>
that could be acquired by such shareholder upon the exercise of the Primary
Subscription and/or Over-Subscription Privilege, and/or (iii) exercise any and
all other rights or remedies to which the Fund may be entitled.
THE METHOD OF DELIVERY TO THE FUND OF SUBSCRIPTION CERTIFICATES AND PAYMENT OF
THE SUBSCRIPTION PRICE WILL BE AT THE ELECTION AND RISK OF THE EXERCISING RIGHTS
HOLDERS, BUT IF SENT BY MAIL IT IS RECOMMENDED THAT SUCH CERTIFICATES AND
PAYMENTS BE SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT
REQUESTED, AND THAT A SUFFICIENT NUMBER OF DAYS BE ALLOWED TO ENSURE DELIVERY TO
THE SUBSCRIPTION AGENT AND CLEARANCE OF PAYMENT PRIOR TO 5:00 P.M., EASTERN
TIME, ON THE EXPIRATION DATE. BECAUSE UNCERTIFIED PERSONAL CHECKS MAY TAKE AT
LEAST FIVE BUSINESS DAYS TO CLEAR, YOU ARE STRONGLY URGED TO PAY, OR ARRANGE FOR
PAYMENT, BY MEANS OF CERTIFIED OR CASHIER'S CHECK OR MONEY ORDER.
All questions concerning the timeliness, validity, form and eligibility of any
exercise of Rights will be determined by the Fund, whose determinations will be
final and binding. The Fund in its sole discretion may waive any defect or
irregularity, or permit a defect or irregularity to be corrected within such
time as it may determine, or reject the purported exercise of any Right.
Subscriptions will not be deemed to have been received or accepted until all
irregularities have been waived or cured within such time as the Subscription
Agent determines in its sole discretion. The Subscription Agent will not be
under any duty to give notification of any defect or irregularity in connection
with the submission of Subscription Certificates or incur any liability for
failure to give such notification.
EXERCISING RIGHTS HOLDERS WILL HAVE NO RIGHT TO RESCIND THEIR SUBSCRIPTION AFTER
RECEIPT OF THEIR PAYMENT FOR SHARES BY THE SUBSCRIPTION AGENT, EXCEPT AS
PROVIDED BELOW UNDER "NOTICE OF NET ASSET VALUE DECLINE."
DELIVERY OF SHARE CERTIFICATES
Certificates representing Shares acquired in the Primary Subscription will be
mailed promptly after the expiration of the Offer once full payment for such
Shares has been received and cleared. Certificates representing Shares acquired
pursuant to the Over-Subscription Privilege will be mailed as soon as
practicable after full payment for such Shares has been received and cleared and
all allocations have been completed. Participants in the Reinvestment Plan will
have any Shares acquired in the Primary Subscription and pursuant to the
Over-Subscription Privilege credited to their accounts under the Reinvestment
Plan. Participants in the Reinvestment Plan wishing to exercise Rights issued
with respect to the Shares held in their accounts under the Reinvestment Plan
must exercise such Rights in accordance with the procedures set forth above.
Shareholders whose Shares are held of record by Cede or by any other depository
or nominee on their behalf or their broker-dealer's behalf will have any Shares
acquired in the Primary Subscription credited to the account of Cede or such
other depository or nominee. Shares acquired pursuant to the Over-Subscription
Privilege will be certificated, and certificates representing such Shares will
be sent directly to Cede or such other depository or nominee. Share certificates
will not be issued for Shares credited to Reinvestment Plan accounts.
FOREIGN RESTRICTIONS
Subscription Certificates will not be mailed to Record Date Shareholders whose
record addresses are outside the United States. Foreign Record Date Shareholders
or their nominees will receive written notice of the Offer. The Rights issued to
foreign Record Date Shareholders will be held by the Subscription Agent for
26
<PAGE>
their accounts until instructions are received to exercise the Rights. Rights
issued to foreign Record Date Shareholders will expire for the failure to submit
instructions to the Subscription Agent prior to or on the Expiration Date.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER
The following discussion summarizes the principal federal income tax
consequences of the Offer to Record Date Shareholders. It is based on the
Internal Revenue Code of 1986, as amended (the "Code"), U.S. Treasury
regulations, Internal Revenue Service rulings and policies and judicial
decisions in effect on the date of this Prospectus. This discussion does not
address all federal income tax aspects of the Offer that may be relevant to a
particular shareholder in light of his or her individual circumstances or to
shareholders subject to special treatment under the Code (such as insurance
companies, financial institutions, tax-exempt entities, dealers in securities,
foreign corporations and persons who are not citizens or residents of the United
States), and it does not address any state, local or foreign tax consequences.
Accordingly, each shareholder should consult his, her or its own tax advisor as
to the specific tax consequences of the Offer to him, her or it. Each
shareholder should also review the discussion of certain tax considerations
affecting the Fund and its shareholders set forth under "Federal Taxation of the
Fund and its Shareholders" below and under "Taxation" in the SAI.
For federal income tax purposes, neither the receipt nor the exercise of the
Rights by Record Date Shareholders will result in taxable income to them, and
they will realize no loss with respect to any Rights that expire without being
exercised.
A Record Date Shareholder's holding period for a Share acquired on exercise of a
Right will begin with the date of exercise. A Record Date Shareholder's basis
for determining gain or loss on the sale of such a Share will equal the sum of
the shareholder's basis in the Right, if any, plus the Subscription Price. A
Record Date Shareholder's basis in a Right will be zero unless either (1) the
fair market value of the Right on the date of distribution is 15% or more of the
fair market value on that date of the Shares with respect to which the Right was
distributed or (2) the shareholder elects, on his, her or its federal income tax
return for the taxable year in which the Right is received, to allocate part of
the basis of those Shares to the Right. If either clause (1) or (2) applies,
then if the Right is exercised, the Record Date Shareholder will allocate his,
her or its basis in the Shares with respect to which the Right was distributed
between those Shares and the Right in proportion to their respective fair market
values on the date of distribution. A Record Date Shareholder's gain or loss
recognized on a sale of a Share acquired on the exercise of a Right will be a
capital gain or loss (assuming the Share was held as a capital asset at the time
of sale) and will be long-term capital gain or loss if the Share was held at
that time for more than one year.
The foregoing is only a summary of certain federal income tax consequences and
does not describe any state or local tax consequences of the Offer. Record Date
Shareholders should consult their own tax advisors concerning the tax
consequences of the Offer.
NOTICE OF NET ASSET VALUE DECLINE
As required by the SEC, the Fund has undertaken to suspend the Offer until it
amends this Prospectus if, subsequent to [ , 1999] (the effective date of
the Fund's Registration Statement), the Fund's NAV declines more than 10% from
its NAV as of that date. Accordingly, the Expiration Date would be extended and
the Fund would notify Record Date Shareholders of any such decline and permit
shareholders to cancel their exercise of Rights.
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<PAGE>
EMPLOYEE BENEFIT PLAN CONSIDERATIONS
Shareholders that are employee benefit plans subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") (including corporate profit
sharing/retirement and savings plans, plans for self-employed individuals and
their employees, and individual retirement accounts ("IRAs")) (collectively,
"Retirement Plans") should be aware that additional contributions of cash to a
Retirement Plan (other than rollover contributions or trustee-to-trustee
transfers from other Retirement Plans) in order to exercise Rights may, when
taken together with contributions previously made, be treated as excess or
nondeductible contributions subject to excise taxes. In the case of Retirement
Plans qualified under section 401(a) of the Code, additional cash contributions
could cause violations of the maximum contribution limitations of section 415 of
the Code or other qualification rules. Retirement Plans in which contributions
are so limited should consider whether there is an additional source of funds
available within the Retirement Plan, including the liquidation of assets, with
which to exercise the Rights. Because the rules governing plans are extensive
and complex, Retirement Plans contemplating the exercise of Rights should
consult with their counsel prior to such exercise.
Retirement Plans and other tax exempt entities, including governmental plans,
should also be aware that if they borrow to finance their exercise of Rights,
they may become subject to the tax on unrelated business taxable income under
section 511 of the Code. If any portion of an IRA is used as security for a
loan, that portion will be treated as a distribution to the IRA owner.
ERISA contains fiduciary responsibility requirements, and ERISA and the Code
contain prohibited transactions rules, that may impact the exercise of Rights.
Due to the complexity of these rules and the penalties for noncompliance,
Retirement Plans should consult with their counsel regarding the consequences of
their exercise of Rights under ERISA and the Code.
DISTRIBUTION ARRANGEMENTS
PaineWebber Incorporated, 1285 Avenue of the Americas, New York, New York, a
broker-dealer and member of the National Association of Securities Dealers,
Inc., will act as the Dealer Manager for the Offer. Under the terms and subject
to the conditions contained in the Dealer Manager Agreement dated the date
hereof, the Dealer Manager will provide financial advisory and marketing
services in connection with the Offer and will solicit the exercise of Rights
and participation in the Over-Subscription Privilege by Record Date
Shareholders. The Offer is not contingent upon any number of Rights being
exercised. The Fund has agreed to pay the Dealer Manager a fee for financial
advisory and marketing services equal to [1.25%] of the aggregate Subscription
Price for each Share issued pursuant to the Offer, and the Fund has also agreed
to pay broker-dealers, including the Dealer Manager, fees for their solicitation
efforts (the "Solicitation Fees") of 2.50% of the Subscription Price per Share
for each Share issued pursuant to the exercise of the Rights and pursuant to the
Over-Subscription Privilege as a result of their soliciting efforts.
Solicitation Fees will be paid to the broker-dealer designated on the applicable
portion of the Subscription Certificates or, in the absence of such designation,
to the Dealer Manager.
In addition, the Fund has agreed to reimburse the Dealer Manager up to an
aggregate of [$_______] for its reasonable expenses incurred in connection with
the Offer. The Fund and the Investment Manger have each agreed to indemnify the
Dealer Manager or contribute to losses arising out of certain liabilities
including liabilities under the Securities Act. The Dealer Manager Agreement
also provides that the Dealer Manager will not be subject to any liability to
the Fund in rendering the services contemplated by such agreement except for any
act of bad faith, willful misconduct or gross negligence of the Dealer Manager
or reckless disregard by the Dealer Manager of its obligations and duties under
such agreement.
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<PAGE>
The Fund has agreed not to offer or sell, or enter into any agreement to sell,
any equity or equity related securities of the Fund or securities convertible
into such securities for a period of 180 days after the date of the Dealer
Manager Agreement, except for the Shares issued in reinvestment of dividends or
other distributions or other limited circumstances.
DILUTION
Upon the completion of the Offer, Record Date Shareholders who do not fully
exercise their Rights will own a smaller proportional interest in the Fund than
they owned prior to the Offer. In addition, because the Subscription Price per
Share will be less than the NAV per Share on the Expiration Date and the Fund
will incur expenses in connection with the Offer, the completion of the Offer
will result in an immediate dilution of NAV per Share for all shareholders,
which will disproportionately affect shareholders who do not exercise their
Rights in full. Although it is not possible to state precisely the amount of
such decrease in NAV per Share, because it is not known at this time what the
NAV per Share will be on the Expiration Date, or what proportion of the Rights
will be exercised, or what the Subscription Price will be, such dilution could
be significant. For example, assuming all of the Shares are sold at the
Estimated Subscription Price and after deducting all expenses related to the
issuance of the Shares, the Fund's NAV per Share on [ , 1999] would be
reduced by approximately $_____ or ____% (or, in the event that all of the
Rights are exercised and the Fund increases the number of Shares subject to
subscription by 25% pursuant to the Over-Subscription Privilege, by
approximately $______ or _____%). See "Risk Factors and Special
Considerations--Dilution."
IMPORTANT DATES TO
REMEMBER EVENT DATE
----- ----
Record Date [ ]
Subscription Period [ ]*
Expiration Date and Pricing [ ]*
Date
Subscription Certificates and [ ]*
Payment for Shares Due**
Notice of Guaranteed Delivery [ ]*
Due
Payment for Guarantees of [ ]*
Delivery Due
Confirmation Mailed to [ ]*
Participants
Final Payment for Shares*** [ ]*
- --------
* Unless the Offer is extended.
** A Record Date Shareholder exercising Rights must deliver by the Expiration
Date either (i) a Subscription Certificate and payment for Shares or (ii) a
Notice of Guaranteed Delivery.
*** Additional amount due from Record Date Shareholders (in the event the Final
Subscription Price exceeds the Estimated Subscription Price).
USE OF PROCEEDS
If [ ] Shares are sold at the Estimated Subscription Price of $____ per
Share, net proceeds of the Offer are estimated to be approximately $________,
after deducting estimated expenses payable by the Fund, including the fees and
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expenses of the Dealer Manager and other offering expenses that in total are
estimated to be [$ ]. If the Fund increases the number of Shares subject
to subscription by up to 25%, or [ ] Shares, in order to satisfy
over-subscription requests, the additional net proceeds will be approximately
$________.
The Investment Manager has advised the Fund that it anticipates that the net
proceeds will be invested in accordance with its investment objective and the
policies set forth under "Investment Objective and Policies" within three months
from the date of this Prospectus (but in no event later than six months from the
date of this Prospectus), depending on market conditions and the availability of
appropriate securities. The proceeds of the Offer may be held in U.S. Government
securities and other high-quality, short-term money market instruments until
they are invested pursuant to the Fund's investment objective. While the
proceeds are invested in such securities the proceeds will not be invested in
securities consistent with the Fund's goal of seeking long-term capital
appreciation. In addition, consistent with the Fund's investment restrictions,
the proceeds of the Offer may be held pending permanent investment in other
instruments including, without limitation, S&P 500 futures. These other
investments may present a substantial investment risk, including the potential
that they may decrease in value prior to the time they are liquidated and the
proceeds are ultimately invested.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to seek capital appreciation by
investing substantially all of its assets in equity and related securities of
U.S. and foreign Health Science Companies. The Fund's Investment Manager
believes that the securities of Health Science Companies offer the potential for
capital appreciation based upon the Investment Manager's projection of
increasing global expenditures for health science products and services
resulting from enhanced consumer demand, continuing technological advances and
demographic trends indicating an aging population. The Fund's Investment Manager
also believes that the potential for capital appreciation within the health
science industries will be driven by increased focus on cost containment and
productivity enhancement. An investment in the Fund should not itself be
considered a balanced investment program and is intended to provide
diversification for a more complete investment program. No assurance can be
given that the Fund will achieve its investment objective.
Under normal market conditions, at least 80% of the Fund's total assets will be
invested in equity and related securities of Health Science Companies. The
principal industry groups of Health Science Companies are:
. Pharmaceuticals
. Biotechnology
. Medical equipment, devices and supplies
. Health care delivery
Health Science Companies also consist of those companies principally engaged in
any other industries relating to human health or the growth or survival of
animals or plants and companies principally engaged in activities that utilize
technologies that are the same as or similar to those developed for or used by
Health Science Companies. The Fund expects to invest both in large,
well-established Health Science Companies with existing products and services as
well as in smaller, emerging Health Science Companies, including start-up
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companies and venture capital opportunities, which may offer limited products or
services or which are seeking to develop products, services or technologies.
Up to 20% of the Fund's total assets may be invested, in the aggregate, in:
equity and related securities of companies engaged, but less than principally,
in the health sciences or in supplying goods or services to Health Science
Companies, or of non-Health Science Companies which benefit from the growth and
development of Health Science Companies or in real estate investment trusts that
hold at least 50% of their interests in facilities of Health Science Companies
("Related Companies"); non-convertible debt securities of Health Science
Companies and Related Companies that are not acquired as units together with
equity securities; and high grade U.S. dollar denominated money market
instruments having maturities of one year or less. Investment in non-convertible
debt securities (other than money market instruments) of Health Science
Companies and Related Companies (whether or not acquired as units with other
securities) is limited to 10% of the Fund's total assets. Current income is
generally not a consideration in the selection of investments.
The Fund has pending before the SEC an application for an exemptive order that,
if granted, would permit the Fund to participate in an interfund lending
facility. As such, the Fund may lend cash to other registered investment
companies (including mutual funds) managed by the Investment Manager
("Affiliated Funds"). If this application is granted, the Fund may from time-to-
time make such loans to Affiliated Funds, and may make such loans from the
proceeds of the Offering, if such proceeds have not been otherwise invested
consistent with the Fund's objective.
The Fund may invest up to 25% of its total assets in securities for which there
is no readily available secondary market, including securities acquired in
private placements, venture capital opportunities, joint ventures and
partnerships. Since its inception, the Fund has consistently made such
investments.
Up to 25% of the Fund's total assets, measured at the time of purchase, may be
invested in Foreign Securities. Securities of Canadian issuers and ADRs are not
subject to this 25% limitation.
The Fund will, under normal conditions, invest at least 65% of its total assets
in issuers that are organized under the laws of, or that maintain their
principal business operations in, at least three countries, one of which is
expected to be the United States.
"Equity and related securities" consist of: common, preferred and convertible
preferred stocks, whether or not voting; partnership interests; securities
having equity characteristics such as rights, warrants and convertible debt
securities, whether or not issued by the same issuer as the security to be
issued upon exercise or conversion; non-convertible debt securities that are
acquired as units together with any of the foregoing, whether or not
transferable or separately traded; and short sale and hedge positions relating
to any of such securities.
The Fund may utilize certain investment practices, such as repurchase
agreements, when-issued and delayed delivery transactions, lending portfolio
securities, foreign currency and other hedging transactions and short sales.
These investment practices involve certain risks. See "Additional Information
About Its Investment Objective and Policies" located in the SAI.
For temporary purposes, and when, in the Investment Manager's judgment,
conditions in the securities markets generally or in the market for the
securities of Health Science Companies would make achievement of the Fund's
investment objective impracticable, the Fund may assume a defensive investment
position. During these periods, the Fund may without limit invest in U.S.
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dollar-denominated, high grade money market instruments rated or, if unrated, in
the Investment Manager's opinion comparable to instruments rated, in the top
three rating categories utilized by at least one national recognized statistical
rating organization and having maturities at the time of purchase of one year or
less, including securities issued or guaranteed by the United States Government
or one of its agencies or instrumentalities ("U.S. Government Securities"),
certificates of deposit, bankers' acceptances, commercial paper, short-term
corporate securities, and repurchase agreements with respect to any of the
foregoing. While the Fund is in a defensive position, the opportunity to achieve
capital appreciation will be limited, and, to the extent that the Investment
Manager's assessment of market conditions is incorrect, the Fund will be
foregoing the opportunity to benefit from capital appreciation resulting from
increases in the value of equity investments; however, the ability to maintain a
defensive investment position provides the flexibility for the Fund to seek to
avoid capital loss during market downturns. It is impossible to predict when, or
for how long, any such investment position will be maintained.
INVESTMENT RESTRICTIONS
The Fund has adopted the following investment restrictions, which, together with
its investment objective, are fundamental policies changeable only with the
approval of a "majority" of the Fund's outstanding voting securities. As defined
in the 1940 Act, this requires the affirmative vote of the holders of (a) more
than 50% of the outstanding Shares of the Fund, or (b) two-thirds or more of the
Shares present at a meeting if more than 50% of the Fund's outstanding Shares
are represented at the meeting in person or by proxy, whichever is less. Under
these restrictions, the Fund may not:
1. borrow money or issue senior securities, except that the Fund may
borrow in an amount not exceeding 15% of its total assets to finance
the repurchase of or tender offers for Shares or to pay dividends and
other distributions, and may borrow for temporary purposes in an amount
not exceeding 5% of its total assets (the Fund will not be deemed to
have issued a senior security by reason of effecting short sales,
lending securities, purchasing securities on a when-issued or delayed
delivery basis, or engaging in hedging transactions in accordance with
its investment policies, or entering into collateral arrangements or
maintaining margin deposits incident to any of the foregoing
practices);
2. buy or sell commodities, commodity contracts, oil, gas or other mineral
interests or exploration programs (however, the Fund may purchase
securities of companies which invest in the foregoing and may enter
into transactions in hedging instruments);
3. buy or sell real estate or interests therein (however, securities
issued by companies which invest in real estate or interests therein
may be purchased and sold);
4. invest in any company for the purpose of exercising control or
management, except to the extent that exercise by the Fund of its
rights under agreements related to portfolio securities would be deemed
to constitute such control;
5. engage in the underwriting of any securities, except insofar as the
Fund may be deemed an underwriter under the Securities Act of 1933 in
the sale of its Shares or in disposing of a portfolio security;
6. make loans of money or securities to any person, except that the Fund
may lend money through the purchase of securities (including repurchase
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<PAGE>
agreements) in accordance with its investment policies, and make loans
of portfolio securities in an amount not exceeding 25% of the Fund's
total assets;
7. with respect to 75% of its total assets, purchase the securities of any
one issuer (except U.S. Government Securities) if the purchase would
cause the Fund to have more than 5% of the value of its total assets
invested in the securities of such issuer or to own more than 10% of
the outstanding voting securities of such issuer;
8. invest in the securities of other investment companies in an amount
exceeding the limitations set forth in the 1940 Act and the rules
thereunder;
9. purchase a security if such purchase would cause more than 25% of its
total assets to be invested in securities of issuers engaged in any one
industry (as determined by standard industry classification codes),
except that the Fund will, under normal market conditions, invest more
than 25% of its total assets in the securities of companies in the
groups of industries in which Health Science Companies are engaged; or
10.pledge, hypothecate, mortgage or otherwise encumber its assets, except
to secure permitted borrowings or for collateral and margin
arrangements associated with the Fund's investment practices.
The percentage limitations on investments set forth above, as well as those
described elsewhere in this Prospectus and SAI, apply only at the time of
investment and require no action by the Fund as a result of subsequent changes
in the value of investments or the total assets of the Fund.
SPECIAL INVESTMENT PRACTICES
The Fund may utilize the following special investment practices:
SHORT SALES. In furtherance of its objective of capital appreciation, the Fund
may effect short sales of any securities which it has authority to purchase,
subject to the limitation that the Fund will not effect a short sale if, as a
result of such sale, the current market value of securities sold short would
exceed 25% of the Fund's total assets. 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. In such a transaction, the Fund must borrow the
security to make delivery to the buyer. The Fund is obligated to replace the
borrowed security and may realize a gain if it purchases the security for
replacement at a lower price. However, the price at which the Fund purchases the
security may be more or less than the price at which the security was sold. The
Fund will incur a loss as a result of a short sale if the cost of purchasing the
borrowed security, and transaction and carrying costs associated with the short
sale, are more than the amount realized from the short sale. Although the Fund's
potential for gain as a result of a short sale is limited to the price at which
it sold the security short less the cost of borrowing the security, its
potential for loss is theoretically unlimited because there is no limit to the
cost of replacing the borrowed security.
If the Fund borrows a security in order to enter into a short sale, the proceeds
of the short sale will be retained by a broker, as security for the borrowing to
the extent necessary to meet margin requirements, until the short position is
closed out. The Fund is also required to pay to the lender of the security the
amount of any dividends or interest paid on the borrowed security. To borrow the
security, the Fund also may be required to pay a premium, which would increase
the cost of the security sold short. The amount of any gain will be decreased,
and the amount of any loss increased, by the amount of any premium or dividends
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<PAGE>
or interest paid on the borrowed security that the Fund may be required to pay
in connection with the short sale.
A short sale "against the box" is a transaction in which the Fund enters into a
short sale of a security that the Fund owns or has the right to acquire at no
additional cost. The proceeds of the short sale are held by a broker until the
Fund delivers the security to close the short position, at which time the Fund
will receive the net proceeds from the sale.
When the Fund engages in short sales other than "against the box," the Fund will
"cover" its position in one of two ways. The Fund may cover by holding a call
option on the security sold short having a strike price no higher than the price
at which the security was sold. Alternatively, the Fund may maintain in an
account with its custodian a segregated amount of cash or U.S. Government
Securities equal to the excess of (1) the market value of the securities sold
short at the time they were sold short, over (2) any cash or U.S. Government
Securities required by the broker to be deposited as collateral in connection
with the short sale (not including the proceeds from the short sale). Until the
borrowed security is replaced, the Fund will maintain this account at a level so
that the amount deposited in the account, plus the collateral deposited with the
broker, will equal the current market value of the securities sold short, but
not less than the market value of the securities at the time they were sold
short.
HEDGING. For hedging purposes, the Fund may purchase and sell stock options,
stock index futures, such as S&P 500 futures, options on stock indices, options
on stock index futures, forward foreign currency contracts and foreign currency
futures contracts and related options (collectively, "Hedging Instruments").
Hedging Instruments may be used to attempt to reduce investment risk by taking
an investment position that is expected to move in the opposite direction from
the position being hedged. The Fund may enter into hedging transactions in
connection with anticipated purchases or sales of portfolio securities or with
respect to anticipated changes in the market prices for securities which are in
its portfolio. To the extent the hedge is successful, a loss (or gain) on one
position will tend to be offset by a gain (or loss) on the other. The Investment
Manager will not engage in financial futures or related options transactions for
speculative purposes but only in an effort to hedge portfolio risks as described
above. The Fund will only invest in futures contracts and related options to the
extent that the Fund would not be required thereby to register with the United
States Commodity Futures Trading Commission as a commodity pool operator. Under
current regulations, the Fund may not purchase or sell futures contracts or
related options if, immediately thereafter, the sum of the amount of initial
margin deposits on the Fund's open regulated options and futures positions and
premiums on open option positions thereon would exceed 5% of the market value of
the Fund's total assets.
The successful use of Hedging Instruments depends on the ability of the
Investment Manager to predict the direction of the market and is subject to
various additional risks. The investment techniques and skills required to use
Hedging Instruments successfully are different from those required to select
equity securities for investment. The correlation between movements in the price
of the Hedging Instruments and the price of the securities being hedged is
imperfect and the risk from imperfect correlation increases, with respect to
stock index related Hedging Instruments, as the composition of the Fund's
portfolio diverges from the composition of the index underlying such Hedging
Instruments. If the Fund has hedged against a decline in the value of its
portfolio securities, the Fund could suffer a loss which is only partially
offset or not offset at all by an increase in the value of the Fund's portfolio
securities. If the Fund has hedged an intended purchase of securities, the Fund
could suffer a loss which is only partially offset or not offset at all by a
reduction in the price at which the securities are purchased. If the Fund hedges
a proposed purchase of securities and determines not to purchase such
securities, any loss on the Hedging Instrument will not be offset. In addition,
the ability of the Fund to close out a position in a Hedging Instrument depends
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on a liquid secondary market. There is no assurance that liquid secondary
markets will exist for any particular Hedging Instrument at any particular time.
The Fund may enter into contracts to purchase or sell foreign currencies at a
future date ("forward contracts") foreign currency futures contracts, options on
such futures contracts and options on foreign currencies as a hedge against
fluctuations in foreign exchange rates pending the settlement of transactions in
Foreign Securities or during the time the Fund holds 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. The
Fund will not attempt to hedge all of its foreign portfolio positions and will
enter into such transactions only to the extent, if any, deemed appropriate by
the Investment Manager. The Fund will not enter into a forward contract for a
term of more than one year. Investors should be aware that hedging against a
decline in a currency does not eliminate fluctuations in the market value of
portfolio securities or prevent losses if the value of such securities declines.
Furthermore, such hedging transactions preclude the opportunity for gain if the
hedged currency should rise. No predictions can be made with respect to whether
the total of such transactions will result in a better or a worse position than
had the Fund not entered into foreign currency hedges.
The Hedging Instruments that the Fund may use are described in the SAI, which
contains further information about the characteristics, risks, possible
benefits, and applicable limitations on the use of such Hedging Instruments.
REPURCHASE AGREEMENTS. In order to make productive use of funds pending other
investments, any of the types of high grade debt securities permissible for
purchase by the Fund may be acquired subject to repurchase agreements with
commercial banks with total assets in excess of $1 billion or securities dealers
with a net worth in excess of $50 million. The Investment Manager will also
consider the creditworthiness of the parties with whom the Fund enters into
repurchase agreements. In a repurchase transaction, at the time the Fund
acquires a security, it simultaneously agrees to resell it to the bank or dealer
from which it was purchased on a specific future date. The repurchase price
exceeds the purchase price by an amount that reflects an agreed upon interest
rate effective for the period during which the repurchase agreement is in
effect. Delivery pursuant to the resale typically will occur within one to seven
days of the purchase. A repurchase transaction is similar to a loan, with the
security underlying the agreement serving as collateral. The Fund requires that
securities underlying repurchase agreements be held by its custodian in an
amount having a value at least equal to the repurchase price. The Investment
Manager will monitor the collateral daily and, if its value declines below the
repurchase price, will immediately demand that additional securities be
transferred. If such demand is not met within one day, the securities will be
sold by the Fund. If any party to a repurchase agreement fails to pay the agreed
upon resale price on the delivery date, the Fund's risks include any decline in
the value of the collateral to an amount which is less than 100% of the
repurchase price, any costs of disposing of such collateral, and any loss from a
delay in disposing of the collateral. There is no limit on the amount of the
Fund's assets that may be subject to repurchase agreements.
RISK FACTORS AND SPECIAL CONSIDERATIONS
DILUTION. If you do not exercise all of your Rights during the Subscription
Period, when the Offering is over you will own relatively less of the Fund than
if you had exercised all of your Rights. The Fund cannot tell you precisely how
much less of the Fund you would own because the Fund does not know how many of
the Fund's Record Date Shareholders will exercise their Rights and how many of
their Rights they will exercise.
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Shareholders will experience an immediate dilution of the aggregate NAV of the
Shares as a result of the Offer because the Subscription Price per Share will be
less than the Fund's NAV per Share on the Expiration Date (and the Fund will
incur expenses in connection with the Offer), and the number of Shares
outstanding after the Offer will increase in a greater percentage than the
increase in the size of the Fund's assets. Such dilution will disproportionately
affect Record Date Shareholders who do not exercise their Rights in full.
Although it is not possible to state precisely the amount of any such decrease
in NAV, because it is not known at this time what the NAV per share will be at
the Expiration Date or what proportion of the Shares will be subscribed, such
dilution could be significant. For example, assuming all the Shares are sold at
the Estimated Subscription Price of __________ and after deducting all expenses
related to the issuance of the Shares, then the Fund's NAV per share on
[ ], 1999 would be reduced by approximately ____ per share or ____ %.
HEALTH SCIENCE COMPANIES. Because the Fund intends to invest substantially all
of its assets in equity and related securities of Health Science Companies, an
investor should be aware of certain special considerations and risk factors
relating to investment in such companies. Investors should also be aware of
considerations and risks relating to the Fund's investment practices. An
investment in the Fund should not be considered a balanced investment program
and is intended to provide diversification for a more complete investment
program. The Fund is not intended for investors seeking income.
Investment in the securities of Health Science Companies entails special
considerations and risks. In addition to the risks associated with any strategy
seeking capital appreciation through investment in equity securities, the Fund's
portfolio will bear the additional risk that many Health Science Companies may
be subject to, and possibly adversely affected by, some of the same general
trends relating to demand for health related products and services and the same
regulatory, economic, and political factors. Certain health science industries
are characterized by single product focus and rapidly changing technologies.
These changes may render existing products and technologies obsolete. There is
also extensive government regulation of certain health science industries. Many
of these activities are funded or subsidized by federal and state governments;
withdrawal or curtailment of this support could have an adverse impact on the
profitability, and market prices, of such companies. Changes in government
regulation could also have an adverse impact. Unanticipated problems may arise
in connection with the development of new products or technologies, and many
such efforts may ultimately be unsuccessful. In addition, testing or marketing
products may require obtaining government approvals, which may be a lengthy and
expensive process with an uncertain outcome. Delays in generating products may
result in the need to seek additional capital, potentially diluting the
interests of existing investors, such as the Fund. These various factors may
result in abrupt advances and declines in the securities prices of particular
companies and, in some cases, may have a broad effect on the prices of
securities of companies in particular health science industries or of Health
Science Companies generally.
INVESTMENTS IN UNSEASONED COMPANIES. The Fund may invest in the securities of
smaller, less seasoned companies. These investments may present greater
opportunities for growth but also involve greater risks than customarily are
associated with investments in securities of more established companies. Some of
the Health Science Companies in which the Fund may invest will be start-up
companies which may have insubstantial operational or earnings history or may
have limited products, markets, financial resources or management depth. Some
may also be emerging companies at the research and development stage with no
products or technologies to market or approved for marketing. Securities of
emerging Health Science Companies may lack an active secondary market and may be
subject to more abrupt or erratic price movements than securities of larger,
more established companies or stock market averages in general. Competitors of
certain Health Science Companies, which may or may not be Health Science
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Companies, may have substantially greater financial resources than many of the
companies in which the Fund may invest.
SUBSTANTIAL COMPETITION. Intense competition exists within and among certain
health science industries, including competition to obtain and sustain
proprietary technology protection. Health Science Companies may be highly
dependent on the strength of a patent to maintain revenue and market share. The
complex nature of the technologies involved can lead to patent disputes,
including litigation that could result in a company losing an exclusive right to
a patent. In addition, there are numerous Related Companies and the Fund may
invest only a limited portion of its assets in the securities of such companies.
These Related Companies, although not principally engaged in the health
sciences, may be large, well-capitalized companies that are engaged in certain
health science businesses. Some of these companies may have substantially
greater capital, research and development, manufacturing, marketing, and human
resources capabilities than certain of the Health Sciences Companies in which
the Fund may invest and may represent significant long-term competition for
Health Sciences Companies. Such large Related Companies may succeed in
developing technologies and products that are more effective or less costly than
any that may be developed by Health Science Companies and may also prove to be
more successful in production and marketing. Competition may increase further as
a result of potential advances in the health sciences and greater availability
of capital for investment in these fields.
PRODUCT LIABILITY EXPOSURE. Certain Health Science Companies and Related
Companies in which the Fund may invest will be exposed to potential product
liability risks that are inherent in testing, manufacturing, marketing, and
selling human therapeutic and diagnostic products. There can be no assurance
that a product liability claim would not have a material adverse effect on the
business, financial condition or securities prices of the companies in which the
Fund has invested.
FOREIGN SECURITIES. The Fund may invest substantially all of its assets in
Foreign Securities. Many Foreign Securities may be less liquid and their prices
more volatile than securities of comparable U.S. companies. Foreign stock
exchanges and brokers are generally subject to less governmental supervision and
regulation than U.S. exchanges and brokers, and commissions on foreign stock
exchanges are generally higher than negotiated commissions in the United States.
In addition, there may, in certain instances, be delays in the settlement of
transactions effected in foreign markets. Certain countries restrict foreign
investments in their securities markets. These restrictions may limit or
preclude investment in certain countries or in certain industries or market
sectors, or may increase the cost of investing in securities of particular
companies.
Foreign companies are not generally subject to uniform accounting, auditing, and
financial reporting standards or to other regulatory requirements comparable to
those applicable to U.S. companies. Thus, there may be less available
information concerning non-U.S. issuers of securities held by the Fund than is
available concerning U.S. companies. In addition, with respect to some foreign
countries there is the possibility of nationalization, expropriation or
confiscatory taxation. Income earned in a foreign nation may be subject to
taxation (including withholding taxes on interest and dividends), or other taxes
may be imposed with respect to investments in Foreign Securities. Other risks
associated with investments in Foreign Securities include limitations on the
removal of securities, property or other assets of the Fund, difficulties in
pursuing legal remedies and obtaining judgments in foreign courts, political or
social instability, and diplomatic developments that could adversely affect the
Fund's investments in companies located in foreign countries.
CURRENCY RISK. The income and capital gains received by the Fund on Foreign
Securities generally will be in non-U.S. currencies. The computation and
distribution of income and capital gains by the Fund, however, will be made in
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U.S. dollars. Therefore, the Fund's reported NAV and its computation and
distribution of income and capital gains in U.S. dollars will vary with
increases and decreases in the exchange rate between the currencies in which the
Fund has invested and the U.S. dollar. A decline in any particular currency
against the U.S. dollar will cause a decline in the U.S. dollar value of the
Fund's holdings of securities denominated in such currency and, therefore, may
cause an overall decline in the Fund's NAV and net investment income and capital
gains, if any, to be distributed in U.S. dollars to shareholders by the Fund. In
addition, the computation of income and capital gains will be made on the date
of its accrual by the Fund rather than on any later date on which the proceeds
are converted into U.S. dollars. See "Taxation" in the SAI.
The rate of exchange between the U.S. dollar and other currencies is determined
by many factors, including the supply and demand for particular currencies,
central bank efforts to support particular currencies, the movement of interest
rates, the pace of activity in the industrial countries, including the United
States, and other economic and financial conditions affecting the world economy.
As discussed above, the Fund may enter into foreign currency related Hedging
Instruments to seek to hedge against fluctuations in foreign exchange rates
pending the settlement of transactions in Foreign Securities or during the time
the Fund holds Foreign Securities. See "Investment Objective and
Policies--Special Investment Practices--Hedging."
EURO CONVERSION. The recent introduction of a new European currency, the euro,
may result in future uncertainties for European securities in the markets in
which they trade and with respect to the operation of the Fund's portfolio. The
euro was introduced on January 1, 1999 by eleven European countries that are
members of the European Economic and Monetary Union. The transition to everyday
usage of the euro will occur during the period from January 1, 1999 through
December 31, 2001. The introduction of the euro will require the redenomination
of European debt and equity securities over a period of time, which may result
in various accounting differences and/or tax treatments that otherwise would not
likely occur. Additional questions are raised by the fact that certain European
Union members, including the United Kingdom, did not implement the euro on
January 1, 1999. If the remainder of the transition to the euro does not take
place as planned, there could be negative effects, such as severe currency
fluctuations and market disruptions.
PORTFOLIO TURNOVER. There are no fixed limitations regarding portfolio turnover.
Frequency of portfolio turnover will, therefore, not be a limiting factor if the
Fund considers it advantageous to purchase or sell securities. The Fund
anticipates that its annual portfolio turnover rate will not exceed 200%. For
the year ended October 31, 1998, the Fund's portfolio turnover rate was 87%. A
higher rate of portfolio turnover involves correspondingly greater aggregate
payments for brokerage commissions than a lower rate, which expenses must be
borne by the Fund and its shareholders, while a lower rate of portfolio turnover
involves correspondingly lower aggregate payments and shareholder expenses.
ILLIQUID INVESTMENTS. The Fund is permitted to invest up to 25% of its total
assets in securities for which there is no readily available secondary market.
The risk of investing in such securities generally is greater than the risk of
investing in the securities of widely held, publicly traded companies. Certain
of these securities may be restricted securities and have legal or contractual
restrictions on resale. Restricted securities may not be sold except in exempt
transactions or in a public offering registered under the Securities Act of
1933. Adverse conditions in the securities markets at certain times may preclude
a public offering of an issuer's unregistered securities. Lack of an active
secondary market and resale restrictions may result in the inability of the Fund
to sell a security at a fair price and may substantially delay the sale of a
security that the Fund seeks to sell. In addition, these securities may exhibit
greater price volatility than securities for which secondary markets exist.
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Companies whose securities are not publicly traded are not subject to the same
disclosure and other legal requirements as are applicable to companies with
publicly traded securities. Restricted securities eligible for resale to
qualified institutional buyers pursuant to Rule 144A under the Securities Act of
1933 that are determined to be liquid by the Board, or by the Investment Manager
under Board-approved guidelines, are not subject to this 25% of assets
limitation. Under guidelines to determine whether securities eligible for resale
under Rule 144A are liquid, factors such as trading activity and the
availability of price quotations will be considered. If trading activity in a
Rule 144A security purchased by the Fund declines, the Fund's holding in that
security may become illiquid.
Securities of many Health Science Companies are traded in the over-the-counter
market, on regional stock exchanges, and on foreign securities exchanges. Such
markets and exchanges may have low trading volume, and securities traded on such
markets and exchanges may experience abrupt and erratic price movements.
Determinations as to whether a "readily available secondary market" exists for a
particular security will be made by the Board or by the Investment Manager under
Board-approved guidelines. Since its inception, the Fund has consistently made
such investments.
JUNK BONDS AND UNRATED DEBT SECURITIES. The Fund may invest up to 10% of its
total assets in the aggregate, in non-convertible debt securities of Health
Science Companies and Related Companies. These securities and other investments
in such companies may be rated as low as C in the rating categories established
by Standard & Poor's and Moody's or may be unrated, if deemed of comparable
credit quality by the Investment Manager. These securities, which are commonly
referred to as "junk bonds," are regarded, on balance, as predominantly
speculative in terms of the capacity of the issuer to pay interest or repay
principal in accordance with the terms of the obligation and accordingly involve
more credit risk than securities rated in the higher rating categories. Such
debt securities are dependent upon favorable business, financial or economic
conditions, may be subordinated to senior debt and can be regarded as having
extremely poor prospects of ever retaining any real investment standing.
The market prices of such securities tend to reflect individual corporate
developments to a greater extent than do securities rated in the higher rating
categories, which react primarily to fluctuations in the general level of
interest rates. Junk bonds also tend to be more sensitive to economic conditions
than higher rated securities. Adverse publicity and investor perceptions,
whether or not based on fundamental analysis, regarding junk bonds may depress
the prices for such securities. These and other factors adversely affecting the
market prices of such securities will adversely affect the Fund's NAV. Although
some risk is inherent in all securities ownership, holders of debt securities
have a claim on the assets of the issuer prior to the holders of equity
securities. Therefore, an investment in debt securities generally entails less
risk than an investment in equity securities of the same issuer.
Junk bonds are frequently issued by corporations in the growth stage of their
development. They may also be issued in connection with a corporate
reorganization or a corporate takeover. Companies that issue such securities
often are highly leveraged and may not have available to them more traditional
methods of financing. Therefore, the risk associated with acquiring the
securities of such issuers generally is greater than is the case with higher
rated securities. For example, during an economic downturn such issuers may not
have sufficient revenues to meet their interest payment obligations. The
issuer's ability to service its debt obligations may also be adversely affected
by specific corporate developments, the issuer's inability to meet specific
projected business forecasts or the unavailability of additional financing. The
risk of loss from default by the issuer is significantly greater for the holders
of such securities because such securities are often unsecured and subordinated
to other creditors of the issuer.
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The Fund may have difficulty disposing of junk bonds and unrated debt securities
because they may not have an active secondary market. The market for junk bonds
has been subject to periods of illiquidity. The lack of an active secondary
market may have an adverse effect on market prices and the Fund's ability to
dispose of particular issues and may also make it more difficult for the Fund to
obtain accurate market quotations for purposes of valuing these securities.
NET ASSET VALUE DISCOUNT. Shares of closed-end funds, such as the Fund,
frequently trade at a discount from their NAV; that is, the market price per
share is less than the value per share of the net assets of the fund. This
characteristic is a risk separate and distinct from the risk that the Fund's NAV
will decrease as a result of its investment activities and may be greater for
investors expecting to sell their Shares in a relatively short period following
completion of this Offering. It should be noted, however, that shares of some
closed-end funds, including the Fund, have traded at premiums to NAV. The Fund
cannot predict whether the Shares will trade at, above or below NAV.
If, at any time, Shares are trading at a substantial discount from NAV, the Fund
may take action to reduce or eliminate the discount from NAV at which Shares are
trading. Such actions could include, among other things, purchasing Shares in
open market transactions or pursuant to a cash tender offer, or recommending to
Fund shareholders that the Fund convert to an open-end investment company.
Conversion to an open-end investment company would make the Shares redeemable
upon demand by shareholders at prices based upon the then current NAV. See
"Conversion to Open-End Status."
DIVIDENDS & OTHER DISTRIBUTIONS. Based on current market condition information
provided by the Investment Manager, the Board of Trustees believes that the
Offer will not result in a change in the Fund's current level of dividends per
Share for the foreseeable future. The Board of Trustees has agreed to maintain
an annual dividend of at least 10% until February 19, 2001 pursuant to its
Quarterly Distribution Policy. However, after that date, there can be no
assurance that the Fund will maintain its current level of dividends per Share,
and thereafter the Board of Trustees may, in its sole discretion, change the
Fund's current dividend policy or its current level of dividends per Share in
response to market or other conditions.
YEAR 2000. INVESCO has committed substantial resources and made significant
progress toward making sure its computer systems will continue to operate
smoothly through the year 2000, and expects that its business partners also will
be prepared for the year 2000. While INVESCO does not anticipate interruptions
in its business, investors should be aware of the possible risks. As is widely
known, there is a chance that some computer systems may not function after
December 31, 1999 because they fail to recognize dates in the year 2000 and
beyond. If a system at INVESCO or one of its business partners should fail, it
could adversely affect the Fund. In addition, the markets for, or values of,
securities in which the Fund invests could be affected by computer failures on
or after January 1, 2000. While INVESCO cannot make assurances that this will
not happen, it continues to thoroughly analyze the securities that the Fund
invests in, including the possible effects of the year 2000 computer problems on
a company or the market the security trades in.
WHEN-ISSUED AND FORWARD DELIVERY SECURITIES. Securities may be purchased on a
"when-issued" or on a "forward delivery" basis, which means that the obligations
will be delivered at a future date beyond customary settlement time. The
commitment to purchase a security for which payment will be made on a future
date may be deemed a separate security. Although the Fund is not limited in the
amount of securities for which it may have commitments to purchase on such
basis, it is expected that in normal circumstances the Fund will not commit more
than 30% of its assets to such purchases. The Fund does not pay for the
securities until received or start earning interest on them until it is notified
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of the settlement date. In order to invest its assets immediately, while
awaiting delivery of securities purchased on such basis, the Fund will normally
invest in short-term securities that offer same-day settlement and earnings but
that may bear interest at a lower rate than longer-term securities.
These transactions are subject to market fluctuation; the value of the
securities at delivery may be more or less than their purchase price, and yields
generally available on comparable securities when delivery occurs may be higher
than yields on the securities obtained pursuant to such transactions. Because
the Fund relies on the buyer or seller, as the case may be, to consummate the
transaction, failure by the other party to complete the transaction may result
in the Fund's missing the opportunity of obtaining a price or yield considered
to be advantageous. The Fund will make commitments to purchase securities on
such basis only with the intention of actually acquiring these securities, but
it may sell such securities prior to the settlement date if such sale is
considered to be advisable. When the Fund engages in "when issued" and "forward
delivery" transactions, it will do so for the purpose of acquiring securities
for its portfolio consistent with its investment objective and policies and not
for the purpose of investment leverage.
The SEC generally requires that when investment companies, such as the Fund,
effect transactions of the foregoing nature, they must either segregate cash or
liquid portfolio securities in the amount of their obligations under the
foregoing transactions or cover such obligations by maintaining positions in
portfolio securities, futures contracts or options that would serve to satisfy
or offset the risk of such obligations. When effecting transactions of the
foregoing nature, the Fund will comply with such segregation or asset coverage
requirements. There is no limitation as to the percentage of the Fund's assets
that may be invested in such transactions.
MANAGEMENT OF THE FUND
INVESTMENT MANAGER
INVESCO has served as the Fund's investment adviser since February 4, 1998 under
an investment advisory agreement ("Investment Management Agreement"). Prior to
that time, INVESCO Trust Company ("ITC"), then a wholly owned subsidiary of the
Investment Manager, served as the Fund's investment adviser. The principal
address of the Investment Manager is 7800 E. Union Avenue, Suite 800, Denver,
Colorado 80237. INVESCO is an indirect wholly owned subsidiary of AMVESCAP PLC
("AMVESCAP"), a publicly traded holding company that, through its subsidiaries,
engages in the business of investment management on an international basis. As
part of AMVESCAP, INVESCO draws on the organization's global presence and
expertise to deliver portfolio management and investment services to its
clients. AMVESCAP maintains offices around the world, including the United
States, London, Eastern Europe, Latin America, Hong Kong and Tokyo. AMVESCAP
offers a broad array of products and services to institutions and individuals
through all major distribution channels in over 30 countries. Recent mergers
with major firms such as AIM Management Group Inc. and GT Global Inc. and
Chancellor LGT Asset Management, Inc. (formerly the distributor of the GT Global
Funds and the asset management division of Liechtenstein Global Trust, AG,
respectively) have positioned AMVESCAP as one of the world's largest independent
fund management companies, adding to its already-significant presence in Europe,
Asia and North America. As of March 31, 1999, aggregate assets under the
management of AMVESCAP and its affiliates worldwide exceeded $___ billion. As of
that same date, INVESCO managed or administered assets of more than $21.2
billion, including 15 registered open-end investment companies with 53 separate
portfolios. INVESCO has built a global reputation by providing professional
investment management to some of the world's largest institutions and more than
a million individuals. INVESCO provides investors with the perspective gained
from more than 65 years of helping clients pursue their financial goals.
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The Investment Manager determines the composition of the Fund's portfolio,
places all orders for the purchase and sale of securities and for other
transactions, and oversees the settlement of the Fund's securities and other
portfolio transactions. The Investment Manager also provides administrative
services to the Fund. These include, among other things, providing officers and
office space, preparing or assisting in preparing materials for shareholders and
regulatory bodies and overseeing the provision to the Fund of custodial and
accounting services.
John Schroer is the portfolio manager for the Fund. Mr. Schroer joined the
Investment Manager in 1992 and became a Senior Vice President of INVESCO 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 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 the Trust Company of the West in Los Angeles as
Assistant Vice President with analytical responsibilities in the health care
industry.
INVESTMENT MANAGEMENT AGREEMENT
Under the management agreement, the Investment Manager is responsible to provide
investment advice to the Fund and, in general, to conduct the management and
investment program of the Fund under the supervision and control of the Board of
Trustees. In addition, the Investment Manager is required to furnish office
facilities and equipment to the Fund and to supply certain other services,
including all facilities and personnel necessary to provide the services
required to be rendered by the Investment Manager.
On February 3, 1998, the Board of Trustees and the Investment Manager agreed to
add a breakpoint to the investment management fee, such that the Fund pays the
Investment Manager a fee based on an annual rate of 1.00% on ending daily net
assets up to and including $500 million, and 0.90% on ending daily net assets in
excess of $500 million. For the fiscal year ended October 31, 1998, the Fund
paid INVESCO investment management fees of $5,556,225. Additionally, in
accordance with an Administrative Agreement, the Fund pays the Investment
Manager a monthly fee based on the annual rate of 0.10% on ending daily net
assets for administrative services. For the fiscal year ended October 31, 1998,
the Fund paid INVESCO administrative fees of $ __________. The fee for
investment management and administrative services are, in the aggregate, higher
than those paid by most U.S. investment companies, including open-end investment
companies, although they are generally comparable to those paid by other
specialized equity, closed-end funds.
The Board of Trustees noted that the Investment Manager will benefit from the
Offer because its fees for investment management services are based on the
average daily net assets of the Fund. It is not possible to state precisely the
amount of additional compensation the Investment Manager will receive as a
result of the Offer because it is not known how many Rights will be exercised
and because the proceeds of the Offer will be invested in additional portfolio
securities that may fluctuate in value. However, in the event that all the
Rights are exercised in full, including the additional [1/5TH TOTAL] Shares by
which the Board, in its discretion, may increase the Offer, based on the
Estimated Subscription Price of $______, the Investment Manager would receive
additional fees for investment management services of approximately $______ per
annum as a result of the increase in assets under management.
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The Chairman of the Board of Trustees, Charles W. Brady, as an "interested
person" of the Fund and of other funds in the INVESCO complex, receives
compensation as an officer of companies affiliated with INVESCO, but does not
receive any trustee fees or other compensation from the Fund or from other funds
in the INVESCO complex for his service as a Trustee or Director.
Under the management agreement, the Fund pays certain of its other costs not
paid by the Investment Manager, including (i) interest and taxes, including
issue and transfer taxes, incurred by or levied on the Fund; (ii) insurance
premiums for fidelity and other coverage requisite to its operations; (iii)
compensation and expenses of its Trustees other than those associated or
affiliated with the Investment Manager; (iv) legal and audit expenses; (v)
custodian, dividend paying agent, registrar and transfer agent fees and expenses
(including charges and expenses of the Fund's Reinvestment Plan) and brokerage
commissions, if any; (vi) certain fees and expenses, incident to the
registration, under Federal law, of the Shares for public sale; (vii) certain
expenses incidental to holding meetings of the Fund's shareholders; (viii)
payments under the Fund's administrative services agreement with INVESCO; (ix)
fees and expenses of listing and maintaining the listing of the Shares on any
national securities exchange; (x) the cost of certificates representing the
Shares; and (xi) such non-recurring expenses as may arise, including any
litigation affecting the Fund and the legal obligation that the Fund may have to
indemnify its officers and Trustees with respect thereto.
The management agreement provides that the Investment Manager shall not be
liable for any error of judgment or mistake of law, or for any loss suffered by
the Fund in connection with the matters to which the management agreement
relates, except a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the Investment Manager in the performance of its
obligations and duties or by reason of its reckless disregard of its obligations
and duties under the management agreement.
The management agreement may be terminated without penalty upon sixty (60) days'
written notice by either party, or by a vote of the majority of the Shares, and
automatically terminates in the event of its assignment.
PORTFOLIO TRADING
The Investment Manager places orders for the purchase and sale of securities
with brokers and dealers based upon its evaluation of their financial
responsibility subject to their ability to effect transactions at favorable
prices. The Investment Manager evaluates the overall reasonableness of brokerage
commissions and markups paid by reviewing the quality of executions obtained on
the Fund's portfolio transactions, viewed in terms of the size of transactions,
prevailing market conditions in the security purchased or sold, and general
economic and market conditions. In seeking to ensure that the commissions and
markups charged to the Fund are consistent with prevailing and reasonable
brokerage commissions or markups, the Investment Manager also endeavors to
monitor brokerage industry practices with regard to the commissions and markups
charged by broker/dealers on transactions effected for other comparable
institutional investors. While the Investment Manager seeks reasonably
competitive rates, the Fund does not necessarily pay the lowest commission,
spread or markup available.
Consistent with the standard of seeking to obtain favorable execution on
portfolio transactions, the Investment Manager may select brokers that provide
research services to effect such transactions. Research services consist of
statistical and analytical reports relating to issuers, industries, securities
and economic factors and trends, which may be of assistance or value to the
Investment Manager in making informed investment decisions. Research services
prepared and furnished by brokers through which the Fund effects securities
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transactions may be used by the Investment Manager in servicing all of its
accounts and not all such services may be used by the Investment Manager in
connection with the Fund.
In recognition of the value of the above-described brokerage and research
services provided by certain brokers, the Investment Manager, consistent with
the standard of seeking to obtain the best execution on portfolio transactions,
may place orders with such brokers for the execution of Fund transactions on
which the commissions are in excess of those which other brokers might have
charged for effecting the same transactions.
One or more of the other accounts which the Investment Manager manages may own,
from time to time, the same investments as the Fund. Investment decisions for
the Fund are made independently from those of such other accounts; however, from
time to time, the same investment decision may be made for more than one company
or account, including the Fund. When two or more companies or accounts,
including the Fund, seek to purchase or sell the same securities, the securities
actually purchased or sold will be allocated among the companies and accounts on
a good faith equitable basis by the Investment Manager in its discretion in
accordance with the accounts' various investment objectives. In some cases, this
system may adversely affect the price or size of the position obtainable for the
Fund. In other cases, however, the ability of the Fund to participate in volume
transactions may produce better execution for the Fund. It is the opinion of the
Board that this advantage, when combined with the other benefits available due
to the Investment Manager's organization, outweighs any disadvantages that may
be said to exist from exposure to simultaneous transactions.
Transactions in foreign securities markets generally involve the payment of
fixed brokerage commissions, which are usually higher than commission rates
available in the United States. In such transactions, the Fund will seek to
obtain prompt execution of orders at the most favorable net price.
NET ASSET VALUE
The Fund calculates the NAV of its Shares daily and makes that information
available for publication. Currently, the WALL STREET JOURNAL and BARRON'S
publish NAVs for closed-end funds each week. NAV per Share will be determined
each day on which the NYSE is open, as of the close of trading on the NYSE that
day, and is calculated by dividing the aggregate value of all securities held by
the Fund and its other assets (including dividends and interest accrued but not
collected) less its liabilities (including accrued expenses) by the number of
outstanding Shares. All assets and liabilities initially expressed in foreign
currencies will be converted into U.S. dollars at the mean between the bid and
offer prices of such currencies against U.S. dollars last quoted by a major bank
selected by the Fund's custodian. Securities traded on securities exchanges are
valued at their last sale prices as of 4:00 P.M., Eastern time, on the exchanges
where such securities are primarily traded. Securities traded in the
over-the-counter market and listed securities for which no sales are reported on
a particular day are valued at their bid prices (or for debt securities yield
equivalents thereof) obtained from one or more dealers making markets for such
securities. If market quotations are not readily available, a security will be
valued at fair value as determined in good faith by, or under the supervision,
of the Board of Trustees. Debt securities will be valued in accordance with the
procedures above, that may include the use of valuations furnished by a pricing
service that employs a matrix to determine valuations for normal institutional
size trading units. Prior to utilizing a pricing service, the Board of Trustees
will review the methods used by such service to assure itself that securities
will be valued at their fair values. The Board of Trustees also will
periodically monitor the methods used by any such pricing service. Debt
securities with remaining maturities of 60 days or less will, absent unusual
circumstances, be valued at amortized cost, so long as such valuation is
determined by the Board of Trustees to represent fair value. Futures contracts
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and options thereon, which are traded on commodities exchanges, are valued at
their settlement value as of the close of such commodities exchanges.
Trading in Foreign Securities generally is completed, and thus the values of
such securities are determined, prior to the close of the NYSE. Foreign currency
exchange rates are also generally determined prior to the primary close of the
NYSE. On occasion, the values of such securities and such exchange rates may be
affected by events occurring between the time as of which determinations of such
values or such exchange rates are made and the primary close of the NYSE. When
such events materially affect the values of securities held by the Fund or its
liabilities, such securities and liabilities will be valued at fair value as
determined in good faith by, or under the supervision of, the Board of Trustees.
DIVIDENDS AND OTHER DISTRIBUTIONS; DIVIDEND REINVESTMENT
AND CASH PURCHASE PLAN
Shareholders who have Shares registered directly in their own names
automatically participate in the Fund's Reinvestment Plan, unless and until an
election is made to withdraw from the Reinvestment Plan as herein provided.
EquiServe, Inc. (the "Agent") acts as agent under the Reinvestment Plan on
behalf of participating shareholders. Shareholders who do not wish to have
distributions automatically reinvested should so notify EquiServe, Inc. [c/o 130
Royall Street Mail Stop 45-02-62 Canton, MA 02021. Under the Reinvestment Plan,
all of the Fund's dividends and other distributions to shareholders are
reinvested in full and fractional Shares as described below. A shareholder who
owns Shares registered in his/her broker's or nominee name, and whose broker
does not provide facilities for a dividend reinvestment program, may be required
to have his/her Shares registered in his/her own name in order to participate in
the Reinvestment Plan. Shareholders wishing to participate in the Reinvestment
Plan whose Shares are held in the name of a broker or nominee should consult
their brokers as to how to accomplish dividend reinvestment.
The Board has implemented a Quarterly Distribution Policy, which entails
quarterly payments of dividends in an amount equal to 2.5% of the Fund's NAV.
The first dividend to be paid on Shares acquired on exercise of the Rights will
be the first quarterly dividend, the record date for which occurs after the
issuance of the Shares.
Whenever the Fund declares an income dividend or a capital gain or other
distribution (collectively, "Dividends") in cash, non-participants in the
Reinvestment Plan will receive cash and participants in the Reinvestment Plan
will receive the equivalent in Shares. Whenever the Fund declares Dividends in
additional unissued but authorized Shares ("Newly Issued Shares"), all
shareholders (including non-participants in the Reinvestment Plan) will receive
Newly Issued Shares and participants in the Reinvestment Plan) will receive
Shares. In either instance, the Shares received by Reinvestment 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 NYSE or elsewhere. Open-Market Purchases
will be made only if the Fund declares a Dividend payable only in cash.
If, on the payment date for a Dividend, the NAV 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
Newly Issued Shares from the Fund on behalf of the Reinvestment Plan participant
at a price per Share equal to the greater of the NAV per Share or 95% of the
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then current market price per Share. This discount from the current market price
reflects savings in underwriting and other costs that the Fund would otherwise
incur to raise additional capital.
If, on the payment date for a Dividend, the NAV 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 participants 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 Dividend, the shareholder
will automatically receive such Dividends in additional Shares.
Participants in the Reinvestment Plan may withdraw from the Reinvestment 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 Reinvestment Plan,
or upon termination of the Reinvestment Plan as provided below, certificates for
whole Shares credited to his/her account under the Reinvestment Plan will, upon
request, be issued. Whether or not a participant requests that certificates for
whole Shares be issued, a cash payment will be made for any fraction of a Share
credited to such account.
The Agent will maintain all shareholder accounts in the Reinvestment 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 Reinvestment 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 Reinvestment 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, that hold
Shares for others who are the beneficial owners participating in the
Reinvestment Plan, the Agent will administer the Reinvestment Plan on the basis
of the number of Shares certified from time to time by the record 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 Reinvestment
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 Reinvestment 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
Reinvestment 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 that may be payable on such Dividends. In the case of non-U.S.
participants whose Dividends are subject to U.S. income tax withholding and in
the case of any participants subject to 31% federal backup withholding, the
Agent will reinvest Dividends after deduction of the amount required to be
withheld.
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The Fund reserves the right to amend or terminate the Reinvestment Plan by
written notice to participants. All correspondence concerning the Reinvestment
Plan should be directed to the Agent at the address referred to in the first
paragraph of this section.
FEDERAL TAXATION OF THE FUND AND ITS SHAREHOLDERS
The following information is a brief, general summary for U.S. taxpayers. Please
see the SAI for additional information. Shareholders should rely on their own
tax advisors for advice about the particular federal, state and local tax
consequences of investing in the Fund.
The Fund intends to operate so that it will not have to pay federal income or
excise tax; failure to do so would adversely affect its investment performance.
The Fund will distribute all or substantially all of its net investment income
and capital gains to its shareholders every year. Shareholders will be taxed on
distributions they receive, regardless of whether they are paid in cash or
reinvested in Shares. If the Fund declares a distribution in October, November
or December of one year to shareholders of record in that year, but pays it in
January of the following year, shareholders will be taxed on the distribution as
if it was received on December 31 of the year in which it was declared.
The Fund will send shareholders a tax report each year, before February 1st. The
report will designate the amount of dividends that must be treated as ordinary
income and the amount, if any, that must be treated as capital gain
distributions. If the Fund designates a distribution as a capital gain
distribution, shareholders will be liable for tax thereon at the long-term
capital gains tax rate, no matter how long they held their Shares.
If a shareholder holds Shares in a Retirement Plan, such as an IRA, the
shareholder generally will not have to pay tax on Fund distributions until they
are distributed to the shareholder from the Retirement Plan. Retirement Plans
are subject to complex tax rules, and shareholders should consult their tax
advisors about investing in Shares through a Retirement Plan.
A shareholder generally will have a capital gain or loss on a sale of Shares.
The amount of the gain or loss and the rate of tax will depend primarily on how
much the shareholder paid for the Shares, how much the shareholder sold them for
and how long the Shares were held.
Like all taxpayers, the Fund may be required to withhold federal income tax at
the rate of 31% of all distributions payable to an individual or other
non-corporate shareholder who fails to provide the Fund with a correct taxpayer
identification number or fails to make required certifications, or if the
shareholder has been notified by the IRS that he or she is subject to backup
withholding. Backup withholding is not an additional tax. Any amounts withheld
may be credited against a shareholder's federal income tax liability.
DESCRIPTION OF SHARES OF BENEFICIAL INTEREST
GENERAL
The Board of Trustees of the Fund has authority to issue an unlimited number of
Shares, $0.01 par value. The Shares outstanding are, and those offered hereby
when issued will be, fully paid and nonassessable by the Fund. The Shares have
no preemptive, conversion, exchange or redemption rights. Each Share has one
vote, with fractional Shares voting proportionately. Shares are freely
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transferable, and holders thereof are entitled to dividends as declared by the
Board of Trustees. If the Fund were liquidated, shareholders would receive their
PRO-RATA portion of its net assets. Under the rules of the NYSE applicable to
listed companies, the Fund will be required to hold an annual meeting of
shareholders in each year. If the Fund were converted to an open-end investment
company or, if for any other reason the Shares are no longer listed on the NYSE
(or any other national securities exchange the rules of which require annual
meetings of shareholders), the Fund does not intend to hold annual meetings of
shareholders.
Under Massachusetts law, shareholders could, under certain circumstances, be
held personally liable for the obligations of the Fund. However, the Declaration
of Trust disclaims shareholder liability for acts or obligations of the Fund and
requires that notice of such disclaimer be given in each agreement obligation,
or instrument entered into or executed by the Fund or the Board of Trustees. The
Declaration of Trust provides for indemnification out of Fund property for all
loss and expense of any shareholder held personally liable for the obligations
of the Fund. Thus, the risk of a shareholder incurring financial loss on account
of shareholder liability is limited to circumstances in which the Fund would be
unable to meet its obligations. The likelihood of such circumstances is remote.
The Fund has no present intention of offering additional Shares, other than
under this Offering and under the Reinvestment Plan. See "Dividends and Other
Distributions; Dividend Reinvestment and Cash Purchase Plan." Other offerings of
Shares, if made, will require approval of the Board of Trustees. Any additional
offering will be subject to the requirements of the 1940 Act that Shares may not
be sold at a price below the then current NAV, exclusive of underwriting
discounts and commissions, except in connection with an offering to existing
shareholders or with the consent of the holders of a majority of the Fund's
outstanding Shares. In addition, the Fund expects that it would commence a
continuous offering of its Shares in the event it converted to an open-end
investment company. See "Conversion to Open-End Status."
The Declaration of Trust further provides that obligations of the Fund are not
binding upon the Trustees individually but only upon the property of the Fund
and that the Board of Trustees will not be liable for errors of judgment or
mistakes of fact or law, but nothing in the Declaration of Trust protects a
Trustee against any liability to which the Trustee would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of office.
CERTAIN ANTI-TAKEOVER PROVISIONS OF THE DECLARATION OF TRUST AND BY-LAWS
The Fund's Declaration of Trust and By-laws (together, the "Charter Documents")
could have the effect of limiting: (i) the ability of other entities or persons
to acquire control of the Fund; (ii) the Fund's freedom to engage in certain
transactions; or (iii) the ability of the Fund's Board of Trustees or
shareholders to amend the Charter Documents or effect changes in the Fund's
management. Those provisions of the Charter Documents may be regarded as
"anti-takeover" provisions. Commencing with the first meeting of shareholders,
the Board of Trustees was divided into three classes, each having a term of
three years. At the annual meeting of shareholders in each year thereafter, the
term of one class of Trustees expires. Accordingly, only those Trustees in one
class may be changed in any one year, and up to three years may be required to
replace a majority of the Board. Such system of electing Trustees may have the
effect of maintaining the continuity of management. Under the Fund's Declaration
of Trust, the affirmative vote of the holders of not less than two-thirds (66
2/3%) of the Fund's outstanding Shares entitled to vote is required to authorize
the consolidation of the Fund with another entity, a merger of the Fund with or
into another entity (except for certain mergers in which the Fund is the
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successor), a sale or transfer of all or substantially all of the Fund's assets,
the termination of the Fund, the conversion of the Fund to an open-end
investment company, and any amendment to the Fund's Declaration of Trust that
would affect any of the other provisions requiring a two-thirds vote. However, a
"Majority Shareholder Vote," as defined in the Charter Documents, shall be
sufficient to approve any of the foregoing transactions that have been
recommended by two-thirds of the Trustees. Notwithstanding the foregoing, if a
corporation, person or entity is directly, or indirectly through its affiliates,
the beneficial owner of more than 5% of the outstanding Shares of the Fund,
("Principal Shareholder") the affirmative vote of 80% (which is higher than that
required under the 1940 Act) of the outstanding Shares is required generally to
authorize any of the following transactions or to amend the provisions of the
Declaration of Trust relating to transactions involving:
(i) a merger or consolidation of the Fund with or into
any such Principal Shareholder;
(ii) the issuance of any securities of the Fund to any
such Principal Shareholder for cash;
(iii) the sale, lease or exchange of all or any substantial
part of the assets of the Fund to any such Principal
Shareholder (except assets having an aggregate market value
of less than $1,000,000);
(iv) the sale, lease or exchange to the Fund, in exchange
for securities of the Fund, of any assets of any such
Principal Shareholder (except assets having an aggregate
fair market value of less than $1,000,000);
(v) the liquidation or termination of the Fund;
(vi) a change in the nature of the business of the Fund so
that it would cease to be an investment company registered
under 1940 Act; or
(vii) the conversion of the Fund to an "open-end company,"
or any amendment to the Declaration of Trust of the Fund
that makes the Shares a "redeemable security," as such
terms are defined in the 1940 Act.
If two-thirds of the Board has approved a memorandum of understanding with such
beneficial owner, however, a majority shareholder vote, as defined in the
Charter Documents, will be sufficient to approve the foregoing transactions.
Reference is made to the Charter Documents of the Fund, on file with the SEC,
for the full text of these provisions.
The overall effect of the provisions of the Charter Documents described above is
to render more difficult the accomplishment of a merger or the assumption of
control by a shareholder or another entity or person and to make the removal of
management more difficult than if such provisions were not in place. These
provisions may be beneficial to management in a hostile tender offer for the
Shares and may have an adverse impact on shareholders who may want to
participate in such a tender offer. In particular, they could have the effect of
depriving shareholders of the opportunity to sell their Shares at a premium over
prevailing market prices by discouraging a third party from seeking to obtain
control of the Fund in a tender offer or similar transaction. Moreover, these
provisions would apply to actions proposed by anyone, including management, and
would make changes in the Fund's structure accomplished through a transaction
covered by the provisions more difficult to achieve. The provisions may give the
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<PAGE>
holders of a minority of the Shares entitled to vote a veto power over a merger
that management and a majority of the Fund's shareholders may believe is
desirable and beneficial.
In the opinion of the Board, however, the anti-takeover provisions of the
Charter Documents provide the advantage of potentially requiring persons seeking
control of the Fund to negotiate with its management regarding price to be paid
and facilitating the continuity of the Fund's management, investment objective
and policies. The Board has considered the foregoing anti-takeover provisions
and concluded that they are in the best interests of the Fund and its
shareholders. The above description is subject to the provisions contained in
the Charter Documents.
REPURCHASE OF SHARES
Shares of closed-end funds frequently trade at a discount from NAV but in some
cases trade at a premium. In recognition of the possibility that the Shares
might similarly trade at a discount, the Fund's Board of Trustees has determined
that it would be in the interest of shareholders for the Fund to take action to
attempt to reduce or eliminate a market value discount from NAV. To that end,
the Board of Trustees recognizes that the Fund might from time to time take
action either to repurchase its Shares in the open market or to tender for its
own Shares at NAV. The Board of Trustees, in consultation with the Investment
Manager, reviews on a quarterly basis the possibility of open market repurchases
and/or tender offers for Shares. There are no assurances that the Board of
Trustees will, in fact, decide to undertake either of these actions or, if
undertaken, that such actions will result in the Shares trading at a price which
is equal to or approximates their NAV. In addition, the Board of Trustees will
not necessarily announce when it has given consideration to these matters. See
"Repurchase of Shares" in the SAI for further information.
CONVERSION TO OPEN-END STATUS
The Fund's Declaration of Trust provides that the Fund may be converted at any
time from a "closed-end company" to an "open-end company" upon the approval of
the holders of not less than two-thirds (66 2/3%) of the Shares outstanding and
entitled to vote. If a corporation, person or entity is directly, or indirectly
through its affiliates, the beneficial owner of more than 5% of the outstanding
Shares, the affirmative vote of 80% (which is higher than that required under
the 1940 Act) of the outstanding Shares is required to authorize such a
conversion. Shareholders of an open-end investment company may require the
company to redeem their shares at any time (except in certain circumstances as
authorized by or under the 1940 Act) at their NAV, less redemption charge, if
any, as might be in effect at the time of redemption. The Declaration of Trust
of the Fund provides that from time to time the Board will consider recommending
to the shareholders a proposal to convert the Fund from a closed-end to an
open-end investment company. The Board may, however, determine that the Fund
should not take any action to convert the Fund to an open-end investment company
or that, due to the characteristics of the Fund's portfolio securities, it may
be inappropriate to convert the Fund to an open-end investment company.
CUSTODIAN, TRANSFER AGENT, DIVIDEND
DISBURSING AGENT, AND REGISTRAR
The Fund's securities and cash are held under a custodian agreement by State
Street Bank and Trust Company ("State Street"), whose principal place of
business is 225 Franklin Street, Boston, Massachusetts, 02110. With respect to
the Fund's investments in Foreign Securities, the custodian employs foreign
subcustodians approved by the Board of Trustees in accordance with applicable
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regulations after consideration of, among other things, the qualifications of
proposed foreign subcustodians and the legal constraints under which foreign
subcustodians operate. State Street also serves as transfer agent, registrar and
dividend disbursing agent for the Shares. Pursuant to a services agreement with
EquiServe, Inc., an affiliate of State Street, serves as Shareholder Service
Agent for the Fund and, as such, performs all of State Street's duties as
transfer agent and dividend-paying agent.
LEGAL MATTERS
Kirkpatrick & Lockhart LLP, Washington, D.C., serves as counsel to the Fund and
to the Independent Trustees and as special counsel to the Fund with respect to
the Offer and will pass on the legality of the Shares offered hereby. Certain
legal matters will be passed on for the Dealer Manager by Skadden, Arps, Slate,
Meagher & Flom (Illinois) and its affiliated entities.
REPORTS TO SHAREHOLDERS
The Fund will send unaudited semi-annual and audited annual reports to
shareholders, including a list of the portfolio investments held by the Fund.
INDEPENDENT ACCOUNTANTS
The data in the "Financial Highlights" section of this Prospectus are based upon
financial statements that have been audited by PricewaterhouseCoopers LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included in reliance upon the authority of said firm as experts
in auditing and accounting.
FURTHER INFORMATION
This Prospectus does not contain all of the information set forth in the
Registration Statement that the Fund has filed with the SEC. The complete
Registration Statement may be obtained from the SEC upon payment of the fee
prescribed by its Rules and Regulations.
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<PAGE>
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
ITEM No. CAPTION LOCATION IN SAI
- -------- ------- ---------------
14. General Information
15. Additional Information About Its Investment
Objective and Policies
16. Investment Restrictions
17. Management
18. Ownership of Fund Shares
19. Portfolio Transactions
20. Repurchase of Shares and Tender Offers
21. Taxation
22. Financial Statements
52
<PAGE>
- ---------------------------------------- --------------------------------
- ---------------------------------------- --------------------------------
No one has been authorized to give any
information or to make any
representations other than those
contained in this Prospectus in
connection with this Offer. If other
information is given or other ________ SHARES OF BENEFICIAL
representations are made, such INTEREST
information or representations must not
be relied upon since neither was INVESCO GLOBAL
authorized by the Fund, the Investment HEALTH
Manager or the Dealer Manager. This SCIENCES FUND
Prospectus does not constitute an offer ISSUABLE UPON EXERCISE OF RIGHTS
to sell or the solicitation of any offer TO SUBSCRIBE FOR SUCH
to buy any security other than the SHARES OF BENEFICIAL INTEREST
Fund's Shares, as described in this
Prospectus. This Prospectus also does
not constitute an offer to sell or a __________________________
solicitation of any offer to buy the
Fund's Shares, as described in this PROSPECTUS
Prospectus, by anyone in any state in __________________________
which such offer or solicitation is not
authorized, or in which the person
making such offer or solicitation is not
qualified to do so, or to any such DEALER MANAGER
person to whom it is illegal to make
such offer or solicitation. The PAINEWEBBER INCORPORATED
information in this Prospectus may no
longer be correct after the date on the
Prospectus. However, if any material [EFFECTIVE DATE], 1999
change occurs during the period in which
this Prospectus is legally required to
be delivered, the Prospectus will be
amended or supplemented accordingly.
----------------------
TABLE OF CONTENTS
PAGE
Prospectus Summary ...................
Fee Table ............................
Financial Highlights .................
The Fund .............................
Use of Proceeds ......................
Investment Objective and Policies
Investment Restrictions ..............
Risk Factors and Special
Considerations .......................
Management of the Fund ...............
Portfolio Trading ....................
Net Asset Value ......................
Dividends and Other Distributions:
Dividend Reinvestment and Cash
Purchase Plan ......................
Federal Taxation Of The Fund And Its
Shareholders........................
Description of Shares of Beneficial
Interest............................
Custodian, Transfer Agent, Dividend
Disbursing Agent, and Registrar
Legal Matters ........................
Independent Accountants ..............
- ---------------------------------------- --------------------------------
- ---------------------------------------- --------------------------------
53
<PAGE>
SUBJECT TO COMPLETION
[EFFECTIVE DATE], 1999.
[INVESCO FUND LOGO]
INVESCO GLOBAL HEALTH SCIENCES FUND
STATEMENT OF ADDITIONAL INFORMATION
This SAI is not a prospectus but should be read in conjunction with the Fund's
Prospectus dated [EFFECTIVE DATE], 1999. This SAI does not include all
information that a prospective investor should consider before purchasing
Shares, and investors should obtain and read the Prospectus prior to purchasing
Shares. A copy of the Prospectus may be obtained without charge, by calling the
Fund at 1-800-528-8765 or by contacting the Fund at 7800 E. Union Avenue, Suite
800, Denver, Colorado 80237. This SAI incorporates by reference the entire
Prospectus.
The Prospectus and this SAI omit certain of the information contained in the
registration statement filed by the Fund with the SEC, Washington, D.C. That
registration statement may be obtained from the SEC upon payment of the fee
prescribed or inspected at the SEC's office at no charge. Capitalized terms not
defined herein have the meanings attributed to them in the Prospectus.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SEC.
THESE SECURITIES MAY NOT BE SOLD NOR MAY ANY OFFERS TO BUY BE ACCEPTED PRIOR TO
THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS STATEMENT OF
ADDITIONAL INFORMATION DOES NOT CONSTITUTE A PROSPECTUS.
<PAGE>
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
ITEM No. CAPTION LOCATION IN SAI
- -------- ------- ---------------
14. General Information
15. Additional Information About Its Investment
Objective and Policies
16. Investment Restrictions
17. Management
18. Ownership of Fund Shares
19. Portfolio Transactions
20. Repurchase of Shares and Tender Offers
21. Taxation
22. Financial Statements
2
<PAGE>
GENERAL INFORMATION
INVESCO Global Health Sciences Fund is a diversified, closed-end management
investment company under the Investment Company Act of 1940, as amended. The
Fund's investment manager is INVESCO Funds Group, Inc.
ADDITIONAL INFORMATION ABOUT ITS INVESTMENT
OBJECTIVE AND POLICIES
The Fund's investment objective is to seek capital appreciation by investing
substantially all of its assets in equity and related securities of U.S. and
foreign Health Science Companies. The Fund is aggressively managed for growth.
The Fund seeks to achieve its objective by investing its assets in a broad range
of health care related equity securities, such as market-leading pharmaceutical
companies, medical devices manufacturers and suppliers, and various private
placement investments.
Some of the different types of securities in which the Fund may invest, subject
to its investment objective, policies, and restrictions, are described in the
Prospectus under "Investment Objective and Policies" and "Special Investment
Practices." Additional information concerning certain of the Fund's investments
and investment techniques is set forth below.
HEDGING -FUTURES AND OPTIONS TRANSACTIONS
GENERAL. The Fund may engage in futures and options transactions in accordance
with its investment objective and policies. The Fund intends to engage in such
transactions if it appears advantageous to the Investment Manager to do so in
order to pursue its investment objective, to hedge against the effects of market
conditions and to stabilize the value of its assets. The use of futures and
options, possible benefits and attendant risks are discussed below, along with
information concerning certain other investment policies and techniques.
OPTIONS ON SECURITIES. The Fund is authorized to write covered call options and
secured put options and to purchase put and call options on the securities in
which it may invest that are listed on domestic exchanges or on the quotation
system operated by the National Association of Securities Dealers, Inc. ("listed
options"), or that are privately negotiated in over-the-counter transactions
("OTC options"). OTC options, other than those discussed in the following
sentence, are deemed to be illiquid securities and are, therefore, subject to
the Fund's limitation that a maximum of 25% of its total assets may be invested
in illiquid securities. The Fund may engage in OTC options transactions on U.S.
Government Securities with U.S. Government Securities dealers recognized by the
Federal Reserve Bank of New York subject to a forward price at which the Fund
has the absolute right to repurchase the OTC option which it has sold, in which
case the value of such OTC option purchased will not be considered illiquid. In
OTC options transactions with other dealers or without such pre-negotiated
forward repurchase prices, OTC options purchased and the Fund assets used to
"cover" OTC options sold by the Fund will be considered "illiquid securities"
and will be subject to the Fund's limitation that a maximum of 25% of its total
assets may be invested in illiquid securities. The "formula" on which the
forward price will be based may vary among contracts with different primary
dealers, although generally it will be based on a multiple of the premium
received by the Fund for writing the option plus the amount, if any, of the
option's intrinsic value, I.E., current market value of the underlying
securities minus the option's strike price. Listed options are issued by a
clearing corporation, the Options Clearing Corporation ("OCC").
3
<PAGE>
By purchasing a listed call option on a security, the Fund will obtain the right
to buy the securities underlying the option from the OCC at a specified exercise
price prior to or at the expiration of the option. By selling (writing) such an
option, the Fund will obligate itself to sell the securities underlying the
option to the OCC at the specified exercise price prior to or at the expiration
if it is assigned an exercise notice. A listed put option on a security
purchased by the Fund gives the Fund the right to sell the securities underlying
the option to the OCC at the exercise price prior to or at the expiration. By
selling (writing) such an option, the Fund obligates itself to buy the
securities underlying the option from the OCC at the exercise price prior to or
at the expiration if it is assigned an exercise notice.
OTC options operate in a similar manner but are purchased from or sold (written)
to dealers or financial institutions which enter into direct agreements with the
Fund. While listed options have "standardized" exercise prices, expiration dates
and other features, the features of OTC options can vary as agreed upon by the
Fund and by the other party to the option and there is no intermediation of the
OCC.
The Fund may purchase call options to protect against increases in the costs of
securities proposed to be acquired or to terminate ("close out") existing option
positions. Put options may be purchased to seek to protect against declines in
the value of securities which are held (or which the Fund has the right to
acquire) or to close out existing option positions. When put and call options
are sold (written) by the Fund, the Fund receives premiums as the writer of the
options, which provide a partial hedge against adverse movements in the prices
of the underlying securities. The income received from premiums will fluctuate
with varying economic market conditions. Calls may also be written to close out
existing option positions. Put options may also be sold when the Investment
Manager wishes to purchase a security at a price lower than its current market
price. Call options written by the Fund must be "covered." A call option is
covered if the Fund owns or has the right to acquire the securities underlying
the option. A call option is also covered if the Fund holds a call on the same
security as the underlying security of the written option, where the exercise
price of the call used for coverage is equal to or less than the exercise price
of the call written or, if the exercise price of the call used for coverage is
greater than the exercise price of the call written, by maintaining the mark to
market difference in cash, U.S. Government Securities or other liquid, high
quality short-term debt obligations in a segregated account with the Fund's
custodian.
In the case of listed options and certain OTC options, during or at the
termination of the option period, the Fund may be required, at any time, to
deliver the underlying security against payment of the exercise price on any
calls it has written. Exercise of certain listed options and OTC options may be
limited to specific expiration dates. This obligation terminates upon the
expiration of the option period. The obligation can be terminated at an earlier
time by effecting a closing purchase transaction. A closing purchase transaction
is accomplished by purchasing an option of the same series as the option
previously written. However, once assigned an exercise notice with respect to a
listed option, the Fund will be unable to effect a closing purchase transaction.
Closing purchases transactions are ordinarily effected to realize a profit on an
outstanding call option, to prevent an underlying security from being called, to
permit the sale of an underlying security or to enable another call option on
the underlying security (with either a different exercise price or expiration
date or both) to be written. Also, effecting a closing purchase transaction will
permit the cash or proceeds from the concurrent sale of any securities subject
to the option to be used for other investments. The Fund may realize a net gain
or loss from a closing purchase transaction depending upon whether the amount of
the premium received on the call option is more or less than the cost of
effecting the closing purchase transaction. Any loss incurred in a closing
purchasing transaction may be wholly or partially offset by unrealized
4
<PAGE>
appreciation in the market value of the underlying security. Conversely, a gain
resulting from a closing purchase transaction could be offset in whole or in
part or exceeded by a decline in the market value of the underlying security.
If a call option written by the Fund expires unexercised, the Fund realizes a
gain in the amount of the premium on the option less the commission paid. Such a
gain, however, may be offset by depreciation in the market value of the
underlying security during the option period. If a call option written by the
Fund is exercised, it realizes a gain or loss from the sale of the underlying
security equal to the difference between the purchase price of the underlying
security and the proceeds of the sale of the security plus the premium received
on the option less the commission paid.
Options written by the Fund normally have expiration dates of up to nine months
from the date written. The exercise price of a call option may be below, equal
to or above the current market value of the underlying security at the time the
option is written.
As a writer of a secured put option on securities, the Fund incurs an obligation
to buy the security underlying the option from the purchaser of the put, at the
option's exercise price at any time during, or at the expiration of, the option
period (certain listed and OTC put-options will be exercisable by the purchaser
only on a specific date). A put is "secured" if the Fund maintains with its
custodian in a segregated account cash, U.S. Government Securities or other
liquid, high quality short-term debt obligations in an amount equal to at least
the exercise price of the option. Similarly, a put position could be covered by
purchase of a put option on the same underlying security, where the exercise
price of the option purchased is equal to or more than the exercise price of the
put written or less than the exercise price of the put written if the mark to
market difference is maintained in cash. In writing puts, the Fund assumes the
risk of loss should the market value of the underlying security decline below
the exercise price of the option (any loss being decreased by the receipt of the
premium on the option written). The operation of and limitations on secured put
options in other respects are substantially identical to those of call options.
The Fund will write put options to obtain income from the premiums paid by
purchasers which provide a partial hedge. Puts may also be written when the Fund
wishes to purchase securities at prices lower than their current market prices,
in which case the Fund will write the put at an exercise price reflecting the
lower purchase price sought. The potential gain on a secured put option is
limited to the premium received on the option (less the commissions paid on the
transaction) while the potential loss equals the difference between the exercise
price of the option and the current market price of the underlying securities at
the time the put is exercised, offset by the premium received (less the
commissions paid on the transaction). Puts may also be written to close out
existing option positions.
The Fund may purchase put options on securities which it holds (or has the right
to acquire) to protect against a decline in the value of its securities. If the
value of the underlying securities were in such a case to fall below the
exercise price of the put purchased in an amount greater than the premium paid
for the option, the Fund would incur no additional loss. The Fund may also
purchase put options to close out written put positions in a manner similar to
call options closing purchase transactions. Such a sale would result in a net
gain or loss depending on whether the amount received on the sale is more or
less than the premium and other transaction costs paid on the put option which
is sold. If a put option purchased by the Fund expires without being sold or
exercised, the premium will be lost.
During the option period, a covered call writer has, in return for the premium
on the option, given up the opportunity for capital appreciation above the
exercise price should the market price of the underlying security increase, but
has retained the risk of loss should the price of the underlying security
decline. A secured put writer also retains the risk of loss should the market
5
<PAGE>
value of the underlying security decline below the exercise price of the option
less the premium received on the sale of the option. In both cases, the writer
has no control over the exercise of the option and may be required to fulfill
its obligation as a writer of the option. Once an option writer has received an
exercise notice with respect to a listed option, it cannot effect a closing
purchase transaction in order to terminate its obligation under the option and
must deliver or receive the underlying securities at the exercise price.
Prior to exercise or expiration, an option position can only be terminated by
entering into a closing purchase or sale transaction. If a covered call option
writer is unable to effect a closing transaction or enter into an offsetting OTC
option, it cannot sell the underlying security until the option expires or the
option is exercised or the Fund provides an alternative means of cover.
Accordingly, a covered call option writer may not be able to sell an underlying
security at a time when it might otherwise be advantageous to do so. A secured
put option writer who is unable to effect a closing transaction or an offsetting
OTC option would continue to bear the risk of decline in the market price of the
underlying security until the option expires or is exercised. In addition, a put
writer would be unable to utilize the amounts securing the put option until the
exercise or expiration of the option.
The Fund's ability to close out its position as a writer of an option is
dependent upon the existence of a liquid secondary market. There is no assurance
that such a market will exist, particularly in the case of OTC options, as such
options will generally only be closed out by entering into a closing transaction
with a dealer. However, the Fund may be able to purchase or write an offsetting
option which does not close out its position as a writer but constitutes an
asset offsetting the risks of the obligation under the option written. If the
Fund is not able to enter into a closing transaction or an offsetting position,
it will be required to maintain the securities subject to the call, or the
collateral underlying the put, even though it might not be advantageous to do
so, until a closing transaction can be entered into (or the option is exercised
or expires).
The possible reasons for the absence of a liquid secondary market for listed
options include: (i) insufficient trading interest in certain options; (ii)
restrictions on transactions imposed by exchanges; (iii) trading halts,
suspensions or other restrictions imposed with respect to particular classes or
series of options or underlying securities; (iv) interruption of the normal
operations on an exchange; (v) inadequacy of the facilities of an exchange or
the OCC to handle current trading volume; or (vi) a decision by one or more
exchanges to discontinue the trading of options (or a particular class or series
of options), in which event the secondary market on that exchange (or in that
class or series of options) would cease to exist, although outstanding options
on that exchange that had been issued by the OCC as a result of trades on that
exchange would generally continue to be exercisable in accordance with their
terms. The inability to close out options positions could also have an adverse
impact on the ability of the Fund to hedge its positions. In addition, in the
event of the bankruptcy of a broker through which the Fund engages in options
transactions, particularly a broker who sold an OTC option to the Fund, the Fund
could experience delays or losses in liquidating open positions purchased or
sold through such brokers or loss of all or part of the value of the options. It
should also be noted that exchanges have limitations governing the maximum
number of options of a particular type that may be written by a single investor.
Positions in excess of these limitations may be required to be liquidated. These
positions limits may operate to restrict the number of options that may be
written by the Fund.
The hours of trading for options may not conform to the hours during which the
underlying securities are traded. To the extent that the option markets close
before the markets for the underlying securities, significant price and rate
movements can take place in the underlying markets that cannot be reflected in
the option markets.
6
<PAGE>
STOCK INDEX OPTIONS. The Fund may purchase and sell (write) options on stock
indices ("index options"). These options are similar to options on securities
except that, rather than taking or making delivery of securities underlying the
option at a specified price upon exercise, an index option gives the holder the
right to receive cash upon exercise of the option if the level of the stock
index upon which the option is based is greater, in the case of a call, or
lesser, in the case of a put, than the exercise price of the option.
Transactions in index options will be effected to hedge against adverse price
movements in the stock market generally or in particular market segments.
Options on stock indexes provide the Fund with a means of seeking to protect
against the risk of market wide price movements. If the Investment Manager
anticipates a market decline, the Fund could purchase a stock index put option.
If the expected market decline materialized, the resulting decrease in the value
of the Fund's securities would be offset to the extent of the increase in the
value of the put option. If the Investment Manager anticipates a market rise,
the Fund may purchase a stock index call option to enable the Fund to
participate in such rise until completion of anticipated stock purchases.
Purchases and sales of stock index options also enable the Investment Manager to
more efficiently achieve changes in equity positions.
Stock index options involve risks similar to those associated with options on
securities. However, because exercise of stock index options are settled in
cash, call writers such as the Fund cannot provide in advance for their
potential settlement obligations by acquiring and holding the underlying
securities. A call write can offset some of the risk of its writing position by
holding a diversified portfolio of stocks similar to those on which the
underlying index is based. However, most investors cannot, as a practical
matter, acquire and hold a portfolio containing exactly the same stocks as the
underlying index and, as a result, bear a risk that the value of the securities
held will vary from the value of the index. For a discussion of the risks
associated with imperfect correlation of the stock index and the securities in
the Fund's portfolio, see "Investment Objective and Policies--Special Investment
Practices--Hedging." Even if an index call writer could assemble a portfolio
that exactly replicated the composition of the underlying index, the writer
still would not be fully covered from a risk standpoint because of the "timing
risk" inherent in writing index options. When a index option is exercised, the
amount of cash that the holder is entitled to receive is determined by the
difference between the exercise price and the closing index level on the date
when the option is exercised. As with other kinds of listed options, the writer
will not learn that it has been assigned an exercise notice until the next
Business Day, at the earliest. By the time it learns that it has been assigned
an exercise notice, the index may have declined, with a corresponding decrease
in the value of its stock portfolio. This "timing risk" is an inherent
limitation on the ability of index call writers to cover their risk exposure by
holding stock positions. In addition, a holder of an index option who exercises
it before the closing index value for that day is available runs the risk that
the level of the underlying index may subsequently change. If such a change
causes the exercise price of the option to exceed the current value of the
underlying securities at the time the option is written, the exercising holder
will be required to pay the difference between the closing index value and the
exercise price of the option (times the applicable multiplier) to the assigned
writer.
If dissemination of the current level of an underlying index is interrupted, or
if trading is interrupted in stocks accounting for a substantial percentage of
the value of an index, the trading of options on that index will ordinarily be
halted. If the trading of options on an underlying index is halted, the Fund
would not be able to close out positions and an exchange may impose restrictions
prohibiting the exercise of such options. If trading in options on the index is
not halted, the prices of the options may be distorted. These results could
result in losses to the Fund. It should also be recognized that the markets for
certain stock index options may be relatively illiquid, which could impair the
ability of the Fund to close out positions on such options.
7
<PAGE>
FUTURES CONTRACTS. The Fund may enter into contracts for the purchase or sale
for future delivery of baskets of securities, financial indexes, financial
instruments or foreign currencies. The Fund will not purchase or sell a futures
contract or purchase an option on a futures contract if, immediately thereafter,
the sum of the amount of initial margin deposits on the Fund's existing futures
positions, and premiums paid on options on futures contracts which are still
outstanding, would exceed 5% of the value of the Fund's assets. U.S. futures
contracts have been designed by exchanges which have been designated "contracts
markets" by the Commodity Futures Trading Commission and must be executed on the
relevant contract market. Futures contracts trade on a number of exchange
markets, and, through their clearing corporations, the exchanges guarantee
performance of the contracts as between the clearing members of the exchange.
At the same time a futures contract is purchased or sold, the Fund must allocate
cash or securities as a good faith deposit payment ("initial margin deposit").
It is expected that the initial deposit would be approximately 5% to 15% of a
contract's face value. Thereafter, the Fund must make additional deposits with
the applicable financial intermediary, and will be credited with an amount equal
to any net gains due to favorable price movements. These additional deposits or
credits are calculated and required daily and are known as "variation margin."
The amount of the initial margin deposit required for a particular futures
contract may be revised from time to time by the applicable exchange as the
volatility of the contract fluctuates.
Futures contracts by their terms call for delivery of the underlying financial
instruments or, in the case of index contracts, for cash settlement at the
delivery date of the contract. In most cases, however, the contractual
obligation is fulfilled before the date of delivery under the terms of the
contract through offset. The offsetting of a contractual obligation is
accomplished by buying (or selling, as the case may be) on a commodities
exchange an identical futures contract calling for delivery in the same month.
Such a transaction, which is effected through a member of an exchange, cancels
the obligation to make or take delivery under the terms of the contract. Since
all transactions in the futures market are made, offset or fulfilled through a
clearing house associated with the exchange on which the contracts are traded,
the Fund will incur brokerage fees when it purchases or sells futures contracts.
The purpose of the acquisition or sale of a futures contract is to attempt to
protect the Fund from fluctuations in the value of the securities held by the
Fund. For example, if the Fund owns equity securities which are expected to
decline in value temporarily, the Fund might enter into futures contracts for
the sale of an index of equity securities. If the Fund's portfolio and the index
tended to fluctuate in common, such a sale would have much the same effect as
selling an equivalent value of the securities owned by the Fund. If the
securities in the portfolio declined as expected, the futures contracts to the
Fund would increase at approximately the same rate, thereby keeping the next
asset value of the Fund from declining as much as it otherwise would have. The
Fund could accomplish similar results by selling its securities. However, since
the futures market is more liquid than the cash market, the use of futures
contracts as an investment technique allows the Fund to maintain a defensive
position without having to sell its portfolio securities. The Fund's portfolio
and the index will not necessarily fluctuate in common. The Fund bears the
additional risk that any divergence resulting from the Fund's portfolio
appreciating or depreciating more or less than the index operates unfavorably
toward the Fund, resulting in a correlation risk similar to that discussed under
"Investment Objective and Policies--Special Investment Practices--Hedging."
Similarly, when the Fund has a quantity of short positions in securities that
are expected to increase in value temporarily, or anticipates the purchase of
such securities, futures contracts may be purchased to attempt to hedge against
8
<PAGE>
anticipated losses to the Fund. To the extent that the fluctuations in futures
contracts are similar to that of the Fund's short positions or the securities
the Fund anticipates acquiring, the Fund could take advantage of the anticipated
rise in value without actually buying the securities.
To the extent the Fund has a short position in a futures contract, the Fund may
cover by holding the instruments or currency underlying the contract or may
maintain assets in a segregated account to cover the Fund's obligations with
respect to such futures contracts. The assets in such account will consist of
cash, cash equivalents or high quality debt securities in an amount equal to the
difference between the fluctuating market value of such futures contracts and
the aggregate value of the initial and variation margin payments made by the
Fund with respect to such futures contracts.
The ordinary spreads between prices in the cash and futures markets, due to
differences in the nature of those markets, are subject to distortions. First,
all participants in the futures market are subject to initial deposit and
variation margin requirements. Rather than meeting additional variation margin
requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the future market could be reduced, thus producing distortion. Third, from
the point of view of speculators, the margin deposit requirements in the futures
market are less onerous than margin requirements in the securities market.
Therefore, increased participation by speculators in the futures market may
cause temporary price distortions. Due to the possibility of distortion, a
correct forecast of price movements by the Investment Manager may still not
result in a successful transaction.
In addition, futures contracts entail risks. Although the Investment Manager
will only enter into futures contracts if it believes that use of such contracts
will benefit the Fund, if the Investment Manager's investment judgment about the
general direction of securities or currency prices is incorrect, the Fund's
overall performance would be poorer than if it had not entered into any such
contract. For example, if the Fund has hedged against the possibility of a
decline in securities prices and prices increase instead, the Fund will lose
part or all of the benefit of the increased value of the securities that it has
hedged because it will have offsetting losses in its futures positions. In
addition, in such situations, if the Fund has insufficient cash, it may have to
sell securities from its portfolio to meet daily variation margin requirements.
Such sales of securities may be, but will not necessarily be, at increased
prices which reflect the rising market. The Fund may have to sell securities at
a time when it may be disadvantageous to do so.
Exchanges may limit the amount by which the price of many futures contracts may
move on any day. If the price moves equal to the daily limit on successive days
then it may prove impossible to liquidate a futures position until the daily
limit moves have ceased.
OPTIONS ON FUTURES CONTRACTS. The Fund is authorized to purchase and write
options on futures contracts for hedging purposes. The purchase of a call option
on a futures contract is similar in some respects to the purchase of a call
option on an individual security. Upon the exercise of a call option, the Fund
receives a long position in the underlying futures contract. Depending on the
pricing of the option compared to either the price of the futures contract upon
which it is based or the price of the underlying financial instruments, it may
or may not be less risky than ownership of the futures contract. As with the
purchase of futures contracts, when the Fund is not fully invested it may
purchase a call option on a futures contract to hedge against a market advance
in which it would not otherwise participate. The purchase of a put option on a
futures contract is similar in some respects to the purchase of protective put
options on portfolio securities. Upon exercise of a put option, the Fund
9
<PAGE>
receives a short position in the underlying futures contract. For example, the
Fund may purchase a put option on a futures contract to hedge the Fund's
portfolio against the risk of declining securities values.
The writing of a call option on a futures contract constitutes a partial hedge
against declining prices of the components of the futures contract. If the
futures price at expiration of the call option is below the exercise price, the
Fund will retain the full amount of the option premium that provides a partial
hedge against any decline that may have occurred in the Fund's portfolio
holdings. The writing of a put option on a futures contract constitutes a
partial hedge against increasing prices of the financial instrument that is
deliverable upon termination of the futures contract. If the futures price at
expiration of the put option is higher than the exercise price, the Fund will
retain the full amount of the option premium that provides a partial hedge
against any increase in the price of securities that the Fund intends to
purchase. If a put or call option the Fund has written is exercised, the Fund
will incur a loss that will be reduced by the amount of the premium it receives.
Depending on the degree of correlation between changes in its portfolio
securities and changes in its futures positions, the Fund's losses from existing
options may to some extent be reduced or increased by changes in portfolio
securities.
The amount of risk the Fund assumes when it purchased an option on a futures
contract is the premium paid for the option plus related transaction costs. In
addition to the correlation risks discussed above, the purchase of an option
also entails the risk that changes in the underlying futures contract will not
be fully reflected in the option purchased.
The Fund's ability to engage in the options and futures strategies described
above will depend on the availability of liquid markets in such instruments. It
is impossible to predict the amount of trading interest that may exist in
various types of options or futures. Therefore no assurance can be given that
the Fund will be able to utilize these instruments effectively for the purposes
set forth above. Furthermore, the Fund's ability to engage in options and
futures transactions may be limited by tax considerations.
FOREIGN MARKET TRANSACTIONS. In addition, options on securities, options on
indices, futures contracts, and options on futures contracts may be traded on
foreign exchanges. Such transactions are subject to the risk of governmental
actions affecting trading in or the prices of such options or futures contracts.
Such positions also could be adversely affected by: (i) other complex foreign,
political, and economic factors; (ii) lesser availability than in the United
States of data on which to make trading decisions; (iii) delays in the Fund's
ability to act upon economic events occurring in foreign markets during
non-business hours in the United States; (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
United States; and (v) lesser trading volume.
FORWARD CONTRACTS. The Fund may enter into forward contracts to purchase or sell
foreign currencies as a hedge against possible variations in foreign exchange
rates. A forward foreign currency contract is an agreement between the
contracting parties to exchange an amount of currency at some future time at an
agreed upon rate. The rate can be higher or lower than the spot rate between the
currencies that are the subject of the contract. A forward contract generally
has no deposit requirement, and such transactions do not involve commissions. By
entering into a forward contract for the purchase or sale of the amount of
foreign currency invested in a Foreign Securities transaction, the Fund can
hedge against possible variations in the dollar versus the subject currency
either between the date the Foreign Security is purchased or sold and the date
on which payment is made or received during the time the Fund holds the Foreign
Security. The Fund will not speculate in forward currency contracts. If the Fund
enters into a "position hedging transaction," which is the sale of forward
foreign currency with respect to a portfolio security denominated in such
foreign currency, its custodian bank will place cash or liquid equity or debt
10
<PAGE>
securities in a separate account of the Fund in an amount equal to the Fund's
total assets committed to the consummation of such forward contract. If the
securities placed in the account declines, additional cash or securities will be
placed in the account so that the account will equal the amount of the Fund's
commitment with respect to such contracts. The Fund will purchase or sell
currency futures or options on such futures for the same reasons as set forth
above for entering into forward foreign currency contracts. The Fund does not
anticipate attempting to hedge all of its foreign portfolio positions and will
enter into such transactions only to the extent, if any, deemed appropriate by
the Investment Manager. The Fund will not enter into a forward contract for a
term of more than one year.
FUTURE DEVELOPMENTS. The Fund may, following written notice thereof to its
shareholders, take advantage of opportunities in the area of options, futures
contracts, options on futures contracts, and other derivative instruments that
are not currently contemplated for use by the Fund or that are not currently
available but that may be developed, to the extent such opportunities are both
consistent with the Fund's investment objective and legally permissible for the
Fund. Such opportunities, if they arise, may involve risks that exceed those
involved in the options and futures activities described above.
REGULATORY RESTRICTIONS. To the extent required to comply with SEC Release No.
10666, when purchasing a futures contract or writing a put option, the Fund will
maintain, in a segregated account, cash or liquid securities equal to the value
of such contracts.
The Fund will typically enter into a futures contract or related option only if
it constitutes a bona fide hedging position under applicable regulations.
Otherwise the Fund will limit its investments in futures contracts and related
options so that, immediately after such investment, the sum of the amount of its
initial margin deposits on open futures contracts and its premiums on open
options contracts will not exceed 5% of the Fund's total assets at current
value.
ACCOUNTING AND TAX CONSIDERATIONS. When the Fund writes an option, an amount
equal to the premium it receives is included in its Statement of Assets and
Liabilities as a liability. The amount of the liability is subsequently marked
to market to reflect the current market value of the option. When the Fund
purchases an option, the premium it pays is recorded as an asset and is
subsequently adjusted to the current market value of the option.
In the case of a regulated futures contract purchased or sold by the Fund, an
amount equal to the initial margin deposit is recorded as an asset. The amount
of the asset is subsequently adjusted to reflect changes in the amount of the
deposit as well as changes in the value of the contract.
For a discussion of the tax treatment of investments in certain options, futures
and foreign currency contracts, see "Taxation" below.
MANAGEMENT
INVESTMENT MANAGEMENT AGREEMENT
The Investment Management Agreement provides that the Investment Manager will
provide portfolio management services, place portfolio transactions in
accordance with policies expressed in the Fund's registration statement, pay the
Fund's office rent, and render significant administrative services on behalf of
the Fund (not otherwise provided by third parties) necessary for the Fund's
operation as a closed-end fund, including preparing reports to and meeting
materials for the Fund's Board of Trustees and reports and notices to Fund
shareholders; supervising, negotiating contractual arrangements with, to the
extent appropriate, and monitoring the performance of various third-party and
11
<PAGE>
affiliated service providers to the Fund (such as the Fund's transfer and
pricing agents, custodian, accountants and others) and other persons in any
capacity deemed necessary or desirable to Fund operations; preparing and making
filings with the SEC and other regulatory and self-regulatory organizations,
including preliminary and definitive proxy materials, post-effective amendments
to the Registration Statement and semi-annual reports on Form N-SAR; overseeing
the tabulation of proxies by the Fund's transfer agent; assisting in the
preparation and filing of the Fund's federal, state and local tax returns;
preparing and filing the Fund's federal excise tax returns; providing assistance
with investor and public relations matters; monitoring the valuation of
portfolio securities and the calculation of NAV; monitoring the registration of
Shares under applicable federal and state securities laws; maintaining or
causing to be maintained for the Fund all books, records and reports and any
other information required under the 1940 Act, to the extent such books, records
and reports and other information are not maintained by the Fund's custodian or
other agents of the Fund; assisting in establishing accounting policies of the
Fund; assisting in the resolution of accounting issues that may arise with
respect to the Fund's operations and consulting with the Fund's independent
accountants, legal counsel and other agents as necessary in connection
therewith; establishing and monitoring the Fund's operating expense budgets;
reviewing the Fund's bills; processing the payment of bills that have been
approved by an authorized person; assisting the Fund in determining the amount
of dividends and other distributions available to be paid by the Fund to its
shareholders, preparing and arranging for the printing of dividend notices to
shareholders, and providing the transfer and dividend paying agent, the
custodian, and the accounting agent with such information as is required for
such parties to effect the payment of dividends and other distributions; and
otherwise assisting the Fund in the conduct of its business, subject to the
direction and control of the Fund's Board of Trustees.
Under the Investment Management Agreement, the Fund is responsible for other
expenses, including organizational expenses (including out-of-pocket expenses,
but not including the Investment Manager's overhead or employee costs); brokers'
commissions or other costs of acquiring or disposing of any portfolio securities
of the Fund; legal, auditing and accounting expenses; payment for portfolio
pricing or valuation services to pricing agents, accountants, bankers and other
specialists, if any; taxes and governmental fees; the fees and expenses of the
Fund's transfer agent; expenses of preparing share certificates and any other
expenses, including clerical expenses, of issuance, offering, distribution,
sale, redemption or repurchase of Shares; the expenses of and fees for
registering or qualifying securities for sale; the fees and expenses of those
Trustees who are not "interested persons" of the Fund (as defined in the 1940
Act); the cost of printing and distributing reports, notices and dividends to
current shareholders; and the fees and expenses of the Fund's custodians,
subcustodians, dividend disbursing agents and registrars. The Fund may arrange
to have third parties assume all or part of the expenses of sale, underwriting
and distribution of Shares. The Fund is also responsible for expenses of
shareholders' and other meetings and its expenses incurred in connection with
litigation and the legal obligation it may have to indemnify officers and
Trustees of the Fund with respect thereto. The Fund is also responsible for the
maintenance of books and records which are required to be maintained by the
Fund's custodian or other agents of the Fund; telephone, telex, facsimile,
postage and other communications expenses; any fees, dues and expenses incurred
by the Fund in connection with membership in investment company trade
organizations; expenses of printing and mailing prospectuses and statements of
additional information of the Fund and supplements thereto to current
shareholders; costs of stationery; fees payable to the Investment Manager and to
any other Fund advisers or consultants; expenses relating to investor and public
relations; interest charges, bond premiums and other insurance expense; freight,
insurance and other charges in connection with the shipment of the Fund's
portfolio securities; and other expenses.
12
<PAGE>
The Investment Manager is responsible for the payment of the compensation and
expenses of all Trustees, officers and executive employees of the Fund
(including the Fund's share of payroll taxes) affiliated with the Investment
Manager and making available, without expense to the Fund, the services of such
Trustees, officers and employees as may duly be elected officers of the Fund,
subject to their individual consent to serve and to any limitations imposed by
law. The Fund is responsible for the fees and expenses (specifically including
travel expenses relating to Fund business) of Trustees not affiliated with the
Investment Manager ("Non-Interested Trustees") Under the Investment Management
Agreement, the Investment Manager also pays the Fund's share of payroll taxes.
During the Fund's most recent fiscal year, no compensation, direct or otherwise
(other than through fees paid to the Investment Manager), was paid or became
payable by the Fund to any of its officers or Trustees who were affiliated with
the Investment Manager.
On February 3, 1998, the Board of Trustees and the Investment Manager agreed to
add a breakpoint to the investment management fee, such that the Fund pays the
Investment Manager a fee based on an annual rate of 1.00% on ending daily net
assets up to and including $500 million, and 0.90% on ending daily net assets in
excess of $500 million. For the fiscal year ended October 31, 1998, the Fund
paid investment management fees of $ 5,556,255. Additionally, in accordance with
an Administrative Agreement, the Fund pays the Investment Manager a monthly fee
based on the annual rate of 0.10% on ending daily net assets for administrative
services.
The Investment Management Agreement further provides that the Investment Manager
shall not be liable for any error of judgment or mistake of law or for any loss
suffered by any Fund in connection with matters to which such agreement relates,
except a loss resulting from willful misfeasance, bad faith or gross negligence
on the part of the Investment Manager in the performance of its duties or from
reckless disregard by the Investment Manager of its obligations and duties under
such agreement. The Investment Management Agreement also provides that purchase
and sale opportunities, which are suitable for more than one client of the
Investment Manager, will be allocated by the Investment Manager in an equitable
manner. Lastly, the Investment Management Agreement contains a provision stating
that it supersedes all prior agreements.
The Investment Management Agreement may be terminated without penalty upon sixty
days' written notice by either party. The Fund may agree to the termination of
its Investment Management Agreement either by the vote of a majority of the
outstanding voting securities of the Fund, or by a vote of the Board of
Trustees. The Investment Management Agreement may also be terminated at any time
without penalty by the vote of a majority of the outstanding voting securities
of the Fund or by a vote of the Board of Trustees if a court establishes that
the Investment Manager or any of its officers or directors has taken any action
resulting in a breach of the Investment Manager's covenants under the Investment
Management Agreement. As stated above, the Investment Management Agreement
automatically terminates in the event of its assignment.
For the fiscal years ended October 31, 1998, 1997, and 1996, the Investment
Manager or its predecessor was paid investment management fees of $5,556,255,
$4,880,120, and $4,517,293, respectively.
TRUSTEES AND OFFICERS
The Fund has a Board composed of four Trustees which supervises the Fund's
investment activities and reviews contractual arrangements with companies that
provide the Fund with services. The Trustees and officers and their positions
with the Fund and their present and principal occupations during the past five
years are listed below. Each Trustee who is an "interested person" of the Fund
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<PAGE>
(as defined in the 1940 Act) is indicated by an asterisk (*). Each Independent
Trustee serves on the Audit Committee of the Board.
All of the officers and Trustees of the Fund hold comparable positions with the
15 mutual funds, consisting of 53 separate portfolios, managed or administered
by INVESCO and distributed by INVESCO Distributors, Inc. (the "INVESCO Funds"),
excluding the Fund.
The Trustees and Executive Officers of the Fund and their principal occupations
during the last five years are set forth below.
NAME AND AGE POSITION WITH PRINCIPAL OCCUPATIONS DURING THE PAST
THE FUND FIVE YEARS
- ----------- ------------ ------------------
CHARLES W. BRADY, CHAIRMAN OF THE Chief Executive Officer and Director of
Age 64* BOARD SINCE AMVESCAP PLC, London, England, and of
1991(MR. BRADY various subsidiaries thereof; Chairman
DID NOT SERVE of the Boards of the INVESCO Funds.
AS A TRUSTEE
BETWEEN
2/28/1997 AND
8/3/1998)
FRED A. DEERING, TRUSTEE SINCE Vice Chairman of the Boards of the
Age 71 1992 INVESCO Funds; formerly Chairman of the
Executive Committee and Chairman of the
Board of Directors of Security Life of
Denver Insurance Company, Denver,
Colorado; Director of ING American
Holdings Company and First ING Life
Insurance Company of New York.
JOHN W. McINTYRE, TRUSTEE SINCE Retired. Formerly, Vice Chairman of
Age 68 1991 the Board of Directors of the Citizens
and Southern Corporation and Chairman
of the Board and Chief Executive
Officer of the Citizens and Southern
Georgia Corp. and Citizens and Southern
National Bank. Director/Trustee of the
INVESCO Funds and Kaiser Foundation
Health Plan of Georgia, Inc., Gables
Residential Trust, Employee's
Retirement System of GA, Emory
University, and J.M. Tull Charitable
Foundation.
DR. LARRY SOLL, TRUSTEE SINCE Retired. Formerly, Chairman of the
Age 56 1991 Board (1987 to 1994), Chief Executive
Officer (1982 to 1989; 1993 to 1994)
and President (1982 to 1989) of
Synergen Inc. (a biotechnology
company), Boulder, Colorado.
Director/Trustee of the INVESCO Funds.
Director of Synergen since its
incorporation in 1982. Director of
Isis Pharmaceuticals, Inc.
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<PAGE>
MARK H. PRESIDENT, AND President, Chief Executive Officer, and
WILLIAMSON, CHIEF OPERATING Director, INVESCO Distributors Inc.;
Age 47 OFFICER SINCE President, Chief Executive Officer and
1998 Chairman, INVESCO; Formerly, Chairman
of the Board and Chief Executive
Officer, NationsBanc Advisors, Inc.
(1995-1997); Chairman of the Board,
NationsBanc Investments, Inc.
(1997-1998).
RONALD L. GROOMS, TREASURER SINCE Senior Vice President and Treasurer of
Age 52 1991 INVESCO Funds Group, Inc. (since
1988). Senior Vice President and
Treasurer of INVESCO Distributors, Inc.
(since 1997).
GLEN A. PAYNE, SECRETARY SINCE Senior Vice President, General Counsel
Age 52 1991 and Secretary of INVESCO Funds Group,
Inc. (since 1995), and INVESCO
Distributors, Inc. (since 1997); Vice
President, Secretary and General
Counsel of INVESCO Funds Group, Inc.
(May 1989 to April 1995); formerly,
employee of a U.S. regulatory agency,
Washington, D.C. (June 1973 through
May 1989).
JOHN R. SCHROER, VICE PRESIDENT Senior Vice President of INVESCO Funds
Age 32 SINCE 1996 Group, Inc. and portfolio manager of
the Fund (since 1996). Portfolio
manager of the INVESCO Strategic Health
Sciences Fund.
Unless otherwise indicated, the address of each Trustee and officer of the Fund
is Post Office Box 173706, Denver, Colorado 80217-3706.
- --------
*Because of Mr. Brady's affiliation with INVESCO, or with companies affiliated
with INVESCO, he is deemed to be an "interested person" of INVESCO Global Health
Sciences Fund, as that term is defined in the 1940 Act.
The Board has an Audit Committee that is composed of Messrs. Deering, Soll and
McIntyre. The Committee makes recommendations regarding the selection of
independent auditors for the Fund, confers with the independent auditors
regarding the Fund's financial statements, the results of audits and related
matters, and performs other tasks as the Board assigns.
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<PAGE>
COMPENSATION OF TRUSTEES
The Trustees and officers who are "interested persons" as designated above
receive no compensation from the Fund. The table below shows amounts paid or
accrued to those Trustees who are not designated "interested persons" during the
Fund's fiscal year ended October 31, 1998, except that the information regarding
the total compensation from the Fund and Fund Complex in the last column is for
the calendar year 1998.
The following table shows the compensation paid by the Fund to its three
Independent Trustees for their services as Trustees of the Fund in the fiscal
year ended October 31, 1998. The following table also shows the total
compensation paid by the Fund and the INVESCO Funds (collectively, the 54 funds
of the "INVESCO Complex", including the Fund) to these Trustees for their
services as Directors or Trustees during the year ended December 31, 1998.
COMPENSATION TABLE
AMOUNTS PAID DURING THE MOST RECENT
FISCAL YEAR BY THE FUND TO TRUSTEES
TOTAL
AGGREGATE BENEFITS ESTIMATED COMPENSATION FROM
COMPENSATION ACCRUED AS ANNUAL THE FUND AND
FROM THE PART OF FUND BENEFITS UPON INVESCO FUNDS PAID
NAME OF TRUSTEE FUND EXPENSES(2) RETIREMENT(3) PAID TO TRUSTEES
- --------------- ---- ----------- ------------------------------
FRED A. DEERING $19,000 $0.00 $ $103,700
JOHN W. MCINTYRE(1) $20,000 $0.00 $ $98,500
DR. LARRY SOLL $19,000 $0.00 $ $96,000
---------- ------------ ---------- --------------
TOTAL $58,000 $0.00 $ $298,200
- -----
AS A PERCENTAGE OF
NET ASSETS 0.0099%(4) 0.00% 0.0014%(5)
- ------
(1) The chairman of the audit committee receives compensation for serving in
such capacity in addition to the compensation paid to all Independent Trustees.
(2) Represents benefits accrued with respect to the Defined Benefit Deferred
Compensation Plan discussed below, and not compensation deferred at the election
of the Trustees. This Plan was adopted by the Board of Trustees on October 12,
1998, and as of October 31, 1998, the Fund's fiscal year end, no benefits have
begun accruing to eligible Trustees.
(3) These figures represent the Fund's estimated annual benefits payable upon
the trustee's retirement. These estimated benefits assume retirement at age 72
and that the basic retainer payable to the Trustees will be adjusted
periodically for inflation. This results in lower estimated benefits for
Trustees who are closer to retirement and higher estimated benefits for Trustees
who are farther from retirement. Each of these Trustees has served as Trustee
for the minimum five-year period required to be eligible to participate in the
Defined Benefit Deferred Compensation Plan.
(4) Total as a percentage of the Fund's net assets as of October 31, 1998.
(5) Total as a percentage of the INVESCO Complex's net assets as of December 31,
1998.
The Fund's Independent Trustees (as defined under the 1940 Act) and of the other
funds in the INVESCO Complex establish their own compensation from the Fund and
other funds in the INVESCO Complex and are not paid by INVESCO or any affiliated
company. Mr. Brady, as an "interested person" of the Fund and of other funds in
the INVESCO Complex, receives compensation as an officer of companies affiliated
with INVESCO, but does not receive any trustee fees or other compensation from
the Fund or from other funds in the INVESCO Complex for his service as a Trustee
or Director.
The Board of Trustees of the Fund has adopted a Defined Benefit Deferred
Compensation Plan (the "Benefit Plan") for the Independent Trustees of the Fund.
Under the Benefit Plan, each Trustee who is not an interested person of the Fund
(as defined in Section 2(a)(19) of the 1940 Act), and who has served for at
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least five years (a "Qualified Trustee") is entitled to receive four quarterly
payments during the first twelve months after his or her retirement, with each
payment to be equal to 25 percent of the sum of the annual basic retainer and
annualized quarterly board meeting fees payable by the Fund to the Independent
Trustee on his or her retirement (the "First Year Retirement Payment"). Trustees
normally retire at age 72, 73, 74 or 75 if the retirement date is extended by
the Board. In no event may a Trustee retire later than the last day of the
calendar quarter in which the Trustee's seventy-fifth birthday occurs.
Beginning with the first anniversary of the Qualified Trustee's retirement, and
beginning as of the retirement of an Independent Trustee whose retirement is
after the date of the last day of the calendar quarter in which such Trustee's
seventy-fifth birthday occurred, the Independent Trustee will receive, for the
remainder of his or her life, a benefit (the "Benefit"), payable quarterly, with
each quarterly payment to be equal to 12.50% of the sum of the annual basic
retainer and annualized quarterly Board meeting fees payable by the Trust to the
Independent Trustee on his or her retirement.
If an Independent Trustee's service as a Trustee is terminated because of his or
her death after the last day of the calendar quarter in which such Trustee's
seventy-second birthday occurred and before the last day of the calendar quarter
in which such Trustee's seventy-fifth birthday occurs, the designated
beneficiary of the Independent Trustee will receive the First Year Retirement
Payments and will, beginning with the quarter following the quarter in which the
last First Year Retirement Payment is made, receive the Benefit for a period of
ten years, with quarterly payments to be made to the designated beneficiary.
If an Independent Trustee's service as a Trustee is terminated because of his or
her death before the last day of the calendar quarter in which such Trustee's
seventy-second birthday occurs or after the last day of the calendar quarter in
which such Trustee's seventy-fifth birthday occurred, the designated beneficiary
of the Independent Trustee will receive the Benefit for a period of ten years,
with quarterly payments to be made to the designated beneficiary beginning in
the first quarter following the Trustee's death.
If an Independent Trustee's service as a Trustee is terminated because of his or
her disability after the last day of the calendar quarter in which such
Trustee's seventy-second birthday occurred and before the last day of the
calendar quarter in which such Trustee's seventy-fifth birthday occurs, the
Independent Trustee will receive the First Year Retirement Payments and will,
beginning with the quarter following the quarter in which the last First Year
Retirement Payment is made, receive the Benefit for the remainder of his or her
life, with quarterly payments to be made to the disabled Independent Trustee. If
the disabled Independent Trustee should die before the First Year Retirement
Payments are completed and before forty quarterly Benefit payments are made,
such payments will continue to be made to the Independent Trustee's designated
beneficiary until the aggregate of the First Year Retirement Payments and forty
quarterly Benefit payments have been made to the disabled Independent Trustee
and the Trustee's designated beneficiary.
If an Independent Trustee's service as a Trustee is terminated because of his or
her disability before the last day of the calendar quarter in which such
Trustee's seventy-second birthday occurs or after the last day of the calendar
quarter in which such Trustee's seventy-fifth birthday occurred, the Independent
Trustee will receive the Benefit for the remainder of his or her life, with
quarterly payments to be made to the disabled Independent Trustee beginning in
the first quarter following the Trustee's termination for disability. If the
disabled Independent Trustee should die before forty quarterly payments are
made, payments will continue to be made to the Independent Trustee's designated
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beneficiary until the aggregate of forty quarterly payments has been made to the
disabled Independent Trustee and the Trustee's designated beneficiary.
Any question involving entitlement to payments under or the administration of
the Benefit Plan will be referred to a four-person committee (the "Committee")
composed of three Independent Trustees designated by all of the Independent
Trustees and one Trustee who is not an Independent Trustee, designated by the
non-Independent Trustee. Except as otherwise provided, the Committee will make
all interpretations and determinations necessary or desirable for the Benefit
Plan's administration, and such interpretations and determinations will be final
and conclusive. Committee members will be elected annually.
The Committee will represent and act on behalf of the Trust in respect of the
Benefit Plan and, subject to the other provisions of the Benefit Plan, the
Committee may adopt, amend or repeal bylaws or other regulations relating to the
administration of the Benefit Plan, the conduct of the Committee's affairs, its
rights or powers, or the rights or powers of its members. The Committee will
report to the Independent Trustees and to the Board from time to time on its
activities in respect of the Benefit Plan. The Committee or persons designated
by it will cause such records to be kept as may be necessary for the
administration of the Benefit Plan. The cost of the Benefit Plan is paid by the
Trust.
On October 12, 1998 the Board of Trustees adopted a Deferred Fee Agreement,
pursuant to which the Independent Trustees may defer receipt of a portion of the
compensation which they would otherwise have been paid as Trustees of the Fund.
The deferred amount is invested in Shares. Each Independent Trustees, therefore,
may be an indirect owner of Shares, in addition to any Shares that may be owned
directly.
OWNERSHIP OF FUND SHARES
As of [ ] 1999, the Trustees and officers of the Fund as a group owned
[XXXX] Shares, representing __% of the outstanding Shares.
As of [ ] 1999, the following persons owned, beneficially or of record,
more than 5% of the outstanding Shares:
NAME AND ADDRESS NUMBER OF SHARES PERCENTAGE OF OUTSTANDING
SHARES
- ------------------ --------- ---------
[XXXXXXX] [X.XX%]
[XXXXXXX] [X.XX%]
[XXXXXXX] [X.XX%]
[XXXXXXX] [X.XX%]
[XXXXXXX] [X.XX%]
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PORTFOLIO TRANSACTIONS
The Investment Manager places orders for the purchase and sale of securities
with brokers and dealers based upon its evaluation of the financial
responsibility of the brokers and dealers, and considering the brokers' and
dealers' ability to effect transactions at the best available prices. The
Investment Manager evaluates the overall reasonableness of brokerage commissions
paid by reviewing the quality of executions obtained on portfolio transactions
of the Fund, viewed in terms of the size of transactions, prevailing market
conditions in the security purchased or sold, and general economic and market
conditions. In seeking to ensure that any commissions or discounts charged the
Fund are consistent with prevailing and reasonable commissions, the Investment
Manager also endeavors to monitor brokerage industry practices with regard to
the commissions charged by broker-dealers on transactions effected for other
comparable institutional investors. While the Investment Manager seeks
reasonably competitive rates, the Fund does not necessarily pay the lowest
commission, spread or discount available.
Consistent with the standard of seeking to obtain the best execution on
portfolio transactions, the Investment Manager may select brokers that provide
research services to effect such transactions. Research services consist of
statistical and analytical reports relating to issuers, industries, securities
and economic factors and trends, which may be of assistance or value to the
Investment Manager in making informed investment decisions. Research services
prepared and furnished by brokers through which the Funds effect securities
transactions may be used by the Investment Manager in servicing all of its
accounts and not all such services may be used by the Investment Manager in
connection with the Fund.
In recognition of the value of the above-described brokerage and research
services provided by certain brokers, the Investment Manager, consistent with
the standard of seeking to obtain the best execution on portfolio transactions,
may place orders with such brokers for the execution of transactions for the
Fund on which the commissions are in excess of those which other brokers might
have charged for effecting the same transactions.
Portfolio transactions may be effected through qualified broker-dealers that
recommend the Fund to their clients or who act as agent in the purchase of the
Shares for their clients. When a number of brokers and dealers can provide
comparable best price and execution on a particular transaction, the Investment
Manager may consider the sale of Shares by a broker or dealer in selecting among
qualified broker-dealers.
The Fund paid $1,511,837, $1,746,140, and $ [ ] in brokerage commissions
during the fiscal years ended October 31, 1998, 1997, and 1996. Of these
amounts, $64,075, $87,007 and $[ ] were paid to the Dealer Manager.
PORTFOLIO TURNOVER
Generally, the Fund will not purchase securities for short-term trading profits.
However, the Fund may dispose of securities without regard to the time they have
been held when such actions, for defensive or other reasons, appear advisable to
the Investment Manager. (The portfolio turnover rate is calculated by dividing
the lesser of purchases or sales of portfolio securities for the particular
fiscal year by the monthly average of the value of the portfolio securities
owned by the Fund during the particular fiscal year. For purposes of determining
this rate, all securities whose maturities at the time of acquisition are one
year or less are excluded.) The annual rate of the Fund's total portfolio
turnover for the years ended December 31, 1998, 1997, and 1996 was 87%, 145%,
and 91%, respectively.
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REPURCHASE OF SHARES AND TENDER OFFERS
Shares of closed-end funds frequently trade at a discount from NAV per share but
in some cases trade at a premium. In recognition of the possibility that the
Shares might similarly trade at a discount, the Fund's Board of Trustees has
determined that it would be in the interest of shareholders for the Fund to take
action to attempt to reduce or eliminate a market value discount from NAV. To
that end, the Board contemplates that the Fund could from time-to-time take
action either to repurchase its Shares in the open market or to tender for its
own Shares at NAV. The Board, in consultation with the Investment Manager, will
review on a quarterly basis the possibility of open market repurchases and/or
tender offers for Shares. There are no assurances that the Board will, in fact,
decide to undertake either of these actions or, if undertaken, that such actions
will result in the Shares trading at a market price per Share that is equal to
or approximates their NAV per Share. In addition, the Board will not necessarily
announce when it has given consideration to these matters.
Subject to the Fund's investment policies and restrictions with respect to
borrowings, the Fund may incur debt to finance repurchases and/or tenders. See
"Investment Objective and Policies" in the Prospectus and "Investment
Restrictions" herein. Interest on any such borrowings will reduce the Fund's net
investment income.
The Fund anticipates that the market price of its Shares will from time to time
vary from their NAV per Share. The market price of the per Share will, among
other things, be determined by the relative demand for and supply of those
Shares in the market, the Fund's investment performance, its dividends and yield
and investor perception of its overall attractiveness as an investment as
compared with other investment alternatives. Nevertheless, the fact that the
Shares may be repurchased or be the subject of tender offers at NAV from time to
time may reduce the spread between market price and NAV that might otherwise
exist. In the opinion of the Investment Manager, sellers may be more inclined to
accept a significant discount if they have a reasonable expectation of being
able to recover NAV in conjunction with a possible repurchase or tender offer.
Although the Board of Trustees believes that share repurchases and tender offers
generally would have a favorable effect on the market price per Share, it should
be recognized that the acquisition of Shares by the Fund will decrease its total
assets and, therefore, have the effect of increasing its expense ratio. Because
of the nature of the Fund's investment objective and policies and its portfolio,
the Investment Manager does not anticipate that repurchases and tender offers
should have a materially adverse effect on the Fund's investment performance and
does not anticipate any material difficulty in disposing of portfolio securities
in order to consummate share repurchases and tender offers.
It is the Board of Trustees' announced policy, which the Board may change, that
the Fund cannot accept tenders or effect repurchases if (1) such transactions,
if consummated, would (a) result in delisting the Shares from the NYSE (the NYSE
having advised the Fund that it would consider delisting if the aggregate market
value of the outstanding Shares is less than $5,000,000, the number of publicly
held Shares falls below 600,000 or the number of round-lot holders falls below
1,200) or (b) terminate the Fund's status as a regulated investment company
under the Code (which would cause the Fund's income to be taxed at the trust
level in addition to being taxed when the shareholders receive dividends from
the Fund), (2) the amount of securities tendered would require liquidation of
such a substantial portion of the Fund's securities that it would not be able to
liquidate portfolio securities in an orderly manner in light of the existing
market conditions and such liquidation would have an adverse effect on the NAV
of the Fund to the detriment of nontendering shareholders or (3) there is, in
the Board of Trustees' judgment, any material (a) legal action or proceeding
instituted or threatened challenging such transactions or otherwise materially
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<PAGE>
adversely affecting the Fund, (b) suspension of or limitation on prices for
trading securities generally on the NYSE or any foreign exchange on which
portfolio securities of the Fund are traded, (c) declaration of a banking
moratorium by federal, state or foreign authorities or any suspension of payment
by banks in the United States, New York State or foreign countries in which the
Fund invests, (d) limitation affecting the Fund or the issuers of its portfolio
securities imposed by federal, state or foreign authorities on the extension of
credit by lending institutions or on the exchange of foreign currency, (e)
commencement of war, armed hostilities or other international or national
calamity directly or indirectly involving the United States or other countries
in which the Fund invests or (f) other event or condition that would have a
material adverse effect on the Fund or its shareholders if Shares were
repurchased. The Board of Trustees may modify these conditions in light of
experience.
Any tender offer made by the Fund will be at a price equal to the NAV per Share
on a date subsequent to the Fund's receipt of all tenders. During the pendency
of any tender offer by the Fund, it will calculate daily the NAV of the Shares
and will establish procedures that will be specified in the tender offer
documents, to enable shareholders to ascertain readily such NAV. Each offer will
be made and shareholders will be notified in accordance with the requirements of
the Securities Exchange Act of 1934 and the 1940 Act, either by publication or
mailing or both. Each offering document will contain the information prescribed
by those laws and the rules and regulations promulgated thereunder. When a
tender offer is authorized to be made by the Fund's Trustees, a shareholder
wishing to accept the offer will be required to tender all (but not less than
all) of the Shares owned by the shareholder (or constructively owned by him or
her for federal income tax purposes under section 318 of the Code). The Fund
will not specify a record date for the tender offer that will not permit a
shareholder of record on the effective date of the tender offer to tender his or
her Shares. The Fund will purchase all Shares tendered in accordance with the
terms of the offer unless it determines to accept none of them (based upon one
of the conditions set forth above). Each person tendering Shares will pay to the
Fund a reasonable service charge currently anticipated to be [$25.00], subject
to change, to help defray certain costs, including the processing of tender
forms, effecting payment, postage and handling. It is the position of the staff
of the SEC that such service charge may not be deducted from the proceeds of the
purchase. The Fund's transfer agent will receive the fee as an offset to these
costs. The Fund expects the costs to the Fund of effecting a tender offer will
exceed the aggregate of all service charges received from those who tender their
Shares. Costs associated with the tender will be charged against capital.
Tendered Shares that have been accepted and purchased by the Fund will be held
in treasury and may be retired by the Trustees. Treasury Shares will be recorded
and reported as an offset to shareholders' equity and accordingly will reduce
the Fund's total assets. If treasury Shares are retired, Shares issued and
outstanding and capital in excess of par value will be reduced.
If the Fund must liquidate portfolio securities in order to purchase tendered
Shares, it may realize gains and losses. The portfolio turnover rate of the Fund
may or may not be affected by the Fund's repurchases of Shares pursuant to a
tender offer.
TAXATION
Set forth below is a discussion of certain U.S. federal income tax
considerations affecting the Fund and the purchase, ownership and disposition of
Shares. This discussion does not purport to be complete or to deal with all
aspects of federal income taxation that may be relevant to shareholders in light
of their particular circumstances. This discussion is based on current
provisions of the Code, the regulations promulgated thereunder, judicial
decisions and administrative pronouncements, all of which are subject to change
(some of which may be retroactive). Prospective investors should consult their
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<PAGE>
own tax advisors with regard to the federal tax consequences of the purchase,
ownership and disposition of Shares, as well as the tax consequences arising
under the laws of any state, foreign country or other taxing jurisdiction.
TAX TREATMENT OF THE FUND
GENERAL. The Fund intends to continue to qualify each year for treatment as a
regulated investment company under the Code ("RIC"). For each taxable year that
it so qualifies, the Fund (but not its shareholders) will be relieved of federal
income tax on the part of its investment company taxable income (consisting
generally of net investment income, net short-term capital gain and net gains
from certain foreign currency transactions) and net capital gain (the excess of
net long-term capital gain over net short-term capital loss) that it distributes
to its shareholders.
To qualify for treatment as a RIC, the Fund must distribute to its shareholders
for each taxable year at least 90% of its investment company taxable income
("Distribution Requirement") and must meet several additional requirements.
These requirements include the following: (1) the Fund must derive at least 90%
of its gross income each taxable year from dividends, interest, payments with
respect to securities loans and gains from the sale or other disposition of
securities or foreign currencies, or other income (including gains from options,
futures or forward contracts) derived with respect to its business of investing
in securities or those currencies ("Income Requirement"); (2) at the close of
each quarter of the Fund's taxable year, at least 50% of the value of its total
assets must be represented by cash and cash items, U.S. government securities,
securities of other RICs and other securities that are limited, in respect of
any one issuer, to an amount that does not exceed 5% of the value of the Fund's
total assets and that does not represent more than 10% of the issuer's
outstanding voting securities; and (3) at the close of each quarter of the
Fund's taxable year, not more than 25% of the value of its total assets may be
invested in securities of any one issuer (other than U.S. government securities
or the securities of other RICs). If the Fund failed to qualify for treatment as
a RIC for any taxable year, it would be taxed as an ordinary corporation on the
full amount of its taxable income for that year (even if that income was
distributed to its shareholders) and all distributions out of its earnings and
profits, including distributions of net capital gain, would be taxable to its
shareholders as dividends (I.E., ordinary income). In addition, the Fund could
be required to recognize unrealized gains, pay substantial taxes and interest
and make substantial distributions before requalifying for RIC treatment.
The Fund will be subject to a non-deductible 4% excise tax ("Excise Tax") to the
extent it fails to distribute by the end of any calendar year substantially all
of its ordinary income for that year and capital gain net income for the
one-year period ending on October 31st of that year, plus certain other amounts.
For these purposes, any such income retained by the Fund, and on which it pays
federal income tax, will be treated as having been distributed.
FOREIGN SECURITIES. The Fund may invest in the stock of "passive foreign
investment companies" ("PFICs"). A PFIC is any foreign corporation (with certain
exceptions) that, in general, meets either of the following tests: (1) at least
75% of its gross income is passive income or (2) an average of at least 50% of
its assets produce, or are held for the production of, passive income. Under
certain circumstances, the Fund will be subject to federal income tax on a
portion of any "excess distribution" received on the stock of a PFIC or of any
gain on disposition of the stock (collectively "PFIC income"), plus interest
thereon, even if the Fund distributes the PFIC income as a dividend to its
shareholders. The balance of the PFIC income will be included in the Fund's
investment company taxable income and, accordingly, will not be taxable to it to
the extent it distributes that income to its shareholders.
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<PAGE>
In lieu of the foregoing tax and interest obligation, the Fund may, and intends
to, elect to "mark to market" its stock in any PFIC. "Marking-to-market," in
this context, means including in ordinary income each taxable year the excess,
if any, of the fair market value of the stock over the Fund's adjusted basis
therein as of the end of that year. Pursuant to the election, the Fund also
would be allowed to deduct (as an ordinary, not capital, loss) the excess, if
any, of its adjusted basis in PFIC stock over the fair market value thereof as
of the taxable year-end, but only to the extent of any net mark-to-market gains
with respect to that stock included in income by the Fund for prior taxable
years under the election (and under regulations proposed in 1992 that provided a
similar election with respect to the stock of certain PFICs). The Fund's
adjusted basis in each PFIC's stock subject to the election would be adjusted to
reflect the amounts of income included and deductions taken thereunder.
Gains from the disposition of foreign currencies will be treated as qualifying
income under the Income Requirement. Gains or losses (1) from the disposition of
foreign currencies, including forward contracts, (2) on the disposition of a
foreign-currency-denominated debt security that are attributable to fluctuations
in the value of the foreign currency between the dates of acquisition and
disposition of the security and (3) that are attributable to exchange rate
fluctuations between the time the Fund accrues interest, dividends or other
receivables, or accrues expenses or other liabilities, denominated in a foreign
currency and the time the Fund actually collects the receivables or pays the
liabilities, generally are treated as ordinary income or loss. These gains,
referred to under the Code as "section 988" gains or losses, increase or
decrease the amount of the Fund's investment company taxable income available to
be distributed to its shareholders as ordinary income, rather than increasing or
decreasing the amount of its net capital gain. In the case of overlap between
sections 988 and 1256 (see below under "Derivatives"), special provisions
determine the character and timing of any income, gain or loss.
Income received by the Fund from investments in Foreign Securities, and gains it
derives from the disposition thereof, may be subject to income, withholding or
other taxes imposed by foreign countries and U.S. possessions that would reduce
the total return on its investments. Tax conventions between certain countries
and the United States may reduce or eliminate those taxes, however, and many
foreign countries do not impose taxes on capital gains in respect of investments
by foreign investors. Foreign taxes withheld from or paid by the Fund will be
treated as a Fund expense unless it meets the requirements, and makes an
election, to enable it, in effect, to pass these taxes through to its
shareholders for use by them as a foreign tax credit or deduction. Each
shareholder will be notified annually whether the foreign taxes paid by the Fund
will "pass through" for that year and, if so, the shareholder's portion of (1)
the foreign taxes paid by the Fund and (2) dividends paid by the Fund that
represent income derived from foreign sources. Individuals who have no more than
$300 ($600 for married persons filing jointly) of creditable foreign taxes
included on Forms 1099 and all of whose foreign source income is "qualified
passive income" may elect each year to be exempt from the extremely complicated
foreign tax credit limitation, in which event they would be able to claim a
foreign tax credit without having to file the detailed Form 1116 that otherwise
is required.
DERIVATIVES. The use of certain derivatives, such as selling (writing) and
purchasing options and futures and entering into forward contracts, involves
complex rules that will determine for federal income tax purposes the amount,
character and timing of recognition of the gains and losses the Fund realizes in
connection therewith. These rules also may require the Fund to "mark to market"
(that is, treat as sold for their fair market value) at the end of each taxable
year certain positions in its portfolio, which may cause the Fund to recognize
income or gain without receiving cash with which to make distributions necessary
to satisfy the Distribution Requirement and avoid imposition of the Excise Tax.
Gains from options, futures and forward contracts derived by the Fund with
respect to its business of investing in securities or foreign currencies will be
treated as qualifying income under the Income Requirement.
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<PAGE>
Certain futures and foreign currency contracts in which the Fund may invest may
be subject to section 1256 of the Code ("section 1256 contracts"). Any section
1256 contracts the Fund holds at the end of each taxable year (other than such
contracts that are part of a "mixed straddle" with respect to which the Fund has
elected not to have the following rules apply) generally must be
marked-to-market for federal income tax purposes. Sixty percent of any net gain
or loss recognized on these deemed sales, and 60% of any net realized gain or
loss from any actual sales of section 1256 contracts, will be treated as
long-term capital gain or loss, and the balance will be treated as short-term
capital gain or loss. These rules may operate to increase the amount that the
Fund must distribute to satisfy the Distribution Requirement (I.E., with respect
to the portion treated as short-term capital gain), which will be taxable to the
shareholders as ordinary income, and to increase the net capital gain it
recognizes, without in either case increasing the cash available to the Fund.
The Fund may elect to exclude certain transactions from the operation of section
1256, although doing so may have the effect of increasing the relative
proportion of net short-term capital gain (taxable as ordinary income) and thus
increasing the amount of dividends that must be distributed.
Gain or loss realized by the Fund on the expiration or sale of certain OTC put
and call options it holds will be either long-term or short-term capital gain or
loss, depending on its holding period for the option. However, gain or loss
realized on the expiration or closing out of such options that are written by
the Fund will be treated as short-term capital gain or loss. In general, if the
Fund exercises an option, or an option that the Fund has written is exercised,
gain or loss on the option will not be separately recognized, but the premium
received or paid will be included in the calculation of gain or loss on
disposition of the property underlying the option.
Offsetting positions in any actively traded security, option, futures or forward
contract entered into or held by the Fund may constitute a "straddle" for
federal income tax purposes. Straddles are subject to certain rules that may
affect the amount, character and timing of the Fund's gains and losses with
respect to positions of the straddle by requiring, among other things, that (1)
loss realized on disposition of one position of a straddle be deferred to the
extent of any unrealized gain in an offsetting position until the latter
position is disposed of, (2) the Fund's holding period in certain straddle
positions not begin until the straddle is terminated (possibly resulting in gain
being treated as short-term rather than long-term capital gain) and (3) losses
recognized with respect to certain straddle positions, that otherwise would
constitute short-term capital losses, be treated as long-term capital losses.
Applicable regulations also provide certain "wash sale" rules, which apply to
transactions where a position is sold at a loss and a new offsetting position is
acquired within a prescribed period, and "short sale" rules applicable to
straddles. Different elections are available to the Fund, which may mitigate the
effects of the straddle rules, particularly with respect to any "mixed straddle"
(I.E., a straddle of which at least one, but not all, positions are section 1256
contracts).
If the Fund has an "appreciated financial position" -- generally, an interest
(including an interest through an option, futures or forward contract or short
sale) with respect to any stock, debt instrument (other than "straight debt") or
partnership interest the fair market value of which exceeds its adjusted basis
- -- and enters into a "constructive sale" of the same or substantially similar
property, the Fund will be treated as having made an actual sale thereof, with
the result that gain will be recognized at that time. A constructive sale
generally consists of a short sale, an offsetting notional principal contract or
a futures or forward contract entered into by the Fund or a related person with
respect to the same or substantially similar property. In addition, if the
appreciated financial position is itself a short sale or such a contract,
acquisition of the underlying property or substantially similar property will be
deemed a constructive sale. The foregoing will not apply, however, to any
transaction during any taxable year that otherwise would be treated as a
constructive sale if the transaction is closed within 30 days after the end of
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that year and the Fund holds the appreciated financial position unhedged for 60
days after that closing (I.E., at no time during that 60-day period is the
Fund's risk of loss regarding that position reduced by reason of certain
specified transactions with respect to substantially similar or related
property, such as having an option to sell, being contractually obligated to
sell, making a short sale or granting an option to buy substantially identical
stock or securities).
TAX TREATMENT OF SHAREHOLDERS
Dividends from the Fund's investment company taxable income (whether received in
cash or reinvested in additional Shares) generally are taxable to its
shareholders as ordinary income to the extent of its earnings and profits.
Distributions of the Fund's net capital gain (whether received in cash or
reinvested in additional Shares), when designated as such, are taxable to its
shareholders as long-term capital gain, regardless of how long they have held
their Shares. A participant in the Dividend Reinvestment and Cash Purchase Plan
("Reinvestment Plan") will be treated as having received a distribution in the
amount of the cash used to purchase Shares on his or her behalf, including a PRO
RATA portion of the brokerage fees incurred by the agent under the Reinvestment
Plan. Distributions by the Fund to its shareholders in any year that exceed its
earnings and profits generally may be applied by each shareholder against the
basis for his or her Shares and will be taxable at capital gains rates (assuming
the Shares are held as a capital asset) to a shareholder to the extent the
distributions to the shareholder exceed the shareholder's basis for his or her
Shares. Shareholders who are not liable for tax on their income and whose Shares
are not debt-financed generally are not required to pay tax on dividends or
other distributions they receive from the Fund.
A portion of the dividends from the Fund's investment company taxable income
(whether paid in cash or reinvested in additional Shares) may be eligible for
the dividends-received deduction allowed to corporations. The eligible portion
may not exceed the aggregate dividends the Fund receives from domestic
corporations. However, dividends received by a corporate shareholder and
deducted by it pursuant to the dividends-received deduction are subject
indirectly to the federal alternative minimum tax. The Fund will notify
shareholders of the amount of any dividends that may be taken into account for
purposes of the dividends-received deduction not later than 60 days after the
close of its taxable year.
The Fund may retain its net capital gain for investment. If the Fund does so,
however, it will be subject to a tax of 35% on the retained amount. In that
event, the Fund expects to designate the retained amount as undistributed
capital gains in a notice to its shareholders, who (1) will be required to
include in their taxable income, as long-term capital gain, their proportionate
shares of the retained amount, (2) will be entitled to credit their
proportionate shares of the tax paid by the Fund against their federal income
tax liabilities and, for any shareholder whose share of that tax exceeds his or
her tax liabilities, to claim a refund, and (3) will increase the tax basis of
their Shares by the difference between the included income and such share of the
Fund tax.
The Fund will notify its shareholders following the end of each calendar year of
the amounts of dividends and capital gain distributions paid (or deemed paid)
that year and undistributed capital gain designated for that year.
Investors should be aware that if Shares are purchased shortly before the record
date for any dividend or other distribution, they will pay full price for the
Shares and will receive some portion of the purchase price back as a taxable
distribution.
25
<PAGE>
On the sale or exchange of Shares (including a sale pursuant to a Share
repurchase or tender offer by the Fund), a shareholder generally will recognize
a taxable gain or loss equal to the difference between his or her adjusted basis
for the Shares and the amount received. Any such gain or loss will be treated as
a capital gain or loss if the Shares are held by the shareholder as capital
assets and will be long-term capital gain or loss if the Shares have been held
for more than one year. Any loss recognized on a sale or exchange of Shares that
were held for six months or less will be treated as long-term, rather than
short-term, capital loss to the extent of any capital gain distributions
previously received thereon. A loss realized on a sale or exchange of Shares
will be disallowed to the extent those Shares are replaced by other Shares
within a period of 61 days beginning 30 days before and ending 30 days after the
date of disposition of the Shares (which could occur, for example, as a result
of participation in the Reinvestment Plan). In that event, the basis of the
replacement Shares will be adjusted to reflect the disallowed loss.
Net capital gain recognized by individuals and other non-corporate taxpayers on
the sale or exchange of capital assets held for one year or less, and all net
capital gain recognized by corporations, is taxed at the same rates as ordinary
income. The maximum tax rate applicable to non-corporate taxpayers' net capital
gain for capital assets held longer than one year is 20% (10% for taxpayers in
the 15% marginal tax bracket); this rate applies to distributions of net capital
gain by the Fund as well as to sales and exchanges of Shares.
FINANCIAL STATEMENTS
PricewaterhouseCoopers LLP are the Fund's independent accountants providing
audit and tax return preparation services and assistance and consultation in
connection with the review of various SEC filings. The address of
PricewaterhouseCoopers LLP is 950 Seventeenth Street, Denver, Colorado, 80202.
The financial statements incorporated by reference in this SAI have been so
incorporated and the financial highlights included in the Prospectus have been
so included, in reliance upon the report of PricewaterhouseCoopers LLP given on
the authority of said firm as experts in accounting and auditing.
INCORPORATION BY REFERENCE
The Fund's Annual Report for the fiscal year ended October 31, 1998 (the
"Report"), which either accompanies this SAI or has previously been provided to
the person to whom this SAI is being sent, is incorporated herein by reference
with respect to all information other than the information set forth in the
Letter to Shareholders included therein. The Fund will furnish, without charge,
a copy of its Report upon written request to INVESCO Global Health Sciences
Fund, 7800 East Union Avenue, Denver, Colorado 80237, or call 1-800-528-8765, or
visit our website at http://ghs.invesco.com.
26
<PAGE>
PART C OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
1. Financial Statements
(a) Financial Highlights - Contained in Part A
(b) Incorporated in Part B by reference to Registrant's October 31, 1998
Annual Report:
1. Statement of Investments as of October 31, 1998
2. Statement of Assets and Liabilities as of October 31, 1998
3. Statement of Operations for the years ended October 31, 1998
and October 31, 1997
4. Statements of Changes in Net Assets for the year ended October
31, 1998
5. Statement of Cash Flows for the year ended October 31, 1998
6. Notes to Financial Statements
7. Financial Highlights
8. Report of Independent Accountants dated December 8, 1998
2. Exhibits*
(a)(1) Declaration of Trust of the Registrant
(a)(2) Amendment of the Declaration of Trust of the Registrant
(b) By-Laws of the Registrant
(c) Not Applicable
(d)(1) Specimen Certificate for Shares of Beneficial Interest of the
Registrant*
(d)(2) Form of Subscription Certificate*
(d)(3) Form of Notice of Guaranteed Delivery*
(d)(4) Form of Nominee Holder Over-Subscription Exercise Form*
(d)(5) Form of Beneficial Owner Listing Certification*
(e) Dividend Reinvestment and Cash Purchase Plan of the Registrant
(f) Not Applicable
27
<PAGE>
(g)(1) Investment Management Agreement between the Registrant and INVESCO
Funds Group, Inc.
(g)(2) Amendment to Investment Management Agreement
(h) Form of Underwriter Agreement between the Registrant and
PaineWebber Incorporated*
(i)(1) Deferred Fee Agreement
(i)(2) Defined Benefit Deferred Compensation Plan for Non-Interested
Directors and Trustees
(j)(1) Custody Agreement between the Registrant and State Street Bank
and Trust Company
(j)(2) Special Custody Account Agreement between the Registrant and
Bear Stearns Securities Corp.
(j)(3) Special Custody Account Agreement between the Registrant and
Herzog, Heine, Geduld
(k)(1) Registrar, Transfer Agency and Service Agreement between the
Registrant and State Street Bank and Trust Company
(k)(2) Administration Agreement between the Registrant and INVESCO Funds
Group Inc.
(k)(3) Amendment to Administration Agreement
(k)(4) Form of Subscription Agreement with INVESCO Funds Group, Inc.*
(l) Opinion and Consent of Kirkpatrick & Lockhart LLP*
(m) Not Applicable
(n) Consent of PricewaterhouseCoopers LLP*
(o) Not Applicable
(p) Subscription Agreement for Initial Capital*
(q) Not Applicable
(r) Financial Data Schedule*
(s) Powers of Attorney*
*to be completed by Amendment
ITEM 25. MARKETING AGREEMENTS
See Form of Dealer Manager Agreement to be filed as Exhibit (h) to this
Registration Statement.
28
<PAGE>
ITEM 26. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION*
Registration Fees....................................................
Printing and Engraving Expenses......................................
Rating Agency Fees and Expenses......................................
Trustees' Fees and Expenses..........................................
Legal Fees and Expenses..............................................
New York Stock Exchange Listing Fees.................................
National Association of Securities Dealers, Inc. Fees................
Accounting Fees and Expenses.........................................
Dealer Manager Expense Reimbursement.................................
Subscription Agent Fees and Expenses.................................
Information Agent's Fees and Expenses................................
Federal Taxes........................................................
State Taxes..........................................................
State Fees...........................................................
Miscellaneous Expenses...............................................
Total................................................................
*to be completed by Amendment
ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL
Not Applicable.
ITEM 28. NUMBER OF HOLDERS OF SECURITIES
NUMBER OF RECORD HOLDERS
TITLE OF CLASS AS OF [ ] 1999
-------------- ------------------
Shares of Beneficial Interest......... [XXX]
ITEM 29. INDEMNIFICATION
Section 5.3 of the Registrant's Declaration of Trust (Exhibit (a) hereto, which
is incorporated by reference herein) provides in effect that the Registrant will
indemnify its officers and Trustees under certain circumstances. However, in
accordance with Section 17(h) and 17(i) of the Investment Company Act of 1940
and its own terms, said Article of the Agreement and Declaration of Trust does
not protect any person against any liability to the Registrant or its
shareholders to which he would otherwise be subject by reason of bad faith,
willful misfeasance, gross negligence, or reckless disregard of the duties
involved in the conduct of his office.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to Trustees, officers and controlling persons of the
Registrant, pursuant to the foregoing provisions or otherwise, the Registrant
has been advised that in the opinion of the SEC, such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a Trustee, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such Trustee, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question as to
29
<PAGE>
whether such indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT MANAGER
The description of the business of INVESCO Funds Group, Inc. is set forth under
the caption "Management of the Fund" in the Prospectus and SAI forming part of
this Registration Statement.
The information as to the Directors and officers of INVESCO Funds Group, Inc.
set forth in INVESCO Funds Group's Form ADV filed with the Securities and
Exchange Commission (File No. 811-6476), as amended through the date hereof, is
incorporated herein by reference.
ITEM 31. LOCATION OF ACCOUNTS AND RECORDS
INVESCO Global Health Sciences Fund, 7800 East Union Avenue, Denver, Colorado
80237, or call 1-800-528-8765. Accounts and Records of the Fund are maintained
at (i) the Fund's office at 7800 East Union, Avenue, Denver, Colorado, 80237 and
(ii) the offices of INVESCO Funds Group, Inc. at 7800 East Union, Avenue,
Denver, Colorado, 80237.
In addition, EquiServe, Inc., 150 Royall Street, Canton, MA 02021 maintains all
the required records in its capacity as transfer, dividend paying, and
shareholder service agent of the Registrant.
ITEM 32. MANAGEMENT SERVICES
Not Applicable.
ITEM 33. UNDERTAKINGS
1. The Registrant undertakes to suspend the Offer until the Prospectus is
amended if (1) subsequent to the effective date of this registration statement,
the NAV declines more than ten percent from its NAV as of the effective date of
this registration statement or (2) the NAV of the Shares exercisable pursuant to
the Rights that are the subject of this registration statement increases to an
amount greater than the net proceeds as stated in the Prospectus included in
this registration statement.
2. Not Applicable.
3. Not Applicable.
4. Not Applicable.
5. The Registrant undertakes:
a. for the purpose of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant under Rule 497(h) under the
Securities Act of 1933 shall be deemed to be part of this registration
statement as of the time it was declared effective; and
b. for the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities
30
<PAGE>
offered therein, and the offering of the securities at that time shall be
deemed to be the initial bona fide offering thereof.
6. The Registrant undertakes to send by first class mail or other means designed
to ensure equally prompt delivery, within two Business Days of receipt of a
written or oral request, any SAI.
31
<PAGE>
SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Denver, State of Colorado on APRIL 7, 1999.
INVESCO GLOBAL HEALTH SCIENCES FUND
By: /s/ Mark H. Williamson April 7, 1999
------------------------------------------
Mark H. Williamson DATE
President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
indicated on the dates indicated. The undersigned hereby constitute and appoint
Glen A. Payne, [Clifford J. Alexander, Robert H. Rosenblum, and Anthony S.
Higgins,] and each of them, with full power to act without the other, his or her
true and lawful attorney-in-fact and agent, with full power and substitution and
resubstitution, for him or her, and in his or her name, place and stead, in any
and all capacities (until revoked in writing) to sign any and all amendments to
the Registration Statement of the INVESCO Global Health Sciences Fund
(including post-effective amendments thereto), and to file the same, with
all exhibits thereto, and other documents in connection therewith, with the SEC,
granting unto said attorneys-in fact and agents, and each of them, full power
and authority to do and perform each and every act and thing ratifying and
confirming all that said attorneys-in fact and agents or any of them, or their
or his or her substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
By: /s/ Mark H. Williamson April 7, 1999
-----------------------------------------------
Principal Executive Officer, DATE
Mark H. Williamson, President
By: /s/ Ronald L. Grooms April 7, 1999
-----------------------------------------------
Principal Financial Officer, DATE
Ronald L. Grooms Vice President and Treasurer
By: /s/ John R. Schroer April 7, 1999
-----------------------------------------------
Vice President DATE
John R. Schroer
By: /s/ Glen A. Payne April 7, 1999
-----------------------------------------------
Secretary DATE
Glen A. Payne
By: * April 7, 1999
-----------------------------------------------
Trustee DATE
Charles W. Brady
32
<PAGE>
By: * April 7, 1999
-----------------------------------------------
Trustee DATE
Fred A. Deering
By: * April 7, 1999
-----------------------------------------------
Trustee DATE
John W. McIntyre
By: * April 7, 1999
-----------------------------------------------
Trustee DATE
Dr. Larry Soll
*By: /s/ Glen A. Payne April 7, 1999
-----------------------------------------------
Glen A. Payne DATE
Attorney in Fact for the Trustees
33
<PAGE>
INDEX OF EXHIBITS
(2)(a)(1) Declaration of Trust of the Registrant
(2)(a)(2) Amendment to the Declaration of Trust of the Registrant
(2)(b) By-Laws of the Registrant
(2)(e) Dividend Reinvestment and Cash Purchase Plan of the Registrant
(2)(g)(1) Investment Advisory Agreement between the Registrant and INVESCO
Funds Group, Inc.
(2)(g)(2) Amendment to Advisory Agreement
(2)(i)(1) Deferred Fee Agreement
(2)(i)(2) Defined Benefit Deferred Compensation Plan for Non-Interested
Directors and Trustees
(2)(j)(1) Custodian Contract between the Registrant and State Street Bank and
Trust Company
(2)(j)(2) Special Custody Account Agreement between the Registrant and Bear,
Stearns Securities Corp.
(2)(j)(3) Special Custody Account Agreement between the Registrant and Herzog,
Heine, Geduld, Inc.
(2)(k)(1) Registrar, Transfer Agency and Service Agreement between the
Registrant and State Street Bank and Trust Company
(2)(k)(2) Administration Agreement between the Registrant and INVESCO Funds
Group, Inc.
(2)(k)(3) Amendment to Administration Agreement
DECLARATION OF TRUST
OF
THE GLOBAL HEALTH SCIENCES FUND
Dated: November 18, 1991
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I - NAME AND DEFINITIONS...........................................1
Section 1.1 Name......................................................1
Section 1.2 Definitions...............................................1
ARTICLE II - TRUSTEES......................................................3
Section 2.1 Number of Trustees........................................3
Section 2.2 Term of Office of Trustees................................3
Section 2.3 Resignation and Appointment of Trustees...................4
Section 2.4 Vacancies.................................................4
Section 2.5 Delegation of Power to Other Trustees.....................5
Section 2.6 Removal of Trustees.......................................5
ARTICLE III - POWER OF TRUSTEES............................................5
Section 3.1 General...................................................5
Section 3.2 Investments...............................................6
Section 3.3 Legal Title...............................................6
Section 3.4 Issuance and Repurchase of Securities.....................7
Section 3.5 Borrowing Money; Lending Fund Assets......................7
Section 3.6 Delegation; Committees....................................7
Section 3.7 Collection and Payment....................................7
Section 3.8 Expenses..................................................7
Section 3.9 Manner of Acting; By-Laws.................................7
Section 3.10 Miscellaneous Powers.....................................8
Section 3.11 Principal Transactions...................................8
Section 3.12 Litigation...............................................8
Section 3.13 Trustees and Officers as Shareholders....................9
ARTICLE IV - INVESTMENT ADVISER, DISTRIBUTOR,
CUSTODIAN AND TRANSFER AGENT..................................9
Section 4.1 Investment Adviser.........................................9
Section 4.2 Administrative Services...................................9
Section 4.3 Distributor..............................................10
Section 4.4 Transfer Agent...........................................10
Section 4.5 Custodian................................................10
Section 4.6 Parties to Contract......................................10
ARTICLE V - LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS..........................................11
Section 5.1 No Personal Liability of Shareholders, Trustees, etc.....11
Section 5.2 Non-Liability of Trustees, etc...........................11
Section 5.3 Indemnification..........................................11
-i-
<PAGE>
Section 5.4 No Bond Required of Trustees..............................12
Section 5.5 No Duty of Investigation; Notice in Fund Instruments, etc12
Section 5.6 Reliance on Experts, etc.................................12
ARTICLE VI - SHARES OF BENEFICIAL INTEREST................................13
Section 6.1 Beneficial Interest......................................13
Section 6.2 Rights of Shareholders...................................13
Section 6.3 Trust Only...............................................13
Section 6.4 Issuance of Shares.......................................13
Section 6.5 Register of Shares.......................................14
Section 6.6 Transfer of Shares.......................................14
Section 6.7 Notices..................................................14
Section 6.8 Voting Powers............................................15
ARTICLE VII - DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS..............................15
Section 7.1 Net Asset Value..........................................15
Section 7.2 Distributions to Shareholders............................15
Section 7.3 Determination of Net Income..............................16
Section 7.4 Power to Modify Foregoing Procedures.....................16
ARTICLE VIII - DURATION; TERMINATION OF FUND;
AMENDMENT; MERGERS, ETC...................................16
Section 8.1 Duration.................................................16
Section 8.2 Termination of Fund......................................17
Section 8.3 Amendment Procedures.....................................17
Section 8.4 Merger, Consolidation and Sale of Assets.................18
Section 8.5 Incorporation and Reorganization.........................19
Section 8.6 Conversion...............................................19
Section 8.7 Certain Transactions.....................................19
ARTICLE IX - REPORTS TO SHAREHOLDERS.......................................21
ARTICLE X - MISCELLANEOUS.................................................21
Section 10.1 Filing..................................................21
Section 10.2 Resident Agent..........................................22
Section 10.3 Governing Law...........................................22
Section 10.4 Organizational Expenses.................................22
Section 10.5 Counterparts............................................22
Section 10.6 Reliance by Third Parties...............................22
Section 10.7 Provisions in Conflict with Law or Regulations..........22
-ii-
<PAGE>
DECLARATION OF TRUST
OF
THE GLOBAL HEALTH SCIENCES FUND
Dated: November 18, 1991
--------------------------------
THIS DECLARATION OF TRUST of The Global Health Sciences Fund is made
the 18th day of November, 1991 by the parties signatory hereto, as Trustees
(such persons, so long as they shall continue in office in accordance with the
terms of this Declaration of Trust, and all other persons who at the time in
question have been duly elected or appointed as Trustees in accordance with the
provisions of this Declaration of Trust and are then in office, being
hereinafter called the "Trustees").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Trustees desire to form a Trust under the laws of
Massachusetts for the investment and reinvestment of funds contributed thereto;
and
WHEREAS, it is provided that the beneficial interest in the Trust
assets be divided into transferable shares of beneficial interest as hereinafter
provided;
NOW, THEREFORE, the Trustees hereby declare that they will hold in
trust all money and property contributed to the Trust to manage and dispose of
the same for the benefit of the holders from time to time of the shares of
beneficial interest issued hereunder and subject to the provisions hereof, to
wit:
ARTICLE I
NAME AND DEFINITIONS
--------------------
SECTION 1.1 NAME. The name of the Trust created hereby is the "The
Global Health Sciences Fund," and so far as may be practicable the Trustees
shall conduct the Trust's activities, execute all documents and sue or be sued
under that name, which name (and the word "Fund" wherever herein used) shall
refer to the Trustees as trustees, and not as individuals, or personally and
shall not refer to the officers, agents, employees or Shareholders of the Fund.
Should the Trustees determine that the use of such name is not advisable, they
may use such other name for the Fund as they deem proper and the Fund may hold
its property and conduct its activities under such other name.
SECTION 1.2 DEFINITIONS. Wherever they are used herein, the
following terms have the following respective meanings:
<PAGE>
(a) "BY-LAWS" means the By-Laws referred to in Section 3.9 hereof,
as from time to time amended.
(b) The terms "COMMISSION," "AFFILIATED PERSON" and "INTERESTED
PERSON" have the meanings given them in the 1940 Act.
(c) "DECLARATION" means this Declaration of Trust as amended from
time to time. Reference in this Declaration of Trust to
"DECLARATION," "HEREOF," "HEREIN" and "HEREUNDER" shall be
deemed to refer to this Declaration rather than the article or
section in which such words appear.
(d) "DISTRIBUTOR" means the party, other than the Fund, to a
contract described Section 4.3 hereof.
(e) "FUND" means The Global Health Sciences Fund.
(f) "FUND PROPERTY" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the
account of the Fund or the Trustees.
(g) "FUNDAMENTAL POLICIES" shall mean the investment policies and
restrictions set forth in the Registration Statement and
designated as fundamental policies herein.
(h) "INVESTMENT ADVISER" means any party, other than the Fund, to
a contract described in Section 4.1 hereof.
(i) "MAJORITY SHAREHOLDER VOTE" means the vote of the holders of a
majority of Shares, which shall consist of (i) a majority of
Shares presented in person or by proxy and entitled to vote at
a meeting of Shareholders at which a quorum, as determined in
accordance with the By-Laws, is present or (ii) a majority of
Shares issued and outstanding and entitled to vote when action
is taken by written consent of Shareholders, unless the action
requires the approval of a "majority of the outstanding voting
securities" under the 1940 Act, in which case such vote as
specified in the 1940 Act shall be required.
(j) "1940 ACT" means the Investment Company Act of 1940 and the
rules and regulations thereunder as amended from time to time.
(k) "PERSON" means and includes individuals, corporations,
partnerships, trusts, associations, joint ventures and other
entities, whether or not legal entities, and governments and
agencies and political subdivisions thereof.
(l) "REGISTRATION STATEMENT" means the Registration Statement of
the Fund under the Securities Act of 1933 as such Registration
Statement may be amended and filed with the Commission from
time to time.
-2-
<PAGE>
(m) "SHAREHOLDER" means a record owner of outstanding Shares.
(n) "SHARES" means the units of interest into which the beneficial
interest in the Fund shall be divided from time to time and
includes fractions of Shares as well as whole Shares.
(o) "TRANSFER AGENT" means the party, other than the Fund, to the
contract described in Section 4.4 hereof.
(p) "TRUSTEES" means the persons who have signed the --------
Declaration, so long as they shall continue in office in
accordance with the terms hereof, and all other persons who
may from time to time be duly elected or appointed, qualified
and serving as Trustees in accordance with the provisions
hereof, and reference herein to a Trustee or the Trustees
shall refer to such person or persons in their capacity as
Trustees hereunder.
ARTICLE II
TRUSTEES
--------
SECTION 2.1 NUMBER OF TRUSTEES. The number of Trustees shall be such
number as shall be fixed from time to time by a written instrument signed by a
majority of the Trustees, provided, however, that the number of Trustees shall
in no event be less than three (3) nor more than fifteen (15). No reduction in
the number of Trustees shall have the effect of removing any Trustee from office
prior to the expiration of his term unless the Trustee is specifically removed
pursuant to Section 2.2 of this Article II at the time of decrease.
SECTION 2.2 TERM OF OFFICE OF TRUSTEES. The Board of Trustees shall
be divided into four classes. Within the limits above specified, the number of
the Trustees in each class shall be determined by resolution of the Board of
Trustees. The term of office of all of the Trustees shall expire on the date of
the first annual or special meeting of shareholders following the effective date
of the Registration Statement relating to the Shares under the Securities Act of
1933, as amended. The term of office of the first class shall expire on the date
of the second annual meeting of shareholders or special meeting in lieu thereof.
The term of office of the second class shall expire on the date of the third
annual meeting of shareholders or special meeting in lieu thereof. The term of
office of the third class shall expire on the date of the fourth annual meeting
of shareholders or special meeting in lieu thereof. The term of office of the
fourth class shall expire on the date of the fifth annual meeting of
shareholders or special meeting in lieu thereof. Upon expiration of the term of
office of each class as set forth above, the number of Trustees in such class,
as determined by the Board of Trustees, shall be elected for a term expiring on
the date of the fourth annual meeting of shareholders or special meeting in lieu
thereof following such expiration to succeed the Trustees whose terms of office
expire. The Trustees shall be elected at an annual meeting of the shareholders
-3-
<PAGE>
or special meeting in lieu thereof called for that purpose, except as provided
in Section 2.3 of this Article and each Trustee elected shall hold office until
his successor shall have been elected and shall have qualified; except (a) that
any Trustee may resign his trust (without need for prior or subsequent
accounting) by an instrument in signed by him or her and delivered to the other
Trustees, which shall take effect upon such delivery or upon such later date as
is specified therein; (b) that any Trustee may be removed (provided the
aggregate number of Trustees after such removal shall not be less than the
number required by Section 2.1 hereof) with cause, at any time by written
instrument, signed by the remaining Trustees, specifying the date when such
removal shall become effective; and (c) that any Trustee who requests in writing
to be retired or who has become incapacitated by illness or injury may be
retired by written instrument signed by a majority of the other Trustees,
specifying the date of his retirement. Upon the resignation or removal of a
Trustee, or his otherwise ceasing to be Trustee, he shall execute and deliver
such documents as the remaining Trustees shall require for the purpose of
conveying to the Fund or the remaining Trustees any Fund Property held in the
name of the resigning or removed Trustee. Upon the incapacity or death of any
Trustee, his legal representative shall execute and deliver on his behalf such
documents as the remaining Trustees shall require as provided in the preceding
sentence.
SECTION 2.3 RESIGNATION AND APPOINTMENT OF TRUSTEES. In case of the
declaration, death, resignation, retirement, removal or inability of any of the
Trustees, or in case a vacancy shall, by reason of any increase in number, or
for any other reason, exist, the remaining Trustees or, prior to the public
offering of Shares of the Fund, if only one Trustee shall then remain in office,
the remaining Trustee, shall fill such vacancy by appointing such other person
as they or any one of them, in their discretion, shall see fit. Such appointment
shall be evidenced by a written instrument signed by a majority of the remaining
Trustees or by the remaining Trustee, as the case may be. Any such appointment
shall not become effective, however, until the person named in the written
instrument or appointment shall have accepted in writing such appointment and
agreed in writing to be bound by the terms of the Declaration. Within twelve
months of such appointment, the Trustees shall cause notice of such appointment
to be mailed to each Shareholder at his or her address as recorded on the books
of the Fund. An appointment of a Trustee may be made by the Trustees then in
office and notice thereof mailed to Shareholders as aforesaid in anticipation of
a vacancy to occur by reason of retirement, resignation or increase in number of
Trustees effective at a later date, provided that said appointment shall become
effective only at or after the effective date of said retirement, resignation or
increase in number of Trustees. The power of appointment is subject to the
provisions of Section 16(a) of the 1940 Act.
SECTION 2.4 VACANCIES. The death, declination, resignation,
retirement, removal or incapacity of the Trustees, or any one of them, shall not
operate to annul the Fund or to revoke any existing agency created pursuant to
the terms of this Declaration. Whenever a vacancy in the number of Trustees
shall occur, until such vacancy is filled as provided in Section 2.3, the
Trustees in office, regardless of their number, shall have all the duties
imposed upon the Trustees by the Declaration. A written instrument certifying
the existence of such vacancy signed by a majority of the Trustees shall be
conclusive evidence of the existence of such vacancy.
SECTION 2.5 DELEGATION OF POWER TO OTHER TRUSTEES. Subject to the
provisions of the 1940 Act, any Trustee may, by power of attorney, delegate his
or her power for a period not exceeding six (6) months at any one time to any
other Trustee or Trustees; provided that in no case shall less than two (2)
Trustees personally exercise the powers granted to the Trustees under the
Declaration except as herein otherwise expressly provided.
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SECTION 2.6 REMOVAL OF TRUSTEES. The Fund shall comply with the
provisions of Section 16(c) of the 1940 Act as though applicable to the Fund,
and with interpretations thereof by the Commission staff, insofar as such
provisions and interpretations provide for the removal of trustees of common-law
trusts and the calling of Shareholder meetings for such purpose; provided,
however, that the Fund may at any time or from time to time apply to the
Commission for one or more exemptions from all or part of said Section 16(c) or
a staff interpretation thereof and, if exemptive order(s) or interpretation(s)
are issued or provided by the Commission or its staff, such order(s) or
interpretation(s) shall be deemed part of Section 16(c) for the purposes of
applying this Section 2.6.
ARTICLE III
POWER OF TRUSTEES
-----------------
SECTION 3.1 GENERAL. The Trustees shall have exclusive and absolute
control over the Fund Property and over the business of the Fund to the same
extent as if the Trustees were the sole owners of the Fund Property and business
in their own right, but with such powers of delegation as may be permitted by
the Declaration. The Trustees shall have power to conduct the business of the
Fund and carry on its operations in any and all of its branches and maintain
offices both within and without the Commonwealth of Massachusetts, in any and
all states of the United States of America, in the District of Columbia, and in
any and all commonwealths, territories, dependencies, colonies, possessions,
agencies or instrumentalities wheresoever in the world they may be located and
to do all such other things and execute all such instruments as they deem
necessary, proper or desirable in order to promote the interests of the Fund
although such things are not herein specifically mentioned. Any determination as
to what is in the interests of the Fund made by the Trustees in good faith shall
be conclusive. In construing the provisions of the Declaration, the presumption
shall be in favor of a grant of power to the Trustees.
The enumeration of any specific power herein shall not be construed
as limiting the aforesaid power. Such powers of the Trustees may be exercised
without order of or resort to any court.
SECTION 3.2 INVESTMENTS. The Trustees shall have the power to:
------------------------
(a) conduct, operate and carry on the business of an investment
company;
(b) subscribe for, invest in, reinvest in, purchase or otherwise
acquire, hold, pledge, sell, sell short, assign, transfer,
exchange, distribute, lend or otherwise deal in, all forms of
securities of every kind, nature, character, type and form,
and other financial instruments that may not be deemed to be
securities, including, but not limited to, futures contracts
and options thereon, forward foreign currency contracts, and
equity swaps. Such securities and other financial instruments
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may include, but are not limited to, shares, stocks, bonds,
debentures, notes, scrip, participation certificates, rights
to subscribe, warrants, options, repurchase agreements,
commercial paper, evidences of indebtedness, certificates of
indebtedness, issued or to be issued by any corporation,
company, partnership, association, trust or entity, public or
private, engaged in the health sciences, whether organized
under the laws of the United States, or any state,
commonwealth, territory or possession thereof, or of any
foreign country, or any state, province, territory or
possession thereof; and to exercise any and all rights, powers
and privileges of ownership or interest in respect of any kind
all such investments of every kind and description, including,
without limitation, the right to consent and otherwise act
with respect thereto, with power to designate one or more
persons, firms, associations or corporations to exercise any
of said rights, powers and privileges in respect of any of
said instruments; and the Trustee shall be deemed to have the
foregoing powers with respect to any additional securities in
which the Fund may invest should the Fundamental Policies be
amended.
The Trustees shall not be limited to investing in obligations maturing before
the possible termination of the Fund, nor shall the Trustees be limited by any
law limiting the investments which may be made by fiduciaries.
SECTION 3.3 LEGAL TITLE. Legal title to all the Fund Property shall
be vested in the Trustees as joint tenants except that the Trustees shall have
power to cause legal title to any Fund Property to be held by or in the name of
one or more of the Trustees, or in the name of the Fund, or in the name of any
other Person as nominee, on such terms as the Trustees may determine, provided
that the interest of the Fund therein is appropriately protected. The right,
title and interest of the Trustees in the Fund Property shall vest automatically
in each Person who may hereafter become a Trustee. Upon the resignation, removal
or death of a Trustee he or she shall automatically cease to have any right,
title or interest in any of the Fund Property, and the right, title and interest
of such Trustee in the Fund Property shall vest automatically in the remaining
Trustees. Such vesting and cessation of title shall be effective whether or not
conveyancing documents have been executed and delivered.
SECTION 3.4 ISSUANCE AND REPURCHASE OF SECURITIES. The Trustees
shall have the power to issue, sell, repurchase, retire, cancel, acquire, hold,
resell, reissue, dispose of, transfer, and otherwise deal in Shares and, subject
to the provisions set forth in Articles VII and VIII hereof, to apply to any
such repurchase, retirement, cancellation or acquisition of Shares any funds or
property of the Fund, whether capital or surplus or otherwise, to the full
extent now or hereafter permitted by the laws of the Commonwealth of
Massachusetts governing business corporations.
SECTION 3.5 BORROWING MONEY; LENDING FUND ASSETS. Subject to the
Fundamental Policies, the Trustees shall have the power to borrow money or
otherwise obtain credit and to secure the same by mortgaging, pledging or
otherwise subjecting as security the assets of the Fund, to endorse, guarantee,
or undertake the performance of any obligation, contract or engagement of any
other Person and to lend Fund assets.
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SECTION 3.6 DELEGATION; COMMITTEES. The Trustees shall have power,
consistent with their continuing exclusive authority over the management of the
Fund and the Fund Property, to delegate from time to time to such of their
number or to officers, employees or agents of the Fund the doing of such things
and the execution of such instruments either in the name of the Fund or the
names of the Trustees or otherwise as the Trustees may deem expedient.
SECTION 3.7 COLLECTION AND PAYMENT. The Trustees shall have power to
collect all property due to the Fund; to pay all claims, including taxes,
against the Fund Property; to prosecute, defend, compromise or abandon any
claims relating to the Fund Property; to foreclose any security interest
securing any obligations, by virtue of which any property is owed to the Fund;
and to enter into releases, agreements and other instruments.
SECTION 3.8 EXPENSES. The Trustees shall have the power to incur and
pay any expenses which in the opinion of the Trustees are necessary or
incidental to carry out any of the purposes of the Declaration, and to pay
reasonable compensation from the funds of the Fund to themselves as Trustees.
The Trustees shall fix the compensation of all officers, employees and Trustees.
SECTION 3.9 MANNER OF ACTING; BY-LAWS. Except as otherwise provided
herein or in the By-Laws or by any provisions of law, any action to be taken by
the Trustees may be taken by a majority of the Trustees present at a meeting of
Trustees (a quorum being present), including any meeting held by means of a
conference telephone circuit or similar communications equipment by means of
which all persons participating in the meeting can hear each other, or by
written consents of all the Trustees. The Trustees may adopt By-Laws not
inconsistent with this Declaration to provide for the conduct of the business of
the Fund and may amend or repeal such By-Laws to the extent such power is not
reserved to the Shareholders.
SECTION 3.10 MISCELLANEOUS POWERS. The Trustees shall have the power
to: (a) employ or contract with such Persons as the Trustees may deem desirable
for the transaction of the business of the Fund; (b) enter into joint ventures,
partnerships and any other combinations or associations; (c) remove Trustees or
fill vacancies in or add to their number, elect and remove such officers and
appoint and terminate such agents or employees as they consider appropriate, and
appoint from their own number, and terminate, any one or more committees which
may exercise some or all of the power and authority of the Trustees as the
Trustees may determine; (d) purchase, and pay for out of Fund Property,
insurance policies insuring the Shareholders, Trustees, officers, employees,
agents, investment advisers, distributors, selected dealers or independent
contractors of the Fund against all claims arising by reason of holding any such
position or by reason of any action taken or omitted to be taken by any such
Person in such capacity, whether or not constituting negligence, or whether or
not the Fund would have the power to indemnify such Person against such
liability; (e) establish pension, profit-sharing, share purchase, and other
retirement, incentive and benefit plans for any Trustees, officers, employees
and agents of the Fund; (f) to the extent permitted by law, indemnify any person
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with whom the Fund has dealings, including any Investment Adviser, Distributor,
Transfer Agent and selected dealers, to such extent as the Trustees shall
determine; (g) guarantee indebtedness or contractual obligations of others; (h)
determine and change the fiscal year of the Fund and the method by which its
accounts shall be kept; and (i) adopt a seal for the Fund, but the absence of
such seal shall not impair the validity of any instrument executed on behalf of
the Fund.
SECTION 3.11 PRINCIPAL TRANSACTIONS. Except in transactions
permitted by the 1940 Act or any rule or regulation thereunder, or any order of
exemption issued by the Commission, or effected to implement the provisions of
any agreement to which the Fund is a party, the Trustees shall not, on behalf of
the Fund, buy any securities (other than Shares) from or sell any securities
(other than Shares) to, or lend any assets of the Fund to, any Trustee or
officer of the Fund or any firm of which any such Trustee or officer is a member
acting as principal, or have any such dealings with any Investment Adviser,
Distributor or Transfer Agent or with any Affiliated Person of such Person; but
the Fund or any Series thereof may employ any such Person, or firm or company in
which such Person is an Interested Person, as broker, legal counsel, registrar,
transfer agent, dividend disbursing agent or custodian upon customary terms.
SECTION 3.12 LITIGATION. The Trustees shall have the power to engage
in and to prosecute, defend, compromise, abandon, or adjust, by arbitration or
otherwise, any actions, suits, proceedings, disputes, claims, and demands
relating to the Fund, and out of the assets of the Fund to pay or to satisfy any
debts, claims or expenses incurred in connection therewith, including those of
litigation, and such power shall include without limitation the power of the
Trustees or any appropriate committee thereof, in the exercise of their or its
good faith business judgment, to dismiss any action, suit, proceeding, dispute,
claim, or demand, derivative or otherwise, brought by any person, including a
Shareholder in its own name or the name of the Fund, whether or not the Fund or
any of the Trustees may be named individually therein or the subject matter
arises by reason of business for or on behalf of the Fund.
SECTION 3.13 TRUSTEES AND OFFICERS AS SHAREHOLDERS. No officer or
Trustee of the Fund, and no officer or director of the Investment Adviser or the
Distributor, and no Investment Adviser or Distributor of the Fund, shall take a
short position in the securities issued by the Fund.
ARTICLE IV
INVESTMENT ADVISER, DISTRIBUTOR,
CUSTODIAN AND TRANSFER AGENT
----------------------------
SECTION 4.1 INVESTMENT ADVISER. Subject to approval by a Majority
Shareholder Vote, the Trustees may in their discretion from time to time enter
into one or more investment advisory or management contracts whereby the other
party or parties to any such contracts shall undertake to furnish the Fund such
management, investment advisory, administration, accounting, legal, statistical
and research facilities and services, promotional or marketing activities, and
such other facilities and services, if any, as the Trustees shall from time to
time consider desirable and all upon such terms and conditions as the Trustees
may in their discretion determine. Notwithstanding any provisions of this
Declaration, the Trustees may authorize the Investment Advisers, or any of them,
under any such contracts (subject to such general or specific instructions as
the Trustees may from time to time adopt) to effect purchases, sales, loans or
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<PAGE>
exchanges of portfolio securities and other investments of the Fund on behalf of
the Trustees or may authorize any officer, employee or Trustee to effect such
purchases, sales, loans or exchanges pursuant to recommendations of such
Investment Advisers, or any of them (and all without further action by the
Trustees). Any such purchases, sales, loans and exchanges shall be deemed to
have been authorized by all of the Trustees.
SECTION 4.2 ADMINISTRATIVE SERVICES. The Trustees may in their
discretion from time to time contract for administrative personnel and services
whereby the other party shall agree to provide the Trustees or the Fund
administrative personnel and services to operate the Fund on a daily or other
basis, on such terms and conditions as the Trustees may in their discretion
determine. Such services may be provided by one or more persons or entities.
SECTION 4.3 DISTRIBUTOR. The Trustees may in their discretion from
time to time enter into one or more contracts, providing for the sale of Shares
whereby the Fund may either agree to sell the Shares to the other parties to the
contracts, or any of them, or appoint any such other party its sales agent for
such Shares. In either case, any such contract shall be on such terms and
conditions as the Trustees may in their discretion determine not inconsistent
with the provisions of this Article IV or the By-Laws, including, without
limitation, the provision for the repurchase or sale of shares of the Fund by
such other party as principal or as agent of the Fund, and for entry by the
other parties to the contracts into selected dealer agreements with registered
securities dealers to further the purpose of distribution of the Shares.
SECTION 4.4 TRANSFER AGENT. The Trustees may in their discretion
from time to time enter into a transfer agency and shareholder service contract
whereby the other party to such contract shall undertake to furnish transfer
agency and shareholder services to the Fund. The contract shall have such terms
and conditions as the Trustees may in their discretion determine not
inconsistent with the Declaration or the By-Laws. Such services may be provided
by one or more persons.
SECTION 4.5 CUSTODIAN. The Trustees may appoint or otherwise engage
one or more banks or trust companies, each having an aggregate capital, surplus
and undivided profits (as shown in its last published report) of at least five
million dollars ($5,000,000) to serve as Custodian with authority as its agent,
but subject to such restrictions, limitations and other requirements, if any, as
may be contained in the By-Laws of the Fund.
SECTION 4.6 PARTIES TO CONTRACT. Any contract of the character
described in Sections 4.1, 4.2, 4.3, 4.4 or 4.5 of this Article IV and any other
contract may be entered into with any Person, although one or more of the
Trustees or officers of the Fund may be an officer, director, trustee,
shareholder, or member of such other party to the contract, and no such contract
shall be invalidated or rendered voidable by reason of the existence of any such
relationship; nor shall any Person holding such relationship be liable merely by
reason of such relationship for any loss or expense to the Fund under or by
reason of said contract or accountable for any profit realized directly or
indirectly therefrom, provided that the contract when entered into was not
inconsistent with the provisions of this Article IV. The same Person may be the
other party to any contracts entered into pursuant to Sections 4.1, 4.2, 4.3,
4.4 or 4.5 above or otherwise, and any individual may be financially interested
or otherwise affiliated with Persons who are parties to any or all of the
contracts mentioned in this Section 4.6.
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ARTICLE V
LIMITATIONS OF LIABILITY OF SHAREHODLERS,
TRUSTEES AND OTHERS
-------------------
SECTION 5.1 NO PERSONAL LIABILITY OF SHAREHOLDERS, TRUSTEES, etc. No
Shareholder shall be subject to any personal liability whatsoever to any Person
in connection with Fund Property or the acts, obligations or affairs of the
Fund. The Trustees shall have no power to bind any Shareholder personally or to
call upon any Shareholder for the payment of any sum of money or assessment
whatsoever other than such as the Shareholder may at any time personally agree
to pay by way of subscription to any Shares or otherwise. Shareholder liability
for the acts and obligations of the Fund is hereby expressly disclaimed. Every
note, bond, contract, or other undertaking issued by or on behalf of the Fund or
the Trustees relating to the Fund shall include a notice and provision limiting
the obligation represented thereby to the Fund and its assets (but the omission
of such notice and provision shall not operate to impose any liability or
obligation on any Shareholder). No Trustee, officer, employee or agent of the
Fund shall be subject to any personal liability whatsoever to any Person, other
than the Fund or its Shareholders, in connection with Fund Property or the
affairs of the Fund, save only that arising from bad faith, willful misfeasance,
gross negligence or reckless disregard for his or her duty to such Person; and
all such Persons shall look solely to the Fund Property for satisfaction of
claims of any nature arising in connection with the affairs of the Fund. If any
Shareholder, Trustee, officer, employee or agent, as such, of the Fund is made a
party to any suit or proceeding to enforce any such liability, he or she shall
not, on account thereof, be held to any personal liability. The Fund shall
indemnify and hold each Shareholder harmless from and against all claims and
liabilities, to which such Shareholder may become subject by reason of his or
her being or having been a Shareholder, other than by reason of his or her own
wrongful act or omission, and shall reimburse such Shareholder for all legal and
other expenses reasonably incurred by him or her in connection with any such
claim or liability. The rights accruing to a Shareholder under this Section 5.1
shall not exclude any other right to which such Shareholder may be lawfully
entitled, nor shall anything herein contained restrict the right of the Fund to
indemnify or reimburse a Shareholder in any appropriate situation even though
not specifically provided herein.
SECTION 5.2 NON-LIABILITY OF TRUSTEES, ETC. No Trustee, officer,
employee or agent of the Fund shall be liable to the Fund, its Shareholders, or
to any Shareholder, Trustee, officer, employee, or agent thereof, for any action
or failure to act (including without limitation the failure to compel in any way
any former or acting Trustee to redress any breach of trust) except for his own
bad faith, willful misfeasance, gross negligence or reckless disregard of his or
her duties.
SECTION 5.3 INDEMNIFICATION
----------------------------
(a) The Trustees shall provide for indemnification by the Fund or
any person who is, or has been, a Trustee, officer, employee or agent of the
Fund against all liability and against all expenses reasonably incurred or paid
by him in connection with any claim, action, suit or proceeding in which he or
she becomes involved as a party or otherwise by virtue of his or her being of
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<PAGE>
having been a Trustee, officer, employee or agent and against amounts paid or
incurred by him or her in the settlement thereof, in such manner as the Trustees
may provide form time to time in the By-Laws.
(b) The words "claim," "action," "suit" or "proceeding" shall apply
to all claims, actions, suits or proceedings (civil, criminal or other,
including appeals), actual or threatened; and the words "liability" and
"expenses" shall include, without limitation, attorneys' fees, costs, judgments,
amounts paid in settlement, fines, penalties and other liabilities.
SECTION 5.4 NO BOND REQUIRED OF TRUSTEES. No Trustee shall be
obligated to give any bond or other security for the performance of any of his
or her duties hereunder.
SECTION 5.5 NO DUTY OF INVESTIGATION; NOTICE IN FUND INSTRUMENTS,
ETC. No purchaser, lender, transfer agent or other Person dealing with the
Trustees or any officer, employee or agent of the Fund shall be bound to make
any inquiry concerning the validity of any transaction purporting to be made by
the Trustees or by said officer, employee or agent or be liable for the
application of money or property paid, loaned, or delivered to or on the order
of the Trustees or of said officer, employee or agent. Every obligation,
contract, instrument, certificate, Share, other security of the Fund or
undertaking, and every other act or thing whatsoever executed in connection with
the Fund shall be conclusively presumed to have been executed or done by the
executors thereof only in their capacity as officers, employees or agents of the
Fund. Every written obligation, contract, instrument, certificate, Share, other
security of the Fund or undertaking made or issued by the Trustees shall recite
that the same is executed or made by them not individually, but as Trustees
under the Declaration, and that the obligations of the Fund under any such
instrument are not binding upon any of the Trustees or Shareholders,
individually, but bind only the Fund, and may contain any further recital which
they, or any one of them, may deem appropriate, but the omission of such recital
shall not affect the validity of such obligation, contract instrument,
certificate, share, security or undertaking and shall not operate to bind the
Trustees or Shareholders individually. The Trustees may maintain insurance for
the protection of the Fund Property, its Shareholders, Trustees, officers,
employees and agents in such amount as the Trustees shall deem adequate to cover
possible tort liability, and such other insurance as the Trustees in their sole
judgment shall deem advisable.
SECTION 5.6 RELIANCE ON EXPERTS, ETC. Each Trustee and officer or
employee of the Fund shall, in the performance of his or her duties, be fully
and completely justified and protected with regard to any act or any failure to
act resulting from reliance in good faith upon the books of account or other
records of the Fund, upon an opinion of counsel, or upon reports made to the
Fund by any of its officers or employees or by any Investment Adviser,
Distributor, Transfer Agent, selected dealers, accountants, appraisers or other
experts or consultants selected with reasonable care by the Trustees, officers
or employees of the Fund, regardless of whether such counsel or expert may also
be a Trustee.
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ARTICLE VI
SHARES OF BENEFICIAL INTEREST
-----------------------------
SECTION 6.1 BENEFICIAL INTEREST. The interest of the beneficiaries
hereunder shall be divided into transferable shares of beneficial interest of
$.01 par value. The number of such shares of beneficial interest authorized
hereunder is unlimited. All Shares issued hereunder, including Shares issued in
connection with a dividend in Shares or a split in Shares, shall be fully paid
and nonassessable.
SECTION 6.2 RIGHTS OF SHAREHOLDERS. The ownership of the Fund
Property of every description and the right to conduct any business hereinbefore
described are vested exclusively in the Trustees, and the Shareholders shall
have no interest therein other than the beneficial interest conferred by their
Shares, and they shall have no right to call for any partition or division of
any property, profits, rights or interests of the Fund nor can they be called
upon to assume any losses of the Fund or suffer an assessment of any kind by
virtue of their ownership of Shares. The Shares shall be personal property
giving only the rights in the Declaration specifically set forth. The Shares
shall not entitle the holder to preference, preemptive, appraisal, conversion or
exchange rights.
SECTION 6.3 TRUST ONLY. It is the intention of the Trustees to
create only the relationship of Trustee and beneficiary between the Trustees and
each Shareholder from time to time. It is not the intention of the Trustees to
create a general partnership, limited partnership, joint stock association,
corporation, bailment or any other form of legal relationship other than a
trust. Nothing in the Declaration shall be construed to make the Shareholders,
either by themselves or with the Trustees, partners or members of a joint stock
association.
SECTION 6.4 ISSUANCE OF SHARES. The Trustees in their discretion
may, from time to time without vote of the Shareholders, issue Shares, in
addition to the then issued and outstanding Shares and Shares held in the
treasury, to such party or parties and for such amount and type of
consideration, including cash or property, at such time or times and on such
terms as the Trustees may deem best, and may in such manner acquire other assets
(including the acquisition of assets subject to, and in connection with, the
assumption of liabilities) and businesses. In connection with any issuance of
Shares, the Trustees may issue fractional Shares and Shares held in the
treasury. The Trustees may from time to time divide or combine the Shares into a
greater or lesser number without thereby changing the proportionate beneficial
interests in the Fund without the vote of the Shareholders. Contributions to the
Fund may be accepted for whole Shares and/or 1/1,000ths of a Share or integral
multiples thereof.
SECTION 6.5 REGISTER OF SHARES. A register shall be kept in respect
of the Fund at the principal office of the Fund or at an office of the Transfer
Agent which shall contain the names and addresses of the Shareholders and the
number of Shares held by them respectively and a record of all transfers
thereof. Such register may be in written form or any other form capable of being
converted into written form within a reasonable time for visual inspection. Such
register shall be conclusive as to who are the holders of the Shares and who
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shall be entitled to receive dividends or distributions or otherwise to exercise
or enjoy the rights of Shareholders. No Shareholder shall be entitled to receive
payment of any dividend or distribution, nor to have notice given to him or her
as herein or in the By-Laws provided, until he or she has given his or her
address to the Transfer Agent or such other officer or agent of the Trustees as
shall keep the said register for entry thereon. The Trustees, in their
discretion, may authorize the issuance of Share certificates and promulgate
appropriate rules and regulations as to their use.
SECTION 6.6 TRANSFER OF SHARES. Shares shall be transferable on the
records of the Fund only by the record holder thereof or by his or her agent
thereunto duly authorized in writing, upon delivery to the Trustees or the
Transfer Agent of a duly executed instrument of transfer, together with such
evidence of the genuineness of each such execution and authorization and of
other matters as may reasonably be required. Upon such delivery the transfer
shall be recorded on the register of the Trust. Until such record is made, the
Shareholder of record shall be deemed to be the holder of such Shares for all
purposes hereunder and neither the Trustees nor any Transfer Agent or registrar
nor any officer, employee or agent of the Fund shall be affected by any notice
of the proposed transfer.
Any person becoming entitled to any Shares in consequence of the
death, bankruptcy, or incompetence of any Shareholder, or otherwise by operation
of law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the proper evidence thereof to the Trustees or the Transfer
Agent, but until such record is made, the Shareholder of record shall be deemed
to be the holder of such Shares for all purposes hereunder and neither the
Trustees nor any Transfer Agent or registrar nor any officer or agent of the
Fund shall be affected by any notice of such death, bankruptcy or incompetence,
or other operation of law, except as may otherwise be provided by the laws of
the Commonwealth of Massachusetts.
SECTION 6.7 NOTICES. Any and all notices to which any Shareholders
may be entitled and any and all communications shall be deemed duly served or
given if mailed, postage prepaid, addressed to any Shareholder of record at his
or her last known address as recorded on the register of the Fund. Annual
reports and proxy statements need not be sent to a Shareholder if: (i) an annual
report and proxy statement for two consecutive annual meetings, or (ii) all, and
at least two, checks (if sent by first class mail) in payment of dividends or
interest and Shares during a twelve-month period have been mailed to such
Shareholder's address and have been returned undelivered. However, delivery of
such annual reports and proxy statements shall resume once a Shareholder's
current address is determined.
SECTION 6.8 VOTING POWERS. The Shareholders shall have power to vote
only (i) for the election of Trustees as provided in Section 2.2 hereof, (ii)
for the removal of Trustees as provided in Section 2.2 hereof, (iii) with
respect to any investment advisory or management contract as provided in Section
4.1, (iv) with respect to termination of the Fund as provided in Section 8.2,
(v) with respect to any amendment of the Declaration to the extent and as
provided in Section 8.3, (vi) with respect to any merger, consolidation,
conversion or sale of assets as provided in Sections 8.4, 8.5 and 8.6, (vii)
with respect to incorporation or reorganization of the Fund to the extent and as
provided in Section 8.5, (viii) to the same extent as the stockholders of a
Massachusetts business corporation as to whether or not a court action,
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proceeding or claim should or should not be brought or maintained derivatively
or as a class action on behalf of the Fund or the Shareholders and (ix) with
respect to such additional matters relating to the Fund as may be required by
law, the Declaration, the By-Laws or any registration of the Fund with the
Commission (or any successor agency) or any state, or as and when the Trustees
may consider necessary or desirable. Each whole Share shall be entitled to one
vote as to any matter on which it is entitled to vote and each fractional Share
shall be entitled to a proportionate fractional vote, except that Shares held in
the treasury of the Fund as of the record date, as determined in accordance with
the By-Laws, shall not be voted. There shall be no cumulative voting in the
election of Trustees. Shareholders shall have no preemptive or other right to
subscribe to any additional Shares or other securities issued by the Fund. Until
Shares are issued, the Trustees may exercise all rights of Shareholders and may
take any action required by law, the Declaration or the By-Laws to be taken by
Shareholders. The By-Laws may include further provisions for Shareholders' votes
and meetings and related matters.
ARTICLE VII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS
----------------------------
SECTION 7.1 NET ASSET VALUE. The net asset value of each outstanding
Share of the Fund shall be determined on such days and at such time or times as
the Trustees may determine. The method of determination of net asset value shall
be determined by the Trustees and shall be as set forth in the Registration
Statement. The power and duty to make the calculations may be delegated by the
Trustees to any Investment Adviser, the Custodian, the Transfer Agent or such
other person as the Trustees by resolution may determine. The Trustees may
suspend the determination of net asset value to the extent permitted by the 1940
Act.
SECTION 7.2 DISTRIBUTIONS TO SHAREHOLDERS. The Trustees shall from
time to time distribute ratably among the Shareholders of the Fund such
proportion of the net income, earnings, profits, gains, surplus (including paid
in surplus), capital, or assets of the Fund held by the Trustees as they may
deem proper. Such distribution may be made in cash or in property (including
without limitation any type of obligations of the Fund or any assets thereof),
and the Trustees may distribute ratably among the Shareholders of the Fund
additional Shares issuable hereunder in such manner, at such times, on such
terms as the Trustees may deem proper. Such distributions may be among the
Shareholders of record (determined in accordance with the Registration
Statement) of the Fund at the time of declaring a distribution or may be among
the Shareholders of record of the Fund at such later date as the Trustees shall
determine. The Trustees may always retain from the net income, earnings, profits
or gains of the Fund such amount as they may deem necessary to pay the debts or
expenses of the Fund or to meet obligations of the Fund, or as they may deem
desirable to use in the conduct of its affairs or to retain for future
requirements or extensions of the business. The Trustees may adopt and offer to
Shareholders of the Fund such dividend reinvestment plans as the Trustees deem
appropriate.
Inasmuch as the computation of net income and gains for federal
income tax purposes may vary from the computation thereof on the books, the
above provisions shall be interpreted to give the Trustees the power in their
discretion to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional amounts sufficient to
enable the Fund to avoid or reduce liability for taxes.
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<PAGE>
SECTION 7.3 DETERMINATION OF NET INCOME. The Trustees shall have the
power to determine the net income of the Fund and from time to time to
distribute such net income ratably among the Shareholders as dividends in cash
or additional Shares issuable hereunder. The determination of net income and the
resultant declaration of dividends shall be as set forth in the Registration
Statement. The Trustees or their delegates shall have full discretion to
determine whether any cash or property received by the Fund shall be treated as
income or as principal and whether any item of expense shall be charged to the
income or the principal account, and their determination made in good faith
shall be conclusive upon the Shareholders. In the case of stock dividends
received, the Trustees shall have full discretion to determine, in the light of
the particular circumstances, how much, if any, of the value thereof shall be
treated as income, the balance, if any, to be treated as principal.
SECTION 7.4 POWER TO MODIFY FOREGOING PROCEDURES. Notwithstanding
any of the foregoing provisions of this Article VII, the Trustees may prescribe,
in their absolute discretion, such other bases and times for determining the per
Share net asset value of the Shares or net income, or the declaration and
payment of dividends and distributions, as they may deem necessary or desirable
to enable the Fund to comply with any provision of the 1940 Act, or any rule or
regulation thereunder, or any order of exemption issued by the Commission, all
as in effect now or hereafter amended or modified.
ARTICLE VIII
DURATION; TERMINATION OF
FUND; AMENDMENT; MERGERS, ETC.
------------------------------
SECTION 8.1 DURATION. The Fund shall continue without limitation of
time but subject to the provisions of this Article VIII.
SECTION 8.2 TERMINATION OF FUND.
---------------------------------
(a) The Fund may be terminated (i) by the affirmative vote of the
holders of not less than two-thirds (66-2/3%) of the Shares outstanding and
entitled to vote at any meeting of Shareholders of the Fund except that a
Majority Shareholder Vote shall be sufficient if termination of the Fund has
been recommended by two-thirds of the Trustees, or (ii) by an instrument in
writing, without a meeting, signed by a majority of the Trustees and consented
to by the holders of not less than two-thirds of such Shares of the Trust. Upon
the termination of the Fund:
(i) The Fund shall carry on no business except for the purpose
of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the
Fund and all of the powers of the Trustees under this Declaration shall continue
until the affairs of the Fund shall have been wound up, including the power to
fulfill or discharge the contracts of the Fund, collect its assets, sell,
convey, assign, exchange, transfer or otherwise dispose of all or any part of
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<PAGE>
the remaining Fund Property to one or more persons at public or private sale for
consideration which may consist in whole or in part of cash, securities or other
property of any kind, discharge or pay its liabilities, and to do all other acts
appropriate to liquidate its business; provided that any sale, conveyance,
assignment, exchange, transfer or other disposition of all or substantially all
the Fund Property shall require Shareholder approval in accordance with Section
8.4 hereof.
(iii) After paying or adequately providing for the payment of
all liabilities, and upon receipt of such releases, indemnities and refunding
agreements, as they deem necessary for their protection, the Trustees may
distribute the remaining Fund Property, in cash or in kind or partly each, among
the Shareholders of the Fund according to their respective rights.
(b) After termination of the Fund and distribution to the
Shareholders as herein provided, a majority of the Trustees shall execute and
lodge among the records of the Fund an instrument in writing setting forth the
fact of such termination, and the Trustees shall thereupon be discharged from
all further liabilities and duties with respect to the Fund, and the rights and
interests of all Shareholders of the Fund shall thereupon cease.
SECTION 8.3 AMENDMENT PROCEDURES.
---------------------------------
(a) Except as provided in paragraph (c) of this Section 8.3, this
Declaration may be amended by a Majority Shareholder Vote, at a meeting of
Shareholders, or by written consent without a meeting. The Trustees may also
amend this Declaration without the vote or consent of Shareholders (i) to change
the name of the Fund, (ii) to supply any omission, or cure, correct or
supplement any ambiguous, defective or inconsistent provision hereof, (iii) if
they deem it necessary to conform this Declaration to the requirements of
applicable federal or state laws or regulations or the requirements of the
Internal Revenue Code, or to eliminate or reduce any federal, state or local
taxes which are or may be payable by the Fund or the Shareholders, but the
Trustees shall not be liable for failing to do so, or (iv) for any other purpose
which does not adversely affect the rights of any Shareholder with respect to
which the amendment is or purports to be applicable.
(b) No amendment may be made under this Section 8.3 which would
change any rights with respect to any Shares of the Fund by reducing the amount
payable thereon upon liquidation of the Fund or by diminishing or eliminating
any voting rights pertaining thereto, except with the vote or consent of the
holders of two-thirds of the Shares of the Fund outstanding and entitled to
vote. Nothing contained in this Declaration shall permit the amendment of this
Declaration to impair the exemption from personal liability of the Shareholders,
Trustees, officers, employees and agents of the Fund or to permit assessments
upon Shareholders set forth in Section 5.1 above.
(c) No amendment may be made under this Section 8.3 which shall
amend, alter, change or repeal any of the provisions of Sections 8.3, 8.4, 8.6
and 8.7 unless the amendment effecting such amendment, alteration, change or
repeal shall receive the affirmative vote or consent of that proportion of the
Shares outstanding and entitled to vote as would be necessary to approve the
transaction or action set forth in that respective section under circumstances
where the Board of Trustees has not recommended approval of the transaction or
-16-
<PAGE>
action. Such affirmative vote or consent shall be in addition to the vote or
consent of the holders of Shares otherwise required by law or by the terms of
any class or series of preferred stock, whether now or hereafter authorized, or
any agreement between the Fund and any national securities exchange.
(d) A certificate signed by a majority of the Trustees or the
Secretary or any Assistant Secretary of the Fund, setting forth an amendment and
reciting that it was duly adopted by the Shareholders or by the Trustees as
aforesaid or a copy of the Declaration, as amended, and executed by a majority
of the Trustees or certified by the Secretary or any Assistant Secretary of the
Trust, shall be conclusive evidence of such amendment when lodged among the
records of the Fund. Unless such amendment or such certificate sets forth some
later time for the effectiveness of such amendment, such amendment shall be
effective when lodged among the records of the Fund.
Notwithstanding any other provision hereof, until such time as the
Registration Statement covering the first public offering of securities of the
Fund shall have become effective, this Declaration may be terminated or amended
in any respect by the affirmative vote of a majority of the Trustees or by an
instrument signed by a majority of the Trustees.
SECTION 8.4 MERGER, CONSOLIDATION AND SALE OF ASSETS. The Fund may
merge or consolidate with any other other corporation, association, trust or
other organization or may sell, lease or exchange all or substantially all of
the Fund Property, including its good will, upon such terms and conditions and
for such consideration when and as authorized, at any meeting of Shareholders
called for the purpose, by the affirmative vote of the holders of not less than
two-thirds (66-2/3%) of the Shares of the Fund outstanding and entitled to vote,
or by an instrument or instruments in writing without a meeting, consented to by
the holders of not less than two-thirds (66-2/3%) of such Shares; provided,
however, that, if such merger, consolidation, sale, lease or exchange is
recommended by two-thirds of the Trustees, a Majority Shareholder Vote shall be
sufficient authorization; and any such merger, consolidation, sale, lease or
exchange shall be deemed for all purposes to have been accomplished under and
pursuant to the laws of the Commonwealth of Massachusetts. Nothing contained
herein shall be construed as requiring approval of shareholders for any sale of
assets in the ordinary course of business of the Fund.
SECTION 8.5 INCORPORATION AND REORGANIZATION. With approval of a
Majority Shareholder Vote, the Trustees may cause to be organized or assist in
organizing a corporation or corporations under the laws of any jurisdiction or
any other trust, partnership, association or other organization to take over all
of the Fund Property or to carry on any business in which the Fund shall
directly or indirectly have any interest, and to sell, convey and transfer the
Fund Property to any such corporation, trust, partnership, association or
organization in exchange for the shares or securities thereof or otherwise, and
to lend money to, subscribe for the shares or securities of, and enter into any
contracts with any such corporation, trust, partnership, association or
organization in which the Fund holds or is about to acquire shares or any other
interest. Subject to Section 8.4 hereof, the Trustees may also cause a merger or
consolidation between the Fund or any successor thereto and any such
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<PAGE>
corporation, trust, partnership, association or other organization if and to the
extent permitted by law, as provided under the law then in effect. Nothing
contained herein shall be construed as requiring approval of Shareholders for
the Trustees to organize or assist in organizing one or more corporations,
trusts, partnerships, associations or other organizations and selling, conveying
or transferring a portion of the Fund Property to such organizations or
entities.
SECTION 8.6 CONVERSION. The Fund may be converted at any time from a
"closed-end company" to an "open-end company" as those terms are defined by the
1940 Act, upon the approval of such a proposal, together with the necessary
amendments to the Declaration of Trust to permit such a conversion, by the
holders of not less than two-thirds (66-2/3%) of the Fund's outstanding Shares
entitled to vote, except that if such proposal is recommended by two-thirds of
the total number of Trustees then in office, such proposal may be adopted by a
Majority Shareholder Vote. From time to time the Trustees will consider
recommending to the Shareholders a proposal to convert the Fund from a
"closed-end company" to an "open-end company." Upon the recommendation and
subsequent adoption of such a proposal and the necessary amendments to this
Declaration to permit such a conversion by not less than two-thirds (66-2/3%) of
the Fund's outstanding Shares entitled to vote, the Fund shall, upon complying
with any requirements of the 1940 Act and state law, become an "open-end"
investment company. Such affirmative vote or consent shall be in addition to the
vote or consent of the holders of the Shares otherwise required by law, or any
agreement between the Fund and any national securities exchange.
SECTION 8.7 CERTAIN TRANSACTIONS.
---------------------------------
(a) Notwithstanding any other provision of this Declaration and
subject to the exceptions provided in paragraph (d) of this Section, the types
of transactions described in paragraph (c) of this Section shall require the
affirmative vote or consent of the holders of eighty percent (80%) of the Shares
outstanding and entitled to vote, when a Principal Shareholder (as defined in
paragraph (b) of this Section) is a party to the transaction. Such affirmative
vote or consent shall be in addition to the vote or consent of the holders of
Shares otherwise required by law or by the terms of any class or series of
preferred stock, whether now or hereafter authorized, or any agreement between
the Fund and any national securities exchange.
(b) The term "Principal Shareholder" shall mean any corporation,
person or other entity which is the beneficial owner, directly or indirectly, of
more than five percent (5%) of the outstanding Shares and shall include any
affiliate or associate, as such terms are defined in clause (ii) below, of a
Principal Shareholder. For the purposes of this Section, in addition to the
Shares which a corporation, person or other entity beneficially owns directly,
(a) any corporation, person or other entity shall be deemed to be the beneficial
owner of any Shares (i) which it has the right to acquire pursuant to any
agreement or upon exercise of conversion rights or warrants, or otherwise (but
excluding share options granted by the Fund) or (ii) which are beneficially
owned, directly or indirectly (including Shares deemed owned through application
of clause (i) above), by any other corporation, person or entity with which its
"affiliate" or "associate" (as defined below) has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of
Shares, or which is its "affiliate" or "associate" as those terms are defined in
Rule 12b-2 of the General Rules and Regulations under the Securities Exchange
Act of 1934, and (b) the outstanding Shares shall include Shares deemed owned
through application of clauses (i) and (ii) above but shall not include any
other Shares which may be issuable pursuant to any agreement, or upon exercise
of conversion rights or warrants, or otherwise.
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<PAGE>
(c) This Section shall apply to the following transactions:
(i) The merger or consolidation of the Fund or any subsidiary
of the Fund with or into any Principal Shareholder.
(ii) The issuance of any securities of the Fund to any
Principal Shareholder for cash.
(iii) The sale, lease or exchange of all or any substantial
part of the assets of the Fund to any Principal Shareholder (except assets
having an aggregate fair market value of less than $1,000,000, aggregating for
the purpose of such computation all assets sold, leased or exchanged in any
series of similar transactions within a twelve-month period).
(iv) The sale, lease or exchange to the Fund or any subsidiary
thereof, in exchange for securities of the Fund of any assets of any Principal
Shareholder (except assets having an aggregate fair market value of less than
$1,000,000, aggregating for the purposes of such computation all assets sold,
leased or exchanged in any series of similar transactions within a twelve-month
period).
(v) The liquidation or dissolution of the Fund.
(vi) A change in the nature of the business of the Fund so
that it would cease to be an investment company registered under the 1940 Act.
(vii) The conversion of the Fund to an "open-end company," or
any amendment to the Declaration of Trust of the Fund that makes the Shares a
"redeemable security," as such terms are defined in the 1940 Act.
(d) The provisions of this Section shall not be applicable to (i)
any of the transactions described in paragraph (c) of this Section if two-thirds
of the Board of Trustees of the Fund shall by resolution have approved a
memorandum of understanding with such Principal Shareholder with respect to and
substantially consistent with such transaction, or (ii) any such transaction
with any corporation of which a majority of the outstanding shares of all
classes of stock normally entitled to vote in elections of directors is owned of
record or beneficially by the Fund and its subsidiaries.
(e) The Board of Trustees shall have the power and duty to determine
for the purposes of this Section on the basis of information known to the Fund
whether (i) a corporation, person or entity beneficially owns more than five
percent (5%) of the outstanding Shares, (ii) a corporation, person or entity is
an "affiliate" or "associate" (as defined above) of another, (iii) the assets
being acquired or leased to or by the Fund or any subsidiary thereof constitute
a substantial part of the assets of the Fund and have an aggregate fair market
value of less than $1,000,000 and (iv) the memorandum of understanding referred
to in paragraph (d) hereof is substantially consistent with the transaction
covered thereby. Any such determination shall be conclusive and binding for all
purposes of this Section.
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<PAGE>
ARTICLE IX
REPORTS TO SHAREHOLDERS
-----------------------
The Trustees shall at least semi-annually submit or cause the
officers of the Fund to submit to the Shareholders a written financial report of
the Fund, including financial statements which shall at least annually be
certified by independent public accountants.
ARTICLE X
MISCELLANEOUS
-------------
SECTION 10.1 FILING. This Declaration and any amendment hereto shall
be filed in the office of the Secretary of the Commonwealth of Massachusetts and
in such other places as may be required under the laws of Massachusetts and may
also be filed or recorded in such other places as the Trustees deem appropriate.
Each amendment so filed shall be accompanied by a certificate signed and
acknowledged by a Trustee or by the Secretary or any Assistant Secretary of the
Fund stating that such action was duly taken in a manner provided herein. A
restated Declaration, integrating into a single instrument all of the provisions
of the Declaration which are then in effect and operative, may be executed from
time to time by a majority of the Trustees and shall, upon filing with the
Secretary of the Commonwealth of Massachusetts, be conclusive evidence of all
amendments contained therein and may thereafter be referred to in lieu of the
original Declaration and the various amendments thereto.
SECTION 10.2 RESIDENT AGENT. Until changed by the Trustees, the
principal office of the Fund shall be 7800 East Union Avenue, Suite 800, Denver,
Colorado 80237. Until changed by the Trustees, Lane & Altman, attention: Joseph
F. Mazzella, Esq., 101 Federal Street, Boston, MA 02110, is the resident agent
of the Fund in the Commonwealth of Massachusetts.
SECTION 10.3 GOVERNING LAW. By the execution hereof, the Trustees
agree that this Declaration shall be effective when executed by all of the
Trustees and delivered for filing to the Secretary of State of the Commonwealth
of Massachusetts with reference to the laws thereof and the rights of all
parties and the validity and construction of every provision hereof shall be
subject to and construed according to the laws of said State.
SECTION 10.4 ORGANIZATIONAL EXPENSES. In the event that any person
advances the organizational expenses of the Fund, such advances shall become an
obligation of the Fund, subject to such terms and conditions as may be fixed by,
and on a date fixed by, or determined with criteria fixed by, the Board of
Trustees, to be amortized over a period or periods to be fixed by the Board.
SECTION 10.5 COUNTERPARTS. The Declaration may be simultaneously
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts, together, shall constitute one and the same
instrument, which shall be sufficiently evidenced by any such original
counterpart.
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<PAGE>
SECTION 10.6 RELIANCE BY THIRD PARTIES. Any certificate executed by
an individual who, according to the records of the Fund, appears to be a Trustee
hereunder, or Secretary or Assistant Secretary of the Fund, certifying to: (a)
the number or identity of Trustees or Shareholders, (b) the due authorization of
the execution of any instrument or writing, (c) the form of any vote passed at a
meeting of Trustees or Shareholders, (d) the fact that the number of Trustees or
Shareholders present at any meeting or executing any written instrument
satisfies the requirements of this Declaration, (e) the form of any By-Laws
adopted by or the identity of any officers elected by the Trustees, or (f) the
existence of any fact or facts which in any manner relate to the affairs of the
Fund shall be conclusive evidence as to the matters so certified in favor of any
person dealing with the Trustees and their successors.
SECTION 10.7 PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS.
------------------------------------------------------------
(a) The provisions of the Declaration are severable, and if the
Trustees shall determine, with the advice of counsel, that any of such
provisions is in conflict with the 1940 Act, the regulated investment company
provisions of the Internal Revenue Code or with other applicable laws and
regulations, the conflicting provisions shall be deemed superseded by such law
or regulation to the extent necessary to eliminate such conflict; provided,
however, that such determination shall not affect any of the remaining
provisions of the Declaration or render invalid or improper any action taken or
omitted prior to such determination.
(b) If any provision of the Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
pertain only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of the
Declaration in any jurisdiction.
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<PAGE>
IN WITNESS WHEREOF, the undersigned, the Trustees of the Fund, have
executed this instrument this 15 day of November, 1991.
/s/ John Kaweske
------------------------
John Kaweske, as Trustee
and not Individually
7800 East Union Avenue
Suite 800
Denver, CO 80237
/s/ R. Dalton Sim
-------------------------
R. Dalton Sim, as Trustee
and not Individually
7800 East Union Avenue
Suite 800
Denver, CO 80237
/s/ Dan J. Hesser
-------------------------
Dan J. Hesser, as Trustee
and not Individually
7800 East Union Avenue
Suite 800
Denver, CO 80237
STATE OF COLORADO )
) ss.:
COUNTY OF DENVER )
On this 15 day of November, 1991, John Kaweske, known to me and
known to be the individual(s) described in and who executed the foregoing
instrument, personally appeared before me and they severally acknowledged the
foregoing instrument to be their free act and deed.
/s/ Cheryl K. Howlett
- ---------------------
Cheryl K. Howlett
Notary Public
My Commission Expires February 22, 1995.
<PAGE>
STATE OF COLORADO )
) ss.:
COUNTY OF DENVER )
On this 15 day of November, 1991, R. Dalton Sim, known to me and
known to be the individual(s) described in and who executed the foregoing
instrument, personally appeared before me and they severally acknowledged the
foregoing instrument to be their free act and deed.
/s/ Cheryl K. Howlett
- ---------------------
Cheryl K. Howlett
Notary Public
My Commission Expires February 22, 1995.
STATE OF COLORADO )
) ss.:
COUNTY OF DENVER )
On this 15 day of November, 1991, Dan J. Hesser, known to me and
known to be the individual(s) described in and who executed the foregoing
instrument, personally appeared before me and they severally acknowledged the
foregoing instrument to be their free act and deed.
/s/ Cheryl K. Howlett
---------------------
Cheryl K Howlett
Notary Public
My Commission Expires February 22, 1995.
The undersigned, being the sole initial shareholder of The Global Health
Sciences Fund ("the Fund") acting pursuant to Section 8.3 of the Fund's
Declaration of Trust (the "Declaration") dated November 18, 1991, and pursuant
to Section 3.10 of the Fund's Bylaws dated December 5, 1991, hereby amend the
Declaration as follows:
Section 2.2 is hereby amended and restated as follows:
SECTION 2.2 TERM OF OFFICE OF TRUSTEES. The Board of Trustees shall be
divided into three classes. Within the limits above specified, the number of the
Trustees in each class shall be determined by resolution of the Board of
Trustees. The term of office of all of the Trustees shall expire on the date of
the first annual or special meeting of Shareholders following the effective date
of the Registration Statement relating to the Shares under the Securities Act of
1933, as amended. The term of office of the first class shall expire on the date
of the second annual meeting of Shareholders or special meeting in lieu thereof.
The term of office of the second class shall expire on the date of the third
annual meeting of Shareholders or special meeting in lieu thereof. The term of
office of the third class shall expire on the date of the fourth annual meeting
of shareholders or special meeting in lieu thereof. Upon expiration of the term
of office of each class as set forth above, the number of Trustees in such class
as set forth above, the number of Trustees in such class, as determined by the
Board of Trustees, shall be elected for a term expiring on the date of the third
annual meeting of Shareholders or special meeting in lieu thereof following such
expiration to succeed the Trustees whose terms of office expire. The Trustees
shall be elected at an annual meeting of the Shareholders or special meeting in
lieu thereof called for that purpose, except as provided in Section 2.3 of this
Article and each Trustee elected shall hold office until his or her successor
shall have been elected and shall have qualified; except (a) that any Trustee
may resign his trust (without need for prior or subsequent accounting) by an
instrument in writing signed by him or her and delivered to the other Trustees,
which shall take effect upon such delivery or upon such later date as is
specified therein; (b) that any Trustee may be removed (provided the aggregate
number of Trustees after such removal shall not be less than the number required
by Section 2.1 hereof) for cause, at any time by written instrument, signed by
the remaining Trustees, specifying the date when such removal shall become
effective; and (c) that any Trustee who requests in writing to be retired or who
has become incapacitated by illness or injury may be retired by written
instrument signed by a majority of the other Trustees, specifying the date of
his retirement. Upon the resignation or removal of a Trustee, or his otherwise
ceasing to be Trustee, he or she shall execute and deliver such documents as the
remaining Trustees shall require for the purpose of conveying to the Fund or the
remaining Trustees any Fund property held in the name of the resigning or
removed Trustee. Upon the incapacity or death of any Trustee, his or her legal
representative shall execute and deliver on his or her behalf such documents as
the remaining Trustees shall require as provided in the preceding sentence.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this instrument as of
this January 15, 1992.
INVESCO TRUST COMPANY
By: /s/ Ronald L. Grooms
--------------------
ATTEST: Ronald L. Grooms
Senior Vice President
By: /s/ Glen A. Payne
------------------------
Glen A. Payne, Secretary
BY-LAWS
OF
THE GLOBAL HEALTH SCIENCES FUND
(a Massachusetts Business Trust)
Adopted November 18, 1991
ARTICLE I
DEFINITIONS
-----------
The terms "COMMISSION", "DECLARATION", "DISTRIBUTOR", "FUND", "FUND
PROPERTY", "INVESTMENT ADVISER", "MAJORITY SHAREHOLDER VOTE", "1940 ACT",
"SHAREHOLDER", "SHARES", "TRANSFER AGENT", and "TRUSTEES" have the respective
meanings given them in the Declaration of Trust of the Fund dated November 18,
1991, as amended from time to time.
ARTICLE II
OFFICES
-------
SECTION 2.1. PRINCIPAL OFFICE. Until changed by the Trustees, the
principal office of the Fund shall be 7800 E. Union Avenue, Suite 800, Denver,
Colorado 80237.
SECTION 2.2. OTHER OFFICES. In addition to its principal office, the
Fund may have an office or offices at such other places within and without the
Commonwealth of Massachusetts as the Trustees may from time to time designate or
the business of the Fund may require.
ARTICLE III
SHAREHOLDERS' MEETINGS
----------------------
SECTION 3.1. PLACE OF MEETINGS. Meetings of Shareholder shall be
held at such place, within or without the Commonwealth of Massachusetts, as may
be designated from time to time by the Trustees.
SECTION 3.2. ANNUAL MEETINGS. Meetings of Shareholders, at which the
Shareholders shall elect Trustees and transact such other business as may
properly come before the meeting, shall be held annually so long as such annual
meetings shall be required by the New York Stock Exchange or the other exchange
or trading system upon which Shares are principally traded.
SECTION 3.3. SPECIAL MEETINGS. Special meetings of Shareholders of
the Fund shall be held whenever called by the Board of Trustees or the Chairman
of the Fund. Special meetings of Shareholders shall also be called by the
Secretary upon the written request of the holders of Shares entitled to vote not
<PAGE>
less than twenty-five percent (25%) of all the votes entitled to be cast at such
meeting. Such request shall state the purpose or purposes of such meeting and
the matters proposed to be acted on thereat. The Secretary shall inform such
Shareholders of the reasonable estimated cost of preparing and mailing such
notice of the meeting, and, upon payment to the Fund of such costs, the
Secretary shall give notice stating the purpose or purposes of the meeting to
all entitled to vote at such meeting. No special meeting need be called upon the
request of the holders of Shares entitled to cast less than a majority of all
votes entitled to be cast at such meeting, to consider any matter which is
substantially the same as a matter voted upon at any special meeting or
Shareholders held during the preceding twelve months.
SECTION 3.4. NOTICE OF MEETINGS. Written or printed notice of every
Shareholders' meeting stating the place, date, and purpose or purposes thereof,
shall be given by the Secretary not less than ten (10) nor more than ninety (90)
days before such meeting to each Shareholder entitled to vote at such meeting.
Such notice shall be deemed to be given when deposited in the United States
mail, postage prepaid, directed to the Shareholder at his address as it appears
on the records of the Fund.
SECTION 3.5. QUORUM AND ADJOURNMENT OF MEETINGS. Except as otherwise
provided by law, by the Declaration or by these By-Laws, at all meetings of
Shareholders the holders of a majority of the Shares issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall be
requisite and shall constitute a quorum for the transaction of business. In the
absence of a quorum, the Shareholders present or represented by proxy and
entitled to vote thereat shall have power to adjourn the meeting from time to
time. Any adjourned meeting may be held as adjourned without further notice. At
any adjourned meeting at which a quorum shall be present, any business may be
transacted as if the meeting had been held as originally called.
SECTION 3.6. VOTING RIGHTS, PROXIES. At each meeting of
Shareholders, each holder of record of Shares entitled to vote thereat shall be
entitled to one vote in person or by proxy, executed in writing by the
Shareholder or his duly authorized attorney-in-fact, for each Share of
beneficial interest of the Fund and for the fractional portion of one vote for
each fractional Share entitled to vote so registered in his name on the records
of the Fund on the date fixed as the record date for the determination of
Shareholders entitled to vote at such meeting. No proxy shall be valid after
eleven months from its date, unless otherwise provided in the proxy. At all
meetings of Shareholders, unless the voting is conducted by inspectors, all
questions relating to the qualification of voters and the validity of proxies
and the acceptance or rejection of votes shall be decided by the chairman of the
meeting. Pursuant to a resolution of a majority of the Trustees, proxies may be
solicited in the name of one or more Trustees or officers of the Fund.
SECTION 3.7. VOTE REQUIRED. Except as otherwise provided by law, by
the Declaration of Trust, or by these By-Laws, at each meeting of Shareholders
at which a quorum is present, all matters shall be decided by Majority
Shareholder Vote.
SECTION 3.8. INSPECTORS OF ELECTION. In advance of any meeting of
Shareholders, the Trustees may appoint Inspectors of Election to act at the
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meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the chairman of any meeting of Shareholders may, and on the request
of any Shareholder or his proxy shall, appoint Inspectors of Election of the
meeting. In case any person appointed as Inspector fails to appear or fails or
refuses to act, the vacancy may be filled by appointment made by the Trustees in
advance of the convening of the meeting or at the meeting by the person acting
as chairman. The Inspectors of Election shall determine the number of Shares
outstanding, the Shares represented at the meeting, the existence of a quorum,
the authenticity, validity and effect of proxies, shall receive votes, ballots
or consents, shall hear and determine all challenges and questions in any way
arising in connection with the right to vote, shall count and tabulate all votes
or consents, determine the results, and do such other acts as may be proper to
conduct the election or vote with fairness to all Shareholders. On request of
the chairman of the meeting, or of any Shareholder or his proxy, the Inspectors
of Election shall make a report in writing of any challenge or question or
matter determined by them and shall execute a certificate of any facts found by
them.
SECTION 3.9. INSPECTION OF BOOKS AND RECORDS. Shareholders shall
have such rights and procedures of inspection of the books and records of the
Fund as are granted to Shareholders under the Corporations and Associations law
of the Commonwealth of Massachusetts.
SECTION 3.10. ACTION BY SHAREHOLDERS WITHOUT MEETING. Except as
otherwise provided by law, the provisions of these By-Laws relating to notices
and meetings to the contrary notwithstanding, any action required or permitted
to be taken at any meeting of Shareholders may be taken without a meeting if a
majority of the Shareholders entitled to vote upon the action consent to the
action in writing and such consents are filed with the records of the Fund. Such
consent shall be treated for all purposes as a vote taken at a meeting of
Shareholders.
ARTICLE IV
TRUSTEES
--------
SECTION 4.1. MEETINGS OF THE TRUSTEES. The Trustees may in their
discretion provide for regular or special meetings of the Trustees. Regular
meetings of the Trustees may be held at such time and place as shall be
determined from time to time by the Trustees without further notice. Special
meetings of the Trustees may be called at any time by the Chairman and shall be
called by the Chairman or the Secretary upon the written request of any two (2)
Trustees.
SECTION 4.2. NOTICE OF SPECIAL MEETINGS. Written notice of special
meetings of the Trustees, stating the place, date and time thereof, shall be
given not less than two (2) days before such meeting to each Trustee,
personally, by telegram, by mail, or by leaving such notice at his place of
residence or usual place of business. If mailed, such notice shall be deemed to
be given when deposited in the United States mail, postage prepaid, directed to
the Trustee at his address as it appears on the records of the Fund. Subject to
the provisions of the 1940 Act, notice or waiver of notice need not specify the
purpose of any special meeting.
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SECTION 4.3. TELEPHONE MEETINGS. Except as may otherwise be required
by law, any Trustee, or any member or members of any committee designated by the
Trustees, may participate in a meeting of the Trustees or any such committee, as
the case may be, by means of a conference telephone or similar communications
equipment if all persons participating in the meeting can hear each other at the
same time. Participation in a meeting by these means constitutes presence in
person at the meeting.
SECTION 4.4. QUORUM, VOTING AND ADJOURNMENT OF MEETINGS. At all
meetings of the Trustees, a majority of the Trustees shall be requisite to and
shall constitute a quorum for the transaction of business. If a quorum is
present, the affirmative vote of a majority of the Trustees present shall be the
act of the Trustees, unless the concurrence of a greater proportion is expressly
required for such action by law, the Declaration or these By-Laws. If at any
meeting of the Trustees there be less than a quorum present, the Trustees
present thereat may adjourn the meeting from time to time, without notice other
than announcement at the meeting, until the quorum shall have been obtained.
SECTION 4.5. ACTION BY TRUSTEES WITHOUT MEETING. The provisions of
these By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at any
meeting of the Trustees may be taken without a meeting if a consent in writing
setting forth the action shall be signed by all of the Trustees entitled to vote
upon the action and such written consent is filed with the minutes of
proceedings of the Trustees.
SECTION 4.6. EXPENSES AND FEES. Each Trustee may be allowed
expenses, if any, for attendance at each regular or special meeting of the
Trustees, and each Trustee who is not an officer or employee of the Fund or of
its investment manager or underwriter or of any corporate affiliate of any of
said persons shall receive for services rendered as a Trustee of the Fund such
compensation as may be fixed by the Trustees. Nothing herein contained shall be
construed to preclude any Trustee from serving the Fund in any other capacity
and receiving compensation therefor.
SECTION 4.7. EXECUTION OF INSTRUMENTS AND DOCUMENTS AND SIGNING OF
CHECKS AND OTHER OBLIGATIONS AND TRANSFERS. All instruments, documents and other
papers shall be executed in the name and on behalf of the Fund and all checks,
notes, drafts and other obligations for the payment of money by the Fund shall
be signed, and all transfers of securities standing in the name of the Fund
shall be executed, by the President, any Vice President or the Treasurer or by
any one or more officers or agents of the Fund as shall be designated for that
purpose by vote of the Trustees.
SECTION 4.8. INDEMNIFICATION OF TRUSTEES, OFFICERS, EMPLOYEES AND
AGENTS.
(a) As used in these By-Laws, the following terms shall have the
meanings set forth below:
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(i) the term "indemnitee" shall mean any present or former
Trustee, officer or employee of the Fund, any present or
former Trustee, partner, Director or officer of another
trust, partnership, corporation or association whose
securities are or were owned by the Fund or of which the Fund
is or was a creditor and who served or serves in such
capacity at the request of the Fund, and the heirs,
executors, administrators, successors and assigns of any of
the foregoing; however, whenever conduct by an indemnitee is
referred to, the conduct shall be that of the original
indemnitee rather than that of the heir, executor,
administrator, successor or assignee;
(ii) the term "covered proceeding" shall mean any threatened,
pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, to which an
indemnitee is or was a party or is threatened to be made a
party by reason of the fact or facts under which he or it is
an indemnitee as defined above;
(iii) the term "disabling conduct" shall mean willful misfeasance,
bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office in question;
(iv) the term "covered expenses" shall mean expenses (including
attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by an indemnitee
in connection with a covered proceeding; and
(v) the term "adjudication of liability" shall mean, as to any
covered proceeding and as to any indemnitee, an adverse
determination as to the indemnitee whether by judgment,
order, settlement, conviction or upon a plea of nolo
contendere or its equivalent.
(b) The Fund shall not indemnify any indemnitee for any covered expenses
in any covered proceeding if there has been an adjudication of
liability against such indemnitee expressly based on a finding of a
disabling conduct.
(c) Except as set forth in paragraph (b) above, the Fund shall indemnify
any indemnitee for covered expenses in any covered proceeding,
whether or not there is an adjudication of liability as to such
indemnitee, such indemnification by the Fund to be to the fullest
extent now or hereafter permitted by any applicable law unless the
By-Laws limit or restrict the indemnification to which any
indemnitee may be entitled. The Board of Trustees may adopt By-Law
provisions to implement paragraphs (a), (b) and (c) hereof.
(d) Nothing herein shall be deemed to affect the right of the Fund
and/or any indemnitee to acquire and pay for any insurance covering
any or all indemnities to the extent permitted by applicable law or
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to affect any other indemnification rights to which any indemnitee
may be entitled to the extent permitted by applicable law. Such
rights to indemnification shall not, except as otherwise provided by
law, be deemed exclusive of any other rights to which such
indemnitee may be entitled under any statute, By-Law, contract or
otherwise.
(e) In case any Shareholder or former Shareholder shall be held to be
personally liable solely by reason of his being or having been a
Shareholder and not because of his acts or omissions or for some
other reason, the Shareholder or former Shareholder (or his heirs,
executors, administrators or other legal representatives or in the
case of a corporation or other entity, its corporate or other
general successor) shall be entitled out of the Fund estate to be
held harmless from and indemnified against all loss and expense
arising from such liability. The Fund shall, upon request by the
Shareholder, assume the defense of any such claim made against any
Shareholder for any act or obligation of the Fund and satisfy any
judgment thereon.
ARTICLE V
COMMITTEES
----------
SECTION 5.1. EXECUTIVE AND OTHER COMMITTEES. The Trustees, by
resolution adopted by a majority of the Trustees, may designate an Executive
Committee and/or other committees, each committee to consist of two (2) or more
of the Trustees of the Fund and may delegate to such committees, in the
intervals between meetings of the Trustees, any or all of the powers of the
Trustees in the management of the business and affairs of the Fund. In the
absence of any member of any such committee, the members thereof present at any
meeting, whether or not they constitute a quorum, may appoint a Trustee to act
in place of such absent member. Each such committee shall keep a record of its
proceedings.
The Executive Committee and any other committee shall fix its own
rules or procedures, but the presence of at least fifty percent (50%) of the
members of the whole committee shall in each case be necessary to constitute a
quorum of the committee and the affirmative vote of the majority of the members
of the committee present at the meeting shall be necessary to take action.
All actions of the Executive Committee shall be reported to the
Trustees at the meeting thereof next succeeding to the taking of such action.
SECTION 5.2. ADVISORY COMMITTEE. The Trustees may appoint an
advisory committee which shall be composed of persons who do not serve the Fund
in any other capacity and which shall have advisory functions with respect to
the investments of the Fund but which shall have no power to determine that any
security or other investment shall be purchased, sold or otherwise disposed of
by the Fund. The number of persons constituting any such advisory committee
shall be determined from time to time by the Trustees. The members of any such
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advisory committee may receive compensation for their services and may be
allowed such fees and expenses for the attendance at meetings as the Trustees
may from time to time determine to be appropriate.
SECTION 5.3. COMMITTEE ACTION WITHOUT MEETING. The provisions of
these By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at any
meeting of any Committee of the Trustees appointed pursuant to Section 5.1 of
these By-Laws may be taken without a meeting if a consent in writing setting
forth the action shall be signed by all members of the Committee entitled to
vote upon the action and such written consent is filed with the records of the
proceedings of the Committee.
ARTICLE VI
OFFICERS
--------
SECTION 6.1. EXECUTIVE OFFICERS. The executive officers of the Fund
shall be a Chairman, a President, one or more Vice Presidents, a Secretary and a
Treasurer. The Chairman shall be selected from among the Trustees but none of
the other executive officers need be a Trustee. Two or more offices, except
those of President and any Vice President, may be held by the same person, but
no officer shall execute, acknowledge or verify any instrument in more than one
capacity.
The executive officers of the Fund shall be elected annually by the
Trustees and each executive officer so elected shall hold office until his
successor is elected and has qualified.
SECTION 6.2. OTHER OFFICERS AND AGENTS. The Trustees may also elect
one or more Assistant Vice Presidents, Assistant Secretaries and Assistant
Treasurers and may elect, or may delegate to the President the power to appoint,
such other officers and agents as the Trustees shall at any time or from time to
time deem advisable.
SECTION 6.3. TERM, REMOVAL AND VACANCIES. Each officer of the Fund
shall hold office until his successor is elected and has qualified. Any officer
or agent of the Fund may be removed by the Trustees whenever, in their judgment,
the best interests of the Fund will be served thereby, but such removal shall be
without prejudice to the contractual rights, if any, of the person so removed.
SECTION 6.4. COMPENSATION OF OFFICERS. The compensation of officers
and agents of the Fund shall be fixed by the Trustees, or by the President to
the extent provided by the Trustees with respect to officers appointed by the
President.
SECTION 6.5. POWER AND DUTIES. All officers and agents of the Fund,
as between themselves and the Fund, shall have such authority and perform such
duties in the management of the Fund as may be provided in or pursuant to these
By-Laws, or to the extent not so provided, as may be prescribed by the Trustees;
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provided, that no rights of any third party shall be affected or impaired by any
such By-Law or resolution of the Trustees unless he has knowledge thereof.
SECTION 6.6. THE CHAIRMAN. The Chairman shall preside at all
meetings of the Shareholders and of the Trustees, and he shall perform such
other duties as the Trustees may from time to time prescribe.
SECTION 6.7. THE PRESIDENT. The President shall be the chief
executive officer of the Fund; he shall have general and active management of
the business of the Fund, shall see that all orders and resolutions of the
Trustees are carried into effect, and, in connection therewith, shall be
authorized to delegate to one or more Vice Presidents such of his powers and
duties at such times and in such manner as he may deem advisable.
SECTION 6.8. THE VICE PRESIDENTS. The Vice Presidents shall be of
such number and shall have such titles as may be determined from time to time by
the Trustees. The Vice President, or, if there be more than one, the Vice
Presidents in the order of their seniority as may be determined from time to
time by the Trustees or the President, shall, in the absence or disability of
the President, exercise the powers and perform the duties of the President, and
he or they shall perform such other duties as the Trustees or the President may
from time to time prescribe.
SECTION 6.9. THE ASSISTANT VICE PRESIDENTS. The Assistant Vice
President, or, if there be more than one, the Assistant Vice Presidents, shall
perform such duties and have such powers as may be assigned from time to time by
the Trustees or the President.
SECTION 6.10. THE SECRETARY. The Secretary shall attend all meetings
of the Trustees and all meetings of the Shareholders and record all the
proceedings of the meetings of the Shareholders and of the Trustees in a book to
be kept for that purpose, and shall perform like duties for the standing
committees when required. He shall give, or cause to be given, notice of all
meetings of the Shareholders and special meetings of the Trustees, and shall
perform such other duties and have such powers as the Trustees, or the
President, may from time to time prescribe. He shall keep in safe custody the
seal of the Fund and affix or cause the same to be affixed to any instrument
requiring it, and, when so affixed, it shall be attested by his signature or by
the signature of an Assistant Secretary.
SECTION 6.11. THE ASSISTANT SECRETARIES. The Assistant Secretary,
or, if there be more than one, the Assistant Secretaries in the order determined
by the Trustees or the President, shall, in the absence or disability of the
Secretary, perform the duties and exercise the powers of the Secretary and shall
perform such duties and have such other powers as the Trustees or the President
may from time to time prescribe.
SECTION 6.12. THE TREASURER. The Treasurer shall be the chief
financial officer of the Fund. He shall keep or cause to be kept full and
accurate accounts of receipts and disbursements in books belonging to the Fund,
and he shall render to the Trustees and the President, whenever any of them
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require it, an account of his transactions as Treasurer and of the financial
condition of the Fund; and he shall perform such other duties as the Trustees,
or the President, may from time to time prescribe.
SECTION 6.13. THE ASSISTANT TREASURERS. The Assistant Treasurer, or,
if there shall be more than one, the Assistant Treasurers in the order
determined by the Trustees or the President, shall, in the absence or disability
of the Treasurer, perform the duties and exercise the powers of the Treasurer
and shall perform such other duties and have such other powers as the Trustees,
or the President, may from time to time prescribe.
SECTION 6.14. DELEGATION OF DUTIES. Whenever an officer is absent or
disabled, or whenever for any reason the Trustees may deem it desirable, the
Trustees may delegate the powers and duties of an officer or officers to any
other officer or officers or to any Trustee or Trustees.
ARTICLE VII
DIVIDENDS AND DISTRIBUTIONS
---------------------------
Subject to any applicable provisions of law and the Declaration,
dividends and distributions upon the Shares may be declared at such intervals as
the Trustees may determine, in cash, in securities or other property, or in
Shares, from any sources permitted by law, all as the Trustees shall from time
to time determine.
Inasmuch as the computation of the net income and net profits from
the sale of securities or other properties for federal income tax purposes may
vary from the computation thereof on the records of the Fund, the Trustees shall
have power, in their discretion, to distribute as income dividends and as
capital gain distributions, respectively, amounts sufficient to enable the Fund
to avoid or reduce liability for federal income taxes.
ARTICLE VIII
CERTIFICATES OF SHARES
----------------------
SECTION 8.1. CERTIFICATES OF SHARES. Certificates for Shares of the
Fund shall be in such form and of such design as the Trustees shall approve,
subject to the right of the Trustees to change such form and design at any time
or from time to time, and shall be entered in the records of the Fund as they
are issued. Each such certificate shall bear a distinguishing number; shall
exhibit the holder's name and certify the number of full Shares owned by such
holder; shall be signed by or in the name of the Fund by the President, or a
Vice President, and countersigned by the Secretary or an Assistant Secretary or
the Treasurer and an Assistant Treasurer of the Fund; shall be sealed with the
seal; and shall contain such recitals as may be required by law. Where any
certificate is signed by a Transfer Agent or by a Registrar, the signature of
such officers and the seal may be facsimile, printed or engraved. The Fund may,
at its option, determine not to issue a certificate or certificates to evidence
Shares owned of record by any Shareholder.
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In case any officer or officers who shall have signed, or whose
facsimile signature or signatures shall appear on, any such certificate or
certificates shall cease to be such officer or officers of the Fund, whether
because of death, resignation or otherwise, before such certificate or
certificates shall have been delivered by the Fund, such certificate or
certificates shall, nevertheless, be adopted by the Fund and be issued and
delivered as though the person or persons who signed such certificate or
certificates or whose facsimile signature or signatures shall appear therein had
not ceased to be such officer or officers of the Fund.
No certificate shall be issued for any Share until such Share is
fully paid.
SECTION 8.2. TRANSFER OF SHARES. Shares shall be transferable on the
books of the Fund by the holder thereof in person or by his duly authorized
attorney or legal representative, upon surrender and cancellation of
certificates, if any, for the same number of Shares, duly endorsed or
accompanied by proper instruments of assignment and transfer, with such proof of
the authenticity of the signature as the Fund or its agent may reasonably
require; in the case of Shares not represented by certificates, the same or
similar requirements may be imposed by the Board of Trustees.
SECTION 8.3. SHARE LEDGERS. The share ledgers of the Fund,
containing the name and address of the Shareholders of the Fund and the number
of Shares held by them respectively, shall be kept at the principal offices of
the Fund or, if the Fund employs a transfer agent, at the offices of the
Transfer Agent of the Fund.
SECTION 8.4. LOST, STOLEN, DESTROYED AND MUTILATED CERTIFICATES. The
Trustees may direct a new certificate or certificates to be issued in place of
any certificate or certificates theretofore issued by the Fund alleged to have
been lost, stolen or destroyed, upon satisfactory proof of such loss, theft, or
destruction; and the Trustees may, in their discretion, require the owner of the
lost, stolen or destroyed certificate, or his legal representative, to give to
the Fund and to such Registrar, Transfer Agent and/or Transfer Clerk as may be
authorized or required to countersign such new certificate or certificates, a
bond in such sum and of such type as they may direct, and with such surety or
sureties, as they may direct, as indemnity against any claim that may be against
them or any of them on account of or in connection with the alleged loss, theft
or destruction of any such certificate.
ARTICLE IX
WAIVER OF NOTICE
----------------
Whenever any notice of the time, place or purpose of any meeting of
Shareholders, Trustees, or of any committee is required to be given in
accordance with law or under the provisions of the Declaration or these By-Laws,
a waiver thereof in writing, signed by the person or persons entitled to such
notice and filed with the records of the meeting, whether before or after the
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holding thereof, or actual attendance at the meeting of Shareholders, Trustees
or committee, as the case may be, in person, shall be deemed equivalent to the
giving of such notice to such person.
ARTICLE X
MISCELLANEOUS
-------------
SECTION 10.1. LOCATION OF BOOKS AND RECORDS. The books and records
of the Fund may be kept outside the Commonwealth of Massachusetts at such place
or places as the Trustees may from time to time determine, except as otherwise
required by law.
SECTION 10.2. RECORD DATE. The Trustees may fix in advance a date as
the record date for the purpose of determining Shareholders entitled to notice
of, or to vote at, any meeting of Shareholders, or Shareholders entitled to
receive payment of any dividend or the allotment of any rights, or in order to
make a determination of Shareholders for any other proper purpose. Such date, in
any case, shall be not more than ninety (90) days, and in case of a meeting of
Shareholders not less than ten (10) days, prior to the date on which particular
action requiring such determination of Shareholders is to be taken. In lieu of
fixing a record date, the Trustees may provide that the transfer books shall be
closed for a stated period but not to exceed, in any case, twenty (20) days. If
the transfer books are closed for the purpose of determining Shareholders
entitled to notice of a vote at a meeting of Shareholders, such books shall be
closed for at least ten (10) days immediately preceding such meeting.
SECTION 10.3. SEAL. The Trustees shall adopt a seal, which shall be
in such form and shall have such inscription thereon as the Trustees may from
time to time provide. The seal of the Fund may be affixed to any document, and
the seal and its attestation may be lithographed, engraved or otherwise printed
on any document with the same force and effect as if it had been imprinted and
attested manually in the same manner and with the same effect as if done by a
Massachusetts business trust under Massachusetts law.
SECTION 10.4. FISCAL YEAR. The fiscal year of the Fund shall end on
such date as the Trustees may by resolution specify, and the Trustees may by
resolution change such date for future fiscal years at any time and from time to
time.
SECTION 10.5. ORDERS FOR PAYMENT OF MONEY. All orders or
instructions for the payment of money of the Fund, and all notes or other
evidences of indebtedness issued in the name of the Fund, shall be signed by
such officer or officers or such other person or persons as the Trustees may
from time to time designate, or as may be specified in or pursuant to the
agreement between the Fund and the bank or trust company appointed as Custodian
of the securities and funds of the Fund.
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ARTICLE XI
COMPLIANCE WITH FEDERAL REGULATIONS
-----------------------------------
The Trustees are hereby empowered to take such action as they may
deem to be necessary, desirable or appropriate so that the Fund is or shall be
in compliance with any federal or state statute, rule or regulation with which
compliance by the Fund is required.
ARTICLE XII
AMENDMENTS
----------
These By-Laws may be amended, altered, or repealed, or new By-Laws
may be adopted, (a) by a Majority Shareholder Vote, or (b) by the Trustees;
provided, however, that no By-Law may be amended, adopted or repealed by the
Trustees if such amendment, adoption or repeal requires, pursuant to law, the
Declaration, or these By-Laws, a vote of the Shareholders. The Trustees shall in
no event adopt By-Laws which are in conflict with the Declaration, and any
apparent inconsistency shall be construed in favor of the related provisions in
the Declaration.
ARTICLE XIII
DECLARATION OF TRUST
--------------------
The Declaration of Trust establishing the Fund, dated November 18,
1991, a copy of which is on file in the office of the Secretary of State of the
Commonwealth of Massachusetts, provides that the name The Global Health Sciences
Fund refers to the Trustees under the Declaration collectively as Trustees, but
not as individuals or personally; and no Trustee, Shareholder, officer, employee
or agent of the Fund shall be held to any personal liability, nor shall resort
be had to their private property for the satisfaction of any obligation or claim
or otherwise, in connection with the affairs of said Fund, but the Fund Estate
only shall be liable.
12
TERMS AND CONDITIONS OF
INVESCO GLOBAL HEALTH SCIENCES FUND
DIVIDEND REINVESTMENT PLAN
(as amended)
All shareholders participating (the "Participants") in the Dividend Reinvestment
Plan (the "Plan") of INVESCO Global Health Sciences Fund (the "Fund") will be
bound by the following provisions:
1. State Street Bank and Trust Company (the "Agent") will act as Agent for
each Participant, and will open an account for each Participant under the
Plan in the same name as their present shares are registered, and put into
effect for them the dividend reinvestment option of the Plan as of the
first record date for a dividend, capital gains or other distribution.
2. Whenever the Fund declares an income dividend, capital gains or other
distribution payable solely in shares, or in shares of the Fund or cash at
the option of the shareholders, each Participant shall take such dividend,
capital gains or other distribution entirely in shares. The Agent shall
automatically receive such shares, including fractions, for each
Participant's account. The number of additional shares to be credited to
each Participant's account shall be determined by dividing the dollar
amount of the dividend, capital gains or other distribution payable on
their shares by the greater of the net asset value per share determined as
of the date of purchase or 95% of the then-current market price per share
of the Fund's shares on the payment date. The payment date shall be the
payable date for such dividend, capital gains or other distribution, or
such prior date as may be determined by the board of trustees of the Fund.
3. In the event that the Fund declares a dividend, capital gains or other
distribution payable only in cash, the Agent shall, except as provided in
the next succeeding paragraph, apply the amount of such dividend, capital
gains or other distribution payable on the shares of each participant in
the Plan (less his or her pro rata share of brokerage commissions incurred
with respect to the Agent's open-market purchases in connection with the
reinvestment of such dividend, capital gains or other distribution) to the
purchase on the open market of shares of the Fund for his or her account.
Such purchases will be made on or shortly after the payment date for such
dividend, capital gains or other distribution, and in no event more than
30 days after such date except where temporary curtailment or suspension
of purchases is necessary to comply with applicable provisions of federal
securities law.
In the event that, at the time of payment of the distribution or dividend,
or prior to the Agent's completion of all such purchases necessary in
connection with such dividend, capital gains or other distribution, the
market price of a share equals or exceeds its net asset value, then the
Agent shall not purchase shares of the Fund in the open market, or shall
cease purchasing shares of the Fund and the Fund will issue the remaining
<PAGE>
shares necessary for the payment of such dividend, capital gains or other
distribution at the greater of net asset value per share or 95% of the
then current market value of the shares of the Fund.
In a case where, in accordance with the preceding paragraph, the Agent has
terminated open-market purchases and the Fund has issued the remaining
shares, the number of shares of the Fund received by the participants in
respect of such dividend, capital gains or other distribution will be
based on the weighted average of prices paid for shares purchased in the
open market and the prices at which the Fund issued the remaining shares.
4. For purposes of making the dividend reinvestment purchase comparison under
the Plan, (a) the market price of the Fund's shares on a particular date
shall be the last sales price on the New York Stock Exchange on that date,
or, if there is no sale on such Exchange on that date, then the mean
between the closing bid and asked quotations for such shares on such
Exchange on such date and (b) the net asset value per share of the Fund's
shares on a particular date shall be the net asset value per share most
recently calculated by or on behalf of the Fund.
5. Open-market purchases provided for above may be made on any securities
exchange where the Fund's shares are traded, in the over-the-counter
market or in negotiated transactions and may be on such terms as to price,
delivery and otherwise as the Agent shall determine. Each Participant's
uninvested funds held by the Agent will not bear interest, and it is
understood that, in any event, the Agent shall have no liability in
connection with any inability to purchase shares within 30 days after the
initial date of such purchase as herein provided, or with the timing of
any purchases effected. The Agent shall have no responsibility as to the
value of the Fund's shares acquired for each Participant's account. For
the purpose of cash investments, the Agent may commingle each
Participant's funds with those of other shareholders of the Fund for whom
the Agent similarly acts as Agent, and the average price (including
brokerage commissions) of all shares purchased by the Agent as Agent shall
be the price per share allocated to each Participant in connection
therewith.
6. The Agent may hold each Participant's shares acquired pursuant to the Plan
together with the shares of other shareholders of the Fund acquired
pursuant to the Plan in noncertificated form in the Agent's name or that
of the Agent's nominee. The Agent will forward to each Participant any
proxy solicitation material; and will vote any shares so held for each
Participant first in accordance with the instructions set forth on proxies
returned by the Participant to the Fund, and then with respect to any
proxies not returned by the Participant to the Fund in the same proportion
as the agent votes proxies returned by the Participants to the Fund. Upon
a Participant's written request, the Agent will deliver to them, without
charge, a certificate or certificates for the full shares.
7. The Agent will confirm to each Participant each acquisition made for their
account as soon as practicable but not later than 60 days after the date
thereof. Although each Participant may from time to time have
<PAGE>
an undivided fractional interest (computed to three decimal places) in a
share of the Fund, no certificates for a fractional share will be issued.
However, dividends, capital gains and other distributions on fractional
shares will be credited to each Participant's account. In the event of
termination of a Participant's account under the Plan, the Agent will
adjust for any such undivided fractional interest in cash at the market
value of the Fund's shares at the time of termination.
8. Any share dividends or split shares distributed by the Fund on shares held
by the Agent for a Participant will be credited to their account. In the
event that the Fund makes available to its shareholders rights to purchase
additional shares of other securities, the shares held for each
Participant under the Plan will be added to other shares held by them in
calculating the number of rights to be issued to each Participant.
9. The Agent's service fee for handling dividends, capital gains or other
distributions will be paid by the Fund. Each Participant will be charged
their pro rata share of brokerage commissions on all open-market purchases
in connection with the reinvestment of dividends, capital gains or other
distributions.
10. Each Participant may terminate their account under the Plan by notifying
the Agent in writing. Such termination will be effective immediately if
the Participant's notice is received by the Agent not less than thirty
days prior to any dividend, capital gains or other distribution record
date. Otherwise such termination will be effective shortly after the
investment of such distributions with respect to any subsequent dividend,
capital gains or other distribution. The Plan may be terminated by the
Agent or the Fund upon notice in writing mailed to each Participant at
least 90 days prior to any record date for the payment of any dividend,
capital gains or other distribution by the Fund. Upon any termination, the
Agent will cause a certificate or certificates to be issued for the full
shares held for each Participant under the Plan and cash adjustment for
any fraction to be delivered to them without charge. If a Participant
elects by notice to the Agent in writing in advance of such termination to
have the Agent sell part or all of their shares and remit the proceeds to
them, the Agent is authorized to deduct a $2.50 fee plus brokerage
commission for this transaction from the proceeds.
11. These terms and conditions may be amended or supplemented by the Agent or
the Fund at any time or times but, except when necessary or appropriate to
comply with applicable law or the rules or policies of the Securities and
Exchange Commission or any other regulatory authority, only by mailing to
each Participant appropriate written notice at least 45 days prior to the
effective date thereof. The amendment or supplement shall be deemed to be
accepted by each Participant unless, prior to the effective date thereof,
the Agent receives written notice of the termination of their account
under the Plan. Any such amendment may include an appointment by the Agent
in its place and stead of a successor Agent under these terms and
conditions, with full power and authority to perform all or any of the
acts to be performed by the Agent under these terms and conditions. Upon
any such appointment of any Agent for the purpose of receiving dividends,
<PAGE>
capital gain and other distributions, the Fund will be authorized to pay
to such successor Agent, for each Participant's account, all dividends,
capital gains and other distributions payable on shares of the Fund held
in their name or under the Plan for retention or application by such
successor Agent as provided in these terms and conditions.
12. The Agent shall at all times act in good faith and agree to use its best
efforts within reasonable limits to ensure the accuracy of all services
performed under this Agreement and to comply with applicable law, but
assumes no responsibility and shall not be liable for loss or damage due
to errors unless such error is caused by the Agent's negligence, bad
faith, or willful misconduct or that of its employees.
13. These terms and conditions shall be governed by the laws of the State of
New York.
<PAGE>
INVESCO GLOBAL HEALTH SCIENCES FUND
Dividend Reinvestment Plan
INVESCO GLOBAL HEALTH SCIENCES FUND
7800 E. Union Avenue
Suite 800
Denver, Colorado 80237
Investment Adviser:
INVESCO TRUST COMPANY
7800 E. Union Avenue
Suite 800
Denver, Colorado 80237
1-800-525-8085
Administrator:
INVESCO Funds Group, Inc.
7800 E. Union Avenue
Denver, CO 80237
1-303-930-6300
Shareholder Inquiries to:
STATE STREET BANK and TRUST COMPANY
c/o INVESCO Global Health Sciences Fund
P.O. Box 8209, Boston, MA 02266-8209
Telephone 1-800-451-6788
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made this 4th day of February, 1998, in Denver, Colorado,
by and between INVESCO FUNDS GROUP, INC. (the "Adviser"), a Delaware
corporation, and INVESCO Global Health Sciences Fund, a Massachusetts business
trust (the "Fund").
WITNESSETH:
WHEREAS, the Fund is organized as a Massachusetts business trust; and
WHEREAS, the Fund is registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), as a diversified, closed end management investment
company and currently has one class of shares (the "Shares"); and
WHEREAS, the Fund desires that the Adviser manage its investment operations
and provide certain other services, and the Adviser desires to manage said
operations and to provide such other services;
NOW, THEREFORE, in consideration of these premises and of the mutual
covenants and agreements hereinafter contained, the parties hereto agree as
follows:
1. INVESTMENT MANAGEMENT SERVICES.
(a) The Adviser hereby agrees to manage the investment operations of the
Fund, subject to the terms of this Agreement and to the supervision of the
Fund's board of trustees (the "Trustees"). The Adviser agrees to perform, or
arrange for the performance of, the following specific services for the Fund:
(i) to manage the investment and reinvestment of all the assets, now or
hereafter acquired, of the Fund, and to execute all purchases and sales of
portfolio securities;
(ii) to maintain a continuous investment program for the Fund, consistent
with (A) the Fund's investment policies as set forth in the Fund's Declaration
of Trust, By Laws and Registration Statement under the 1940 Act and the
Securities Act of 1933 and (B) the Fund's status as a regulated investment
company under the Internal Revenue Code of 1886, as amended;
(iii) to determine what securities are to be purchased or sold for the Fund,
unless otherwise directed by the Trustees, and to execute transactions
accordingly;
(iv) to provide to the Fund the benefit of all of the investment analysis and
research, the reviews of current economic conditions and of trends, and the
<PAGE>
consideration of long range investment policy now or hereafter generally
available to investment advisory customers of the Adviser;
(v) to determine what portion of the Fund should be invested in the various
types of securities authorized for purchase by the Fund;
(vi) to make recommendations as to the manner in which voting rights, rights
to consent to Fund action and any other rights pertaining to the Fund's
securities shall be exercised; and
(vii) to prepare proxy materials for meetings of the Fund's shareholders and
such registrations and reports as may be required by federal securities laws.
(b) With respect to execution of transactions for the Fund, the Adviser is
authorized to employ such brokers or dealers as may, in the Adviser's best
judgment, implement the policy of the Fund to obtain prompt and reliable
execution at the most favorable price obtainable. In assigning an execution or
negotiating the commission to be paid therefor, the Adviser is authorized to
consider the full range and quality of a broker's services which benefit the
Fund, including but not limited to research and analytical capabilities,
reliability of performance, and financial soundness and responsibility. Research
services prepared and furnished by brokers through which the Adviser effects
securities transactions on behalf of the Fund may be used by the Adviser in
servicing all of its accounts, and not all such services may be used by the
Adviser in connection with the Fund. In the selection of a broker or dealer for
execution of any negotiated transaction, the Adviser shall have no duty or
obligation to seek advance competitive bidding for the most favorable negotiated
commission rate for such transaction, or to select any broker solely on the
basis of its purported or "posted" commission rate for such transaction,
provided, however, that the Adviser shall consider such "posted" commission
rates, if any, together with any other information available at the time as to
the level of commissions known to be charged on comparable transactions by other
qualified brokerage firms, as well as all other relevant factors and
circumstances, including the size of any contemporaneous market in such
securities, the importance to the Fund of speed, efficiency, and confidentiality
of execution, the execution capabilities required by the circumstances of the
particular transactions, and the apparent knowledge or familiarity with sources
from or to whom such securities may be purchased or sold. Where the commission
rate reflects services, reliability and other relevant factors in addition to
the cost of execution, the Adviser shall have the burden of demonstrating that
such expenditures were bona fide and for the benefit of the Fund.
2. FUND ADMINISTRATION AND ALLOCATION OF EXPENSES. The Adviser shall at its
expense provide all executive, administrative and clerical personnel as shall be
required to provide effective administration for the Fund, except such services,
facilities and personnel as the Fund shall obtain pursuant to the Administration
Agreement annexed hereto as Exhibit A. Services to be provided by the Adviser
hereunder shall include the compilation and maintenance of such records with
2
<PAGE>
respect to the Fund's operations as may reasonably be required, other than such
books and records to be maintained by INVESCO Funds Group, Inc. under the terms
of the Administration Agreement; the preparation and filing of such reports with
respect thereto as shall be required by the Securities and Exchange Commission
(the "SEC") and periodic reports with respect to its operations for the
shareholders of the Fund except required reports to shareholders and Form N-SAR
(or such other form as the SEC may substitute therefor); preparation of proxy
materials for meetings of the Fund shareholders; and the preparation of such
registrations and reports as may be required by federal securities laws. The
Adviser shall, at its own cost and expense, also provide the Fund with adequate
office space, facilities and equipment. All other costs and expenses not
expressly assumed by the Adviser under this Agreement shall be paid by the Fund,
including, but not limited to (i) interest and taxes, including issue and
transfer taxes, incurred by or levied on the Fund; (ii) insurance premiums for
fidelity and other coverage requisite to its operations; (iii) compensation and
expenses of its Trustees other than those associated or affiliated with the
Adviser; (iv) legal and audit expenses; (v) custodian, dividend paying agent,
registrar and transfer agent fees and expenses (including charges and expenses
of the Fund's Dividend Reinvestment Plan Agent) and brokerage commissions, if
any; (vi) fees and expenses, other than as hereinabove provided, incident to the
registration, under Federal law, of shares of the Fund for public sale; (vii)
except as noted above, all other expenses incidental to holding meetings of the
Fund's shareholders; (viii) payments under the Fund's Administration Agreement;
(ix) fees and expenses of listing and maintaining the listing of the Fund's
shares on any national securities exchange; (x) cost of certificates
representing the Fund's shares; and (xi) such nonrecurring expenses as may
arise, including litigation affecting the Fund and the legal obligation that the
Fund may have to indemnity its officers and Trustees with respect thereto.
3. USE OF AFFILIATED COMPANIES. In connection with the rendering of the
services required to be provided by the Adviser under this Agreement, the
Adviser may, to the extent it deems appropriate and subject to compliance with
the requirements of applicable laws and regulations, and upon receipt of written
approval of the Fund, make use of its affiliated companies and their employees;
provided that the Adviser shall supervise and remain fully responsible for all
such services in accordance with and to the extent provided by this Agreement
and that all costs and expenses associated with the providing of services by any
such companies or employees and required by this Agreement to be borne by the
Adviser shall be borne by the Adviser or its affiliated companies.
4. COMPENSATION OF THE ADVISER For the services to be rendered and the
charges and expenses to be assumed by the Adviser hereunder, the Fund shall pay
to the Adviser a monthly fee at an annual rate of 1.00% of the first $500
million of the Fund's ending weekly net assets and 0.90% of the Fund's ending
weekly net assets in excess of $500 million. The fee provided for hereunder
shall be prorated in any month in which this Agreement is not in effect for the
entire month.
3
<PAGE>
5. AVOIDANCE OF INCONSISTENT POSITIONS AND COMPLIANCE WITH LAWS. In
connection with purchases or sales of securities for the investment portfolio of
the Fund, neither the Adviser nor its officers or employees will act as a
principal or agent for any party other than the Fund or receive any commissions.
The Adviser will comply with all applicable laws in acting hereunder including,
without limitation, the 1940 Act; the Investment Advisers Act of 1940, as
amended; and all rules and regulations duly promulgated under the foregoing.
6. DURATION AND TERMINATION. THIS Agreement shall become effective as of the
date it is approved by a majority of the outstanding voting securities of the
Fund, and unless sooner terminated as hereinafter provided, shall remain in
force for an initial term ending two years from the date of execution, and from
year to year thereafter, but only as long as such continuance is specifically
approved at least annually (i) by a vote of a majority of the outstanding voting
securities of the Fund or by the Trustees, and (ii) by a majority of the
Trustees who are not interested persons of the Adviser or the Fund by votes cast
in person at a meeting called for the purpose of voting on such approval.
This Agreement may, on 60 days' prior written notice, be terminated without
the payment of any penalty, by the Trustees, or by the vote of a majority of the
outstanding voting securities of the Fund, as the case may be, or by the
Adviser. This Agreement shall immediately terminate in the event of its
assignment, unless an order is issued by the Securities and Exchange Commission
conditionally or unconditionally exempting such assignment from the provisions
of Section 15(a) of the 1940 Act, in which event this Agreement shall remain in
full force and effect subject to the terms and provisions of said order. In
interpreting the provisions of this paragraph 6, the definitions contained in
Section 2(a) of the 1940 Act and the applicable rules under the 1940 Act
(particularly the definitions of "interested person," "assignment" and "vote of
a majority of the outstanding voting securities") shall be applied.
The Adviser agrees to furnish to the Trustees such information on an annual
basis as may reasonably be necessary to evaluate the terms of this Agreement.
Termination of this Agreement shall not affect the right of the Adviser to
receive payments on any unpaid balance of the compensation described in
paragraph 4 earned prior to such termination.
7. NON-EXCLUSIVE SERVICES. The Adviser shall, during the term of this
Agreement, be entitled to render investment advisory services to others,
including, without limitation, other investment companies with similar
objectives to those of the Fund. The Adviser may, when it deems such to be
advisable, aggregate orders for its other customers together with any securities
of the same type to be sold or purchased for the Fund in order to obtain best
execution and lower brokerage commissions. In such event, the Adviser shall
allocate the shares so purchased or sold, as well as the expenses incurred in
the transaction, in the manner it considers to be most equitable and consistent
with its fiduciary obligations to the Fund and the Adviser's other customers.
4
<PAGE>
8. LIABILITY OF THE ADVISER.
(a) The Adviser shall not be liable for any act or omission, error of
judgment or mistake of law, or for any loss suffered by the Fund in connection
with matters relating to this Agreement, except a loss resulting from willful
misfeasance, bad faith or gross negligence of the Adviser in the performance of,
or from reckless disregard of, its obligations and duties under this Agreement,
or except a loss resulting from breach of fiduciary duty with respect to receipt
of compensation for services (in which case any award of damages shall be
limited to the period and amount set forth in Section 36(b)(3) of the 1940 Act).
(b) A copy of the Declaration of Trust of the Fund is on file with the
Secretary of the State of Massachusetts, and notice is hereby given that this
Agreement is not executed on behalf of the Trustees of the Fund as individuals,
and the obligations of this agreement are not binding upon any of the Trustees,
officers, shareholders or partners of the Fund individually, but are binding
only upon the assets and property of the Fund.
The Adviser agrees that no shareholder, Trustee, officer or partner of the
Fund may be held personally liable or responsible for any obligations of the
Fund arising out of this Agreement. With respect to obligations of the Fund
arising out of this Agreement, the Adviser shall look for payment or
satisfaction of any claim solely to the assets and property of the Fund.
9. MISCELLANEOUS PROVISIONS.
Notice. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as such
other party may designate for the receipt of such notice.
Amendments Hereof. No provision of this Agreement may be orally changed or
discharged, but may only be modified by an instrument in writing signed by the
Fund and the Adviser. In addition, no amendment to this Agreement shall be
effective unless approved by (i) the vote of a majority of the Trustees,
including a majority of the Trustees who are not parties to this Agreement or
interested persons of any such party cast in person at a meeting called for the
purpose of voting on such amendment, and (ii) the vote of a majority of the
outstanding voting securities of the Fund (other than an amendment which can be
effective without shareholder approval under applicable law).
SEVERABILITY. Each provision of this Agreement is intended to be severable.
If any provision of this Agreement shall be held illegal or made invalid by a
court decision, statute, rule or otherwise, such illegality or invalidity shall
not affect the validity or enforceability of the remainder of this Agreement.
5
<PAGE>
HEADINGS. The headings in this Agreement are inserted for convenience and
identification only and are in no way intended to describe, interpret, define or
limit the size, extent or intent of this Agreement or any provision hereof.
APPLICABLE LAW. This Agreement construed in accordance with the laws of the
State of Colorado. To the extent that the applicable laws of the State of
Colorado, or any of the provisions herein, conflict with applicable provisions
of the 1940 Act, the latter shall control.
IN WITNESS WHEREOF, the Adviser and the Fund each has caused this Agreement
to be duly executed on its behalf by an officer thereunto duly authorized, the
day and year first above written.
INVESCO FUNDS GROUP, INC.
By: /s/ William J. Galvin
------------------------
William J. Galvin
Senior Vice President
ATTEST:
By: /s/ Glen A. Payne
------------------------
Glen A. Payne, Secretary
INVESCO GLOBAL HEALTH SCIENCES FUND
By: /s/ John Schroer
-----------------------
John Schroer
Vice President
ATTEST:
By: /s/ Glen A. Payne
------------------------
Glen A. Payne, Secretary
Amendment to Investment Advisory Agreement
This is an Amendment to the Investment Advisory Agreement (the "Agreement") made
and entered into between the INVESCO Global Health Sciences Fund, a
Massachusetts business trust (the "Fund"), and INVESCO Funds Group, Inc., a
Delaware corporation registered with the Securities and Exchange as an
investment adviser (the "Adviser"), effective as of the 1st day of November,
1998.
WHEREAS, the Fund and the Adviser desire to specify that the advisory fee to be
paid to the Adviser by the Fund under the Agreement will be computed based on
the Fund's daily net assets; and
WHEREAS, the Fund and the Adviser desire to incorporate into the advisory fee
rate set forth in the Agreement the new ninety basis point breakpoint approved
by the Fund's Board of Trustees on February 3, 1998.
NOW, THEREFORE, in consideration of the premises and mutual covenants contained
in the Agreement, it is agreed that the provisions of Section 4 of the Agreement
entitled "Compensation of the Adviser" are hereby amended to read as follows:
COMPENSATION OF THE ADVISER. For the services to be rendered and the
charges and expenses to be assumed by the Adviser hereunder, the Fund
shall pay to the Adviser a monthly fee at the annual rate of 1.00% of the
Fund's daily net assets up to $500 million, and 0.90% of the Fund's daily
net assets on all assets of the Fund over $500 million. The fee provided
for hereunder shall be prorated in any month in which this Agreement is
not in effect for the entire month.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment on this 1st day of
November, 1998.
INVESCO GLOBAL HEALTH SCIENCES FUND
Attest: Glen A. Payne /s/
Secretary
By: Mark H. Williamson /s/
President
INVESCO FUNDS GROUP, INC.
Attest: Glen A. Payne /s/
Secretary
By: Ronald L. Grooms /s/
Senior Vice President
DEFERRED FEE AGREEMENT
THIS AGREEMENT, dated ____________, 1998, by and between ______________
("Trustee"), currently residing at ____________________________________________,
and INVESCO Global Health Sciences Fund, a Massachusetts Business Trust with
offices at 7800 East Union Avenue, Denver, Colorado (the "Trust").
W I T N E S S E T H
WHEREAS, Trustee currently serves as director of the Trust and receives
fees ("Trustee's Fees") from the Trust in that capacity; and
WHEREAS, Trustee desires that an arrangement be established with the Trust
under which he or she may defer receipt of the Trustee's Fees which may
otherwise become payable to him and which relate to services performed after the
date hereof; and
WHEREAS, the Trust is agreeable to such an arrangement as evidenced by the
resolution of its Board of Trustees ("Board") dated October 12, 1998.
NOW, THEREFORE, IT IS AGREED AS FOLLOWS:
1. Trustee irrevocably elects to defer receipt, subject to the provisions
of this Agreement, of $____________, $___________ per annum, or __________
percent (___%) of any Trustee's Fees which may otherwise become payable to him
or her after the date of this Agreement, and which relate to services performed
after the date hereof. An election to defer either a dollar amount per annum or
<PAGE>
a percentage of Trustee's Fees shall continue from year to year unless Trustee
terminates such election by written request. Any such termination shall be
effective only with respect to Trustee's Fees which become payable after the
date of termination. Trustee's Fees with respect to which Trustee shall have
elected to defer receipt (and shall not have revoked such election) as provided
above are hereinafter referred to as "Deferred Trustee's Fees."
2. During any calendar year for which Trustee's Fees otherwise payable to
Trustee are Deferred Trustee's Fees, the Trust shall credit the amount of such
Deferred Trustee's Fees as of the date such fees would have been paid to such
Trustee had this Agreement not been in effect to a separate memorandum account
(the "Deferred Fee Account").
3. The Deferred Fee Account shall be deemed invested in shares of the
Trust. The Deferred Fee Account shall be adjusted to reflect its share of any
income or gain or charged with its share of any loss arising from such deemed
investments by the Deferred Fee Account.
4. The Trust may, at its sole discretion, set aside assets to fund the
obligations created by this Agreement and similar agreements by other trustees
of the Trust in a Deferred Fee Account Fund and may invest assets of the
Deferred Fee Account Fund in any investment medium including, but not limited
to, shares of the Trust and any other security or investment medium in which the
assets of the Trust are permitted to be invested.
5. The Trust's obligation to make payments out of the Deferred Fee
Account shall be a general obligation of the Trust, and such payment shall be
made from the Trust's general assets and property. Trustee's relationship to the
Trust under this Agreement shall be that of a general unsecured creditor, and
neither
2
<PAGE>
this Agreement nor any action taken pursuant to this Agreement shall create or
be construed to create a trust or fiduciary relationship of any kind between the
Trust and Trustee, his or her designated beneficiary or any other person, or a
security interest of any kind in any property of the Trust in favor of Trustee
or any other person. The Trust shall not be required to purchase, hold or
dispose of any investments pursuant to this Agreement; however, in order to
cover its obligations hereunder, if the Trust elects to establish a Deferred Fee
Account Fund to purchase any investments (including, without limitation, shares
of the Trust), the same shall continue for all purposes to be a part of the
general assets and property of the Trust, subject to the claims of its general
creditors, and no person other than the Trust shall by virtue of the provisions
of this Agreement have any interest in such assets other than an interest as a
general creditor. The Trust shall provide an annual statement to each Trustee
who shall have elected to defer receipt of Trustee's Fees showing such
information as is appropriate, including the aggregate amount credited or
charged to the Deferred Fee Account, as of a reasonably current date.
6. Payment of amounts out of the Deferred Fee Account shall be made to
Trustee as selected by Trustee below.
Once a selection has been made, Trustee may not select a different
time or method of payment for prior amounts credited to his Deferred Fee
Account, but may select a different payment time or method for future Trustee's
Fees to be credited to the Deferred Fee Account.
3
<PAGE>
Payments shall be made to Trustee upon the happening of the
following event or events (the "payment event"), unless the Trust, in its sole
discretion, determines to make payments at another time:
__________ termination of service as a Trustee.
__________ attainment of age ___.
__________ termination of service as a Trustee or attainment of
age ____, whichever may first occur.
Payments shall be made to Trustee as follows:
__________ lump sum payment.
__________ payment in _____ quarterly installments, each payment to
be equal to the value of the Deferred Fee Account
immediately prior to the date of payment divided by the
number of remaining payments.
The death of Trustee shall constitute the payment event and payments shall then
be made as set forth in paragraph 7(b) herein.
In the event Trustee selects installment payments, each quarterly
installment payment shall be made as of the last day of the months of January,
April, July, and October of each year, beginning with the payment month next
following the payment event. Until payments of amounts credited to the Deferred
Fee Account have been completed, the unpaid balance shall be credited with the
income and gains and charged with losses of the deemed investments in the
Deferred Fee Account Trust. The Trust in its sole discretion reserves the right
to accelerate payments of amounts in Trustee's Deferred Fee Account at any time
after the payment event. Notwithstanding the foregoing, in the event of the
liquidation, dissolution or winding up of the Trust's assets and property of its
shareholders, all unpaid amounts in the Deferred Fee Account as of the effective
date thereof shall be paid in a lump sum on such effective date. (For this
4
<PAGE>
purpose, a sale, conveyance or transfer of the Trust's assets to a trust,
partnership, association or another Trust in exchange for cash, shares or other
securities, with the transfer being made subject to, or with the assumption by
the transferee of, the liabilities of the Trust, shall not be deemed a
termination of the Trust or such a distribution.)
7. Payment of amounts credited to the Deferred Fee Account shall be made
to Trustee in the form of a check. Such payment shall be made to Trustee except
that:
a. in the event that Trustee shall be determined by a court of
competent jurisdiction to be incapable of managing his or her
financial affairs, and if the Trust has actual notice of such
determination, payment shall be made to Trustee's personal
representative(s); and
b. in the event of Trustee's death, payment shall be made to the
last beneficiary designated by Trustee for purposes of receiving
such payment in such event in a written notice delivered to the
President of the Trust; provided that if such beneficiary has not
survived Trustee, payment shall be made to Trustee's estate.
Trustee hereby designates
______________________________________________________ as the
initial beneficiary for purposes of receiving such payment in
such event. Trustee may from time to time designate new
beneficiaries and such designation shall effectively revoke all
prior designations filed by Trustee.
8. The Trust may in its sole discretion accelerate the payment of
deferred amounts if such acceleration is requested by a Trustee or, after his or
her death, by his or her beneficiary or heir. Acceleration may occur only in the
event of unforeseeable financial emergency or severe hardship resulting from one
5
<PAGE>
or more recent events beyond the control of Trustee or his or her beneficiary or
heir and is limited to the amount deemed reasonably necessary to satisfy the
emergency or hardship. The acceleration must be approved by the Board without
regard to the vote of the Trustee who requests the acceleration.
9. Amounts in the Deferred Fee Account shall not in any way be subject to
the debts or other obligations of Trustee and may not be sold, transferred,
pledged or assigned by him or her except as provided in paragraph 6(b).
10. This Agreement shall not be construed to confer any right on the part
of Trustee to be or remain a Trustee of the Trust or to receive any, or any
particular rate of, Trustee's Fees.
11. Interpretations of and determinations related to this Agreement made
by the Trust, including the matter of whether to establish a Deferred Fee
Account Fund, the selection of an investment medium for the assets in the Trust,
if established, and determinations of the amounts in the Deferred Fee Account,
shall be made by a committee composed of the President and the Treasurer of the
Trust and the principal investment officer of the Trust's United States-based
investment adviser (the "Committee") and, if made in good faith, shall be
conclusive and binding upon all parties; and the Trust shall not incur any
liability to Trustee for any such interpretation or determination so made or for
any other action taken by it in connection with this Agreement in good faith.
The Committee shall administer this Agreement, and shall be responsible for
administration of the Deferred Fee Account Fund, if established. All actions of
the Committee shall be considered for all purposes to be the action of the Board
unless the Board, in its capacity as such, subsequently takes a different
action. The Board may employ such persons or organizations to render advice or
6
<PAGE>
perform services with respect to its responsibilities as it, in its sole
discretion, determines to be necessary and appropriate. Any actions taken by the
Board pursuant to this Section 11 shall be implemented only if approved by a
majority of those Trustees of the Trust who are not participants in a Deferred
Fee Agreement with the Trust.
12. This Agreement contains the entire understanding and agreement between
the parties with respect to the subject matter hereof, and may not be amended,
modified or supplemented in any respect except by subsequent written agreement
entered into by all parties.
13. This Agreement shall be binding upon, and shall inure to the benefit
of, the Trust and its successors and assigns and Trustee and his/her heirs,
executors, administrators and personal representatives.
14. This Agreement is being entered into in, and shall be construed in
accordance with the laws of, the State of Colorado.
15. The Trust reserves the right to terminate this Agreement at any time.
Upon such termination, all deferral elections will cease to be effective and all
contractual obligations created under this Agreement will be fixed as of the
termination date. Distribution of deferred accounts will be made at the sole
discretion of the Trust.
7
<PAGE>
IN WITNESS WHEREOF, the Trust has caused this Agreement to be executed on
its behalf by its President, and Trustee has executed this Agreement, on the
date first written above.
INVESCO GLOBAL HEALTH SCIENCES FUND
By: /s/ Fred A. Deering
------------------------------------
Fred A. Deering, Trustee
By: /s/ John W. McIntyre
------------------------------------
John W. McIntyre, Trustee
By: /s/ Larry Soll
------------------------------------
Dr. Larry Soll, Trustee
8
DEFINED BENEFIT DEFERRED COMPENSATION PLAN
FOR NON-INTERESTED DIRECTORS AND TRUSTEES
INVESCO Global Health Sciences Fund (the "Trust") has adopted this Defined
Benefit Deferred Compensation Plan ("Plan") for the benefit of those trustees of
the Trust who are not interested trustees thereof as defined in Section 2(a)(19)
of the Investment Company Act of 1940, as amended ("Independent Trustees").
1. ELIGIBILITY
Each Independent Trustee who has served as such ("Eligible Service") on
the Board of Trustees of the Trust ("Board") for an aggregate of at least five
years at the time of his/her Service Termination Date (as defined in paragraph
2) will be entitled to receive benefits under the Plan. An Independent Trustee's
period of Eligible Service commences on the date of election to the Board.
Hereafter, references in this Plan to Independent Trustees shall be deemed to
include only those Trustees who have met the Eligible Service requirement for
Plan participation.
2. SERVICE TERMINATION AND SERVICE TERMINATION DATE
a. SERVICE TERMINATION. Service Termination means termination of
service (other than by disability or death) of an Independent Trustee which
results from the Trustee's having reached his or her Service Termination Date.
b. SERVICE TERMINATION DATE. An Independent Trustee's Service
Termination Date is that date upon which he or she no longer serves as a
Trustee. Normally, an Independent Trustee's Service Termination Date will be the
last day of the calendar quarter in which such Trustee's seventy-second birthday
occurs. A majority of the Board may annually extend a Trustee's normal Service
Termination Date for a maximum period of three years, through the date not later
than the last day of the calendar quarter in which such Trustee's seventy-fifth
birthday occurs.
As used in this Plan unless otherwise stipulated, Service Termination Date
shall mean the date upon which the Independent Trustee no longer serves as a
Trustee.
3. DEFINED PAYMENTS AND BENEFIT
a. PAYMENTS. If an Independent Trustee's Service Termination Date
occurs on a date not later than the last day of the calendar quarter in which
such Trustee's seventy-fourth birthday occurs, the Independent Trustee will
receive four quarterly payments during the first twelve months subsequent to his
or her Service Termination Date (the "First Year Retirement Payments"), with
each payment to be equal to 25 percent of the sum of the annual basic retainer
and annualized quarterly Board meeting fees payable by the Trust to the
<PAGE>
Independent Trustee on his or her Service Termination Date (excluding any fees
relating to attending or chairing committee meetings or other fees payable to an
Independent Trustee).
b. BENEFIT. Commencing with the first anniversary of the Service
Termination Date of any Independent Trustee who has received the First Year
Retirement Payments, and commencing as of the Service Termination Date of an
Independent Trustee whose Service Termination Date is subsequent to the date of
the last day of the calendar quarter in which such Trustee's seventy-fourth
birthday occurred, the Independent Trustee will receive, for the remainder of
his or her life, a benefit (the "Benefit"), payable quarterly, with each
quarterly payment to be equal to 12.50 percent of the sum of the annual basic
retainer and annualized quarterly Board meeting fees payable by the Trust to the
Independent Trustee on his or her Service Termination Date (excluding any fees
relating to attending or chairing committee meetings or other fees payable to an
Independent Trustee).
Example: As of July 1, 1998, the annual Benefit would be $_______ (annual
basic retainer of $______, plus annualized quarterly Board meeting fees of
$______ times 12.50 percent of the total each quarter: $_____ + $_______ =
$_______ x .125 = $______ x 4 = $______). The annual Benefit may increase or
decrease in the future in accordance with changes in the Independent Trustees'
annual basic retainer and/or Board meeting fees.
c. DEATH PROVISIONS. If an Independent Trustee's service as a
Trustee is terminated because of his or her death subsequent to the last day of
the calendar quarter in which such Trustee's seventy-second birthday occurred
and prior to the last day of the calendar quarter in which such Trustee's
seventy-fourth birthday occurs, the designated beneficiary of the Independent
Trustee shall receive the First Year Retirement Payments and shall, commencing
with the quarter following the quarter in which the last First Year Retirement
Payment is made, receive the Benefit for a period of ten years, with quarterly
payments to be made to the designated beneficiary.
If an Independent Trustee's service as a Trustee is terminated because of
his or her death prior to the last day of the calendar quarter in which such
Trustee's seventy-second birthday occurs or subsequent to the last day of the
calendar quarter in which such Trustee's seventy-fourth birthday occurred, the
designated beneficiary of the Independent Trustee shall receive the Benefit for
a period of ten years, with quarterly payments to be made to the designated
beneficiary commencing in the first quarter following the Trustee's death.
d. DISABILITY PROVISIONS. If an Independent Trustee's service as a
Trustee is terminated because of his or her disability subsequent to the last
day of the calendar quarter in which such Trustee's seventy-second birthday
occurred and prior to the last day of the calendar quarter in which such
Trustee's seventy-fourth birthday occurs, the Independent Trustee shall receive
the First Year Retirement Payments and shall, commencing with the quarter
following the quarter in which the last First Year Retirement Payment is made,
receive the Benefit for the remainder of his or her life, with quarterly
payments to be made to the disabled Independent Trustee. If the disabled
Independent Trustee should die before the First Year Retirement Payments are
completed and before forty quarterly Benefit payments are made, such payments
2
<PAGE>
will continue to be made to the Independent Trustee's designated beneficiary
until the aggregate of the First Year Retirement Payments and forty quarterly
Benefit payments have been made to the disabled Independent Trustee and the
Trustee's designated beneficiary.
If an Independent Trustee's service as a Trustee is terminated because of
his or her disability prior to the last day of the calendar quarter in which
such Trustee's seventy-second birthday occurs or subsequent to the last day of
the calendar quarter in which such Trustee's seventy-fourth birthday occurred,
the Independent Trustee shall receive the Benefit for the remainder of his or
her life, with quarterly payments to be made to the disabled Independent Trustee
commencing in the first quarter following the Trustee's termination for
disability. If the disabled Independent Trustee should die before forty
quarterly payments are made, payments will continue to be made to the
Independent Trustee's designated beneficiary until the aggregate of forty
quarterly payments has been made to the disabled Independent Trustee and the
Trustee's designated beneficiary.
e. DEATH OF INDEPENDENT TRUSTEE AND BENEFICIARY. If, subsequent to
the death of the Independent Trustee, his or her designated beneficiary should
die before the First Year Retirement Payments and/or a total of forty quarterly
Benefit payments are made, the remaining value of the Independent Trustee's
First Year Retirement Payments and/or Benefit (which Benefit shall in no event
exceed the value of forty quarterly payments minus the number of payments made)
shall be determined as of the date of the death of the Independent Trustee's
designated beneficiary and shall be paid to the estate of the designated
beneficiary in one lump sum or in periodic payments, with the determinations
with respect to the value of the First Year Retirement Payments and/or Benefit
and the method and frequency of payment to be made by the Committee (as defined
in paragraph 8.a.) in its sole discretion.
4. DESIGNATED BENEFICIARY
The beneficiary referred to in paragraph 3 may be designated or changed by
the Independent Trustee without the consent of any prior beneficiary on a form
provided by the Committee (as defined in paragraph 8.a.) and delivered to the
Committee (or its designee as described on the form) before the Independent
Trustee's death. If no such beneficiary shall have been designated, or if no
designated beneficiary shall survive the Independent Trustee, the value or
remaining value of the Independent Trustee's First Year Retirement Payments
and/or Benefit (which Benefit shall in no event exceed the value of forty
quarterly payments minus the number of payments made) shall be determined as of
the date of the death of the Independent Trustee by the Committee and shall be
paid as promptly as possible in one lump sum to the Independent Trustee's
estate.
5. DISABILITY
An Independent Trustee shall be deemed to have become disabled for the
purposes of paragraph 3 if the Committee shall find on the basis of medical
evidence satisfactory to it that the Independent Trustee is disabled, mentally
or physically, as a result of an accident or illness, so as to be prevented from
performing each of the duties which are incumbent upon an Independent Trustee in
fulfilling his or her responsibilities as such.
3
<PAGE>
6. TIME OF PAYMENT
The First Year Retirement Payments and/or the Benefit for each year will
be paid in quarterly installments that are as nearly equal as possible.
7. PAYMENT OF FIRST YEAR RETIREMENT PAYMENTS AND/OR BENEFIT: ALLOCATION
OF COSTS
The Trust is responsible for the payment of the amount of the First Year
Retirement Payments and/or Benefit applicable to the Trust, as well as its
proportionate share of all expenses of administration of the Plan, including
without limitation all accounting and legal fees and expenses and fees and
expenses of any Actuary. The obligations of the Trust to pay such First Year
Retirement Payments and/or Benefit and expenses will not be secured or funded in
any manner, and such obligations will not have any preference over the lawful
claims of the Trust's creditors and shareholders.
8. ADMINISTRATION
a. THE COMMITTEE. Any question involving entitlement to payments
under or the administration of the Plan will be referred to a four-person
committee (the "Committee") composed of three Independent Trustees designated by
all of the Independent Trustees of the Trust and one Trustee of the Trust who is
not an Independent Trustee, designated by the non-Independent Trustees. Except
as otherwise provided herein, the Committee will make all interpretations and
determinations necessary or desirable for the Plan's administration, and such
interpretations and determinations will be final and conclusive. Committee
members will be elected annually.
b. POWERS OF THE COMMITTEE. The Committee will represent and act on
behalf of the Trust in respect of the Plan and, subject to the other provisions
of the Plan, the Committee may adopt, amend or repeal bylaws or other
regulations relating to the administration of the Plan, the conduct of the
Committee's affairs, its rights or powers, or the rights or powers of its
members. The Committee will report to the Independent Trustees and to the Board
from time to time on its activities in respect of the Plan. The Committee or
persons designated by it will cause such records to be kept as may be necessary
for the administration of the Plan.
9. MISCELLANEOUS PROVISIONS
a. RIGHTS NOT ASSIGNABLE. Other than as is specifically provided in
paragraph 3, the right to receive any payment under the Plan is not transferable
or assignable, and nothing in the Plan shall create any benefit, cause of
action, right of sale, transfer, assignment, pledge, encumbrance, or other such
right in any heirs or the estate of any Independent Trustee.
b. AMENDMENT, ETC. The Committee, with the concurrence of the Board,
may at any time amend or terminate the Plan or waive any provision of the Plan;
provided, however, that subject to the limitations imposed by paragraph 7, no
amendment, termination or waiver will impair the rights of an Independent
Trustee to receive the payments which would have been made to such Independent
Trustee had there been no such amendment, termination, or waiver.
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<PAGE>
c. NO RIGHT TO REELECTION. Nothing in the Plan will create any
obligation on the part of the Board to nominate any Independent Trustee for
reelection.
d. CONSULTING. Subsequent to his/her Service Termination Date, an
Independent Trustee may render such services for any Trust, for such
compensation, as may be agreed upon from time to time by such Independent
Trustee and the Board.
e. EFFECTIVENESS. The Plan will be effective for all Independent
Trustees who have Service Termination Dates occurring on and after October 1,
1998. Periods of Eligible Service shall include periods commencing prior and
subsequent to such date. Upon its adoption by the Board, the Plan will become
effective on the date when the Committee determines that any regulatory approval
or advice that may be necessary or appropriate in connection with the Plan has
been obtained.
Adopted October 12, 1998
5
CUSTODIAN CONTRACT
Between
THE GLOBAL HEALTH SCIENCES FUND
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
1. Employment of Custodian and Property to be
Held By It....................................................... 1
2. Duties of the Custodian with Respect to Property of
the Fund Held by the
Custodian in the United States................................... 2
2.1 Holding Securities......................................... 2
2.2 Delivery of Securities..................................... 3
2.3 Registration of Securities................................. 7
2.4 Bank Accounts.............................................. 8
2.5 Availability of Federal Funds.............................. 9
2.6 Collection of Income ...................................... 9
2.7 Payment of Fund Monies..................................... 10
2.8 Liability for Payment in Advance of
Receipt of Securities Purchased............................ 13
2.9 Appointment of Agents...................................... 13
2.10 Deposit of Securities in Securities System................. 14
2.10A Fund Assets Held in the Custodian's Direct
Paper System............................................... 17
2.11 Segregated Account......................................... 18
2.12 Ownership Certificates for Tax Purposes.................... 20
2.13 Proxies.................................................... 20
2.14 Communication Relating to Fund
Portfolio Securities....................................... 20
2.15 Reports to Fund by Independent Public
Accountants................................................ 21
3. Duties of the Custodian with Respect to Property of
the Fund Held Outside of the United States....................... 22
3.1 Appointment of Foreign Sub-custodians....................... 22
3.2 Assets to be Held........................................... 22
3.3 Foreign Securities Depositories............................. 23
3.4 Segregation of Securities................................... 23
3.5 Agreements with Foreign Banking Institutions................ 23
3.6 Access of Independent Accountants of the Fund............... 24
3.7 Reports by Custodian........................................ 24
3.8 Transactions in Foreign Custody Account..................... 25
3.9 Liability of Foreign Sub-custodians......................... 26
3.10 Liability of Custodian..................................... 26
3.11 Reimbursement for Advances................................. 27
3.12 Monitoring Responsibilities................................ 28
3.13 Branches of U.S. Banks..................................... 29
3.14 Tax Law.................................................... 29
4. Payments for Repurchases or Redemptions and Sales
of Shares of the Fund............................................ 30
5. Proper Instructions.............................................. 31
6. Actions Permitted Without Express Authority...................... 32
7. Evidence of Authority............................................ 32
<PAGE>
8. Duties of Custodian with Respect to the Books of
Account and Calculations of Net Asset Value and
Net Income....................................................... 33
9. Records.......................................................... 33
10. Opinion of Fund's Independent Accountant......................... 34
11. Compensation of Custodian........................................ 34
12. Responsibility of Custodian...................................... 34
13. Effective Period, Termination and Amendment...................... 36
14. Successor Custodian.............................................. 38
15. Interpretive and Additional Provisions........................... 39
16. Massachusetts Law to Apply....................................... 40
17. Limitations of Liability of the Trustees and
Shareholders..................................................... 40
18. Prior Contracts.................................................. 40
<PAGE>
CUSTODIAN CONTRACT
------------------
This Contract between The Global Health Sciences Fund, a business
trust organized and existing under the laws of Massachusetts, having its
principal place of business at 7800 E. Union Avenue, Denver, Colorado, 80237,
hereinafter called the "Fund", and State Street Bank and Trust Company, a
Massachusetts trust company, having its principal place of business at 225
Franklin Street, Boston, Massachusetts, 02110, hereinafter called the
"Custodian",
WITNESSETH: That in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:
1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT. The Fund hereby
employs the Custodian as the custodian of its assets, including securities it
desires to be held in places within the United States ("domestic securities")
and securities it desires to be held outside the United States ("foreign
securities") pursuant to the provisions of the Declaration of Trust. The Fund
agrees to deliver to the Custodian all securities and cash owned by it, and all
payments of income, payments of principal or capital distributions received by
it with respect to all securities owned by the Fund from time to time, and the
cash consideration received by it for such new or treasury shares of beneficial
interest ("Shares") of the Fund as may be issued or sold from time to time. The
Custodian shall not be responsible for any property of the Fund held or received
by the Fund and not delivered to the Custodian.
<PAGE>
Upon receipt of "Proper Instructions" (within the meaning of Article
5), the Custodian shall from time to time employ one or more sub-custodians
located in the United States, but only in accordance with an applicable vote by
the Board of Trustees of the Fund, and provided that the Custodian shall have no
more or less responsibility or liability to the Fund on account of any actions
or omissions of any sub-custodian so employed than any such sub-custodian has to
the Custodian. The Custodian may employ as sub-custodians for the Fund's
securities and other assets the foreign banking institutions and foreign
securities depositories designated in Schedule "A" hereto but only in accordance
with the provisions of Article 3.
2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD BY
THE CUSTODIAN IN THE UNITED STATES
2.1 HOLDING SECURITIES. The Custodian shall hold and physically segregate
for the account of the Fund all noncash property, to be held by it in
the United States, including all domestic securities owned by the
Fund, other than (a) securities which are maintained pursuant to
Section 2.10 in a clearing agency which acts as a securities
depository or in a book-entry system authorized by the U.S. Department
of the Treasury, collectively referred to herein as "Securities
System" and (b) commercial paper of an issuer for which State Street
Bank and Trust Company acts as issuing and paying agent ("Direct
Paper") which is deposited and/or maintained in the Direct Paper
System of the Custodian pursuant to Section 2.10A.
- 2 -
<PAGE>
2.2 DELIVERY OF SECURITIES. The Custodian shall release and deliver
domestic securities owned by the Fund held by the Custodian or in a
Securities System account of the Custodian or in the Custodian's
Direct Paper book-entry system account ("Direct Paper System Account")
only upon receipt of Proper Instructions, which may be continuing
instructions when deemed appropriate by the parties, and only in the
following cases:
1) Upon sale of such securities for the account of the Fund and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Fund;
3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other
similar offers for portfolio securities of the Fund;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable; provided
that, in any such case, the cash or other consideration is to be
delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the name
of the Fund or into the name of any nominee or nominees of the
- 3 -
<PAGE>
Custodian or into the name or nominee name of any agent appointed
pursuant to Section 2.9 or into the name or nominee name of any
sub-custodian appointed pursuant to Article 1; or for exchange
for a different number of bonds, certificates or other evidence
representing the same aggregate face amount or number of units;
PROVIDED that, in any such case, the new securities are to be
delivered to the Custodian;
7) Upon the sale of such securities for the account of the Fund, to
the broker or its clearing agent, against a receipt, for
examination in accordance with "street delivery" custom; provided
that in any such case, the Custodian shall have no responsibility
or liability for any loss arising from the delivery of such
securities prior to receiving payment for such securities except
as may arise from the Custodian's own negligence or willful
misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment
- 4 -
<PAGE>
of the securities of the issuer of such securities, or pursuant
to provisions for conversion contained in such securities, or
pursuant to any deposit agreement; provided that, in any such
case, the new securities and cash, if any, are to be delivered to
the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that, in
any such case, the new securities and cash, if any, are to be
delivered to the Custodian;
10) For delivery in connection with any loans of securities made by
the Fund, BUT ONLY against receipt of adequate collateral as
agreed upon from time to time by the Custodian and the Fund,
which may be in the form of cash or obligations issued by the
United States government, its agencies or instrumentalities,
except that in connection with any loans for which collateral is
to be credited to the Custodian's account in the book-entry
system authorized by the U.S. Department of the Treasury, the
Custodian will not be held liable or responsible for the delivery
- 5 -
<PAGE>
of securities owned by the Fund prior to the receipt of such
collateral;
11) For delivery as security in connection with any borrowings by the
Fund requiring a pledge of assets by the Fund, BUT ONLY against
receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian and a broker-dealer registered
under the Securities Exchange Act of 1934 (the "Exchange Act")
and a member of The National Association of Securities Dealers,
Inc. ("NASD"), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national
securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in
connection with transactions by the Fund;
13) For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian, and a Futures Commission Merchant
registered under the Commodity Exchange Act, relating to
compliance with the rules of the Commodity Futures Trading
Commission and/or any Contract Market, or any similar
- 6 -
<PAGE>
organization or organizations, regarding account deposits in
connection with transactions by the Fund;
14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for the Fund, for delivery to such Transfer Agent or to
the holders of shares in connection with distributions in kind,
as may be described from time to time in the Fund's currently
effective prospectus and statement of additional information
("prospectus"), in satisfaction of requests by holders of Shares
for repurchase or redemption; and
15) For any other proper corporate purpose, BUT ONLY upon receipt of,
in addition to Proper Instructions, a certified copy of a
resolution of the Board of Trustees or of the Executive Committee
signed by an officer of the Fund and certified by the Secretary
or an Assistant Secretary, specifying the securities to be
delivered, setting forth the purpose for which such delivery is
to be made, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of
such securities shall be made.
2.3 REGISTRATION OF SECURITIES. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the
- 7 -
<PAGE>
Fund or in the name of any nominee of the Fund or of any nominee of
the Custodian which nominee shall be assigned exclusively to the Fund,
UNLESS the Fund has authorized in writing the appointment of a nominee
to be used in common with other registered investment companies having
the same investment adviser as the Fund, or in the name or nominee
name of any agent appointed pursuant to Section 2.9 or in the name or
nominee name of any sub-custodian appointed pursuant to Article 1. All
securities accepted by the Custodian on behalf of the Fund under the
terms of this Contract shall be in "street name" or other good
delivery form. If, however, the Fund directs the Custodian to maintain
securities in "street name", the Custodian shall utilize its best
efforts only to timely collect income due the Fund on such securities
and to notify the Fund on a best efforts basis only of relevant
corporate actions including, without limitation, pendency of calls,
maturities, tender or exchange offers.
2.4 BANK ACCOUNTS. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of the Fund,
subject only to draft or order by the Custodian acting pursuant to the
terms of this contract, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by it from or for
the account of the Fund, other than cash maintained by the Fund in a
- 8 -
<PAGE>
bank account established and used in accordance with Rule 17f-3 under
the Investment Company Act of 1940. Funds held by the Custodian for
the Fund may be deposited by it to its credit as Custodian in the
Banking Department of the Custodian or in such other banks or trust
companies as it may in its discretion deem necessary or desirable;
PROVIDED however, that every such bank or trust company shall be
qualified to act as a custodian under the Investment Company Act of
1940 and that each such bank or trust company and the funds to be
deposited with each such bank or trust company shall be approved by
vote of a majority of the Board of Trustees of the Fund. Such funds
shall be deposited by the Custodian in its capacity as Custodian and
shall be withdrawable by the Custodian only in that capacity.
2.5 AVAILABILITY OF FEDERAL FUNDS. Upon mutual agreement between the Fund
and the Custodian, the Custodian shall, upon the receipt of Proper
Instructions, make federal funds available to the Fund as of specified
times agreed upon from time to time by the Fund and the Custodian in
the amount of checks received in payment for Shares of the Fund which
are deposited into the Fund's account.
2.6 COLLECTION OF INCOME. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other
payments with respect to United States registered securities held
hereunder to which the Fund shall be entitled either by law or
pursuant to custom in the securities business, and shall collect on a
- 9 -
<PAGE>
timely basis all income and other payments with respect to United
States bearer securities if, on the date of payment by the issuer,
such securities are held by the Custodian or its agent thereof and
shall credit such income, as collected, to the Fund's custodian
account. Without limiting the generality of the foregoing, the
Custodian shall detach and present for payment all coupons and other
income items requiring presentation as and when they become due and
shall collect interest when due on securities held hereunder. Income
due the Fund on United States securities loaned pursuant to the
provisions of Section 2.2 (10) shall be the responsibility of the
Fund. The Custodian will have no duty or responsibility in connection
therewith, other than to provide the Fund with such information or
data as may be necessary to assist the Fund in arranging for the
timely delivery to the Custodian of the income to which the Fund is
properly entitled.
2.7 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions, which may
be continuing instructions when deemed appropriate by the parties, the
Custodian shall pay out monies of the Fund in the following cases
only:
1) Upon the purchase of domestic securities, options, futures
contracts or options on futures contracts for the account of
the fund but only (a) against the delivery of such
securities, or evidence of title to such options, futures
- 10 -
<PAGE>
Contracts or options on futures contracts, to the custodian
(or any bank, banking firm or trust company doing business
in the united states or abroad which is qualified under the
investment company act of 1940, as amended, to act as a
custodian and has been designated by the custodian as its
agent for this purpose) registered in the name of the fund
or in the name of a nominee of the custodian referred to in
section 2.3 Hereof or in proper form for transfer; (b) in
the case of a purchase effected through a securities system,
in accordance with the conditions set forth in section 2.10
Hereof; (c) in the case of a purchase involving the direct
paper system, in accordance with the conditions set forth in
section 2.10A; (d) in the case of repurchase agreements
entered into between the fund and the custodian, or another
bank, or a broker-dealer which is a member of nasd, (i)
against delivery of the securities either in certificate
form or through an entry crediting the custodian's account
at the federal reserve bank with such securities or (ii)
against delivery of the receipt evidencing purchase by the
fund of securities owned by the custodian along with written
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<PAGE>
evidence of the agreement by the Custodian to repurchase
such securities from the Fund or (e) for transfer to a time
deposit account of the Fund in any bank, whether domestic or
foreign; such transfer may be effected prior to receipt of a
confirmation from a broker and/or the applicable bank
pursuant to Proper Instructions from the Fund as defined in
Article 5;
2) In connection with conversion, exchange or surrender of
securities owned by the Fund as set forth in Section 2.2
hereof;
3) For the redemption or repurchase of Shares issued by
the Fund as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by the
Fund, including but not limited to the following payments
for the account of the fund: interest, taxes, management,
accounting, transfer agent and legal fees, and operating
expenses of the fund whether or not such expenses are to be
in whole or part capitalized or treated as deferred
expenses;
5) For the payment of any dividends declared pursuant
to the governing documents of the Fund;
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6) For payment of the amount of dividends received in respect
of securities sold short;
7) For any other proper purpose, BUT ONLY upon receipt of, in
addition to Proper Instructions, a certified copy of a
resolution of the Board of Trustees or of the Executive
Committee of the Fund signed by an officer of the Fund and
certified by its Secretary or an Assistant Secretary,
specifying the amount of such payment, setting forth the
purpose for which such payment is to be made, declaring such
purpose to be a proper purpose, and naming the person or
persons to whom such payment is to be made.
2.8 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED.
Except as specifically stated otherwise in this Contract, in any and
every case where payment for purchase of domestic securities for the
account of the Fund is made by the Custodian in advance of receipt of
the securities purchased in the absence of specific written
instructions from the Fund to so pay in advance, the Custodian shall
be absolutely liable to the Fund for such securities to the same
extent as if the securities had been received by the Custodian.
2.9 APPOINTMENT OF AGENTS. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or
trust company which is itself
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qualified under the Investment Company Act of 1940, as amended, to act
as a custodian, as its agent to carry out such of the provisions of
this Article 2 as the Custodian may from time to time direct;
PROVIDED, however, that the appointment of any agent shall not relieve
the Custodian of its responsibilities or liabilities hereunder.
2.10 DEPOSIT OF SECURITIES IN SECURITIES SYSTEMS.
The Custodian may deposit and/or maintain domestic securities owned by
the Fund in a clearing agency registered with the Securities and
Exchange Commission under section 17A of the Securities Exchange Act
of 1934, which acts as a securities depository, or in the book-entry
system authorized by the U.S. Department of the Treasury and certain
federal agencies, collectively referred to herein as "Securities
System" in accordance with applicable Federal Reserve Board and
Securities and Exchange Commission rules and regulations, if any, and
subject to the following provisions:
1) The Custodian may keep domestic securities of the Fund in a
Securities System provided that such securities are
represented in an account ("Account") of the Custodian in
the Securities System which shall not include any assets of
the Custodian other than assets held as a fiduciary,
custodian or otherwise for customers;
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<PAGE>
2) The records of the Custodian with respect to domestic
securities of the Fund which are maintained in a Securities
System shall identify by book-entry those securities
belonging to the Fund;
3) The Custodian shall pay for domestic securities purchased
for the account of the Fund upon (i) receipt of advice from
the Securities System that such securities have been
transferred to the Account, and (ii) the making of an entry
on the records of the Custodian to reflect such payment and
transfer for the account of the Fund. The Custodian shall
transfer domestic securities sold for the account of the
Fund upon (i) receipt of advice from the Securities System
that payment for such securities has been transferred to the
Account, and (ii) the making of an entry on the records of
the Custodian to reflect such transfer and payment for the
account of the Fund. Copies of all advices from the
Securities System of transfers of domestic securities for
the account of the Fund shall identify the Fund, be
maintained for the Fund by the Custodian and be provided to
the Fund at its request. Upon request, the Custodian shall
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<PAGE>
furnish the Fund confirmation of each transfer to or from
the account of the Fund in the form of a written advice or
notice and shall furnish to the Fund copies of daily
transaction sheets reflecting each day's transactions in the
Securities System for the account of the Fund.
4) The Custodian shall provide the Fund with any report
obtained by the Custodian on the Securities System's
accounting system, internal accounting control and
procedures for safeguarding domestic securities deposited in
the Securities System;
5) The Custodian shall have received the initial or annual
certificate, as the case may be, required by Article 13
hereof;
6) Anything to the contrary in this Contract notwithstanding,
the Custodian shall be liable to the Fund for any loss or
damage to the Fund resulting from use of the Securities
System by reason of any negligence, misfeasance or
misconduct of the Custodian or any of its agents or of any
of its or their employees or from failure of the Custodian
or any such agent to enforce effectively such rights as it
may have against the Securities System; at the election of
the Fund, it shall be entitled to be subrogated to the
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<PAGE>
rights of the Custodian with respect to any claim against
the Securities System or any other person which the
Custodian may have as a consequence of any such loss or
damage if and to the extent that the Fund has not been made
whole for any such loss or damage.
2.10A FUND ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM
The Custodian may deposit and/or maintain securities owned by the Fund
in the Direct Paper System of the Custodian subject to the following
provisions:
1) No transaction relating to securities in the Direct Paper
System will be effected in the absence of Proper
Instructions;
2) The Custodian may keep securities of the Fund in the Direct
Paper System only if such securities are represented in an
account ("Account") of the Custodian in the Direct Paper
System which shall not include any assets of the Custodian
other than assets held as a fiduciary, custodian or
otherwise for customers;
3) The records of the Custodian with respect to securities of
the Fund which are maintained in the Direct Paper System
shall identify by book-entry those securities belonging to
the Fund;
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<PAGE>
4) The Custodian shall pay for securities purchased for the
account of the Fund upon the making of an entry on the
records of the Custodian to reflect such payment and
transfer of securities to the account of the Fund. The
Custodian shall transfer securities sold for the account of
the Fund upon the making of an entry on the records of the
Custodian to reflect such transfer and receipt of payment
for the account of the Fund;
5) The Custodian shall furnish the Fund confirmation of each
transfer to or from the account of the Fund, in the form of
a written advice or notice, of Direct Paper on the next
business day following such transfer and shall furnish to
the Fund copies of daily transaction sheets reflecting each
day's transaction in the Securities System for the account
of the Fund;
6) The Custodian shall provide the Fund with any report on its
system of internal accounting control as the Fund may
reasonably request from time to time;
2.11 SEGREGATED ACCOUNT. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or accounts
for and on behalf of the Fund, into which account or accounts may be
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transferred cash and/or securities, including securities maintained in
an account by the Custodian pursuant to Section 2.10 hereof, (i) in
accordance with the provisions of any agreement among the Fund, the
Custodian and a broker-dealer registered under the Exchange Act and a
member of the NASD (or any futures commission merchant registered
under the Commodity Exchange Act), relating to compliance with the
rules of The Options Clearing Corporation and of any registered
national securities exchange (or the Commodity Futures Trading
Commission or any registered contract market), or of any similar
organization or organizations, regarding escrow or other arrangements
in connection with transactions by the Fund, (ii) for purposes of
segregating cash or government securities in connection with options
purchased, sold or written by the Fund or commodity futures contracts
or options thereon purchased or sold by the Fund, (iii) for the
purposes of compliance by the Fund with the procedures required by
Investment Company Act Release No. 10666, or any subsequent release or
releases of the Securities and Exchange Commission relating to the
maintenance of segregated accounts by registered investment companies
and (iv) for other proper corporate purposes, BUT ONLY, in the case of
clause (iv), upon receipt of, in addition to Proper Instructions, a
certified copy of a resolution of the Board of Trustees or of the
Executive Committee signed by an officer of the Fund and certified by
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the Secretary or an Assistant Secretary, setting forth the purpose or
purposes of such segregated account and declaring such purposes to be
proper corporate purposes.
2.12 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to domestic securities of the Fund held by it
and in connection with transfers of such securities.
2.13 PROXIES. The Custodian shall, with respect to the domestic securities
held hereunder, cause to be promptly executed by the registered holder
of such securities, if the securities are registered otherwise than in
the name of the Fund or a nominee of the Fund, all proxies, without
indication of the manner in which such proxies are to be voted, and
shall promptly deliver to the Fund such proxies, all proxy soliciting
materials and all notices relating to such securities.
2.14 COMMUNICATIONS RELATING TO FUND PORTFOLIO SECURITIES Subject to
the provisions of Section 2.3, the Custodian shall transmit promptly
to the Fund all written information (including, without limitation,
pendency of calls and maturities of domestic securities and
expirations of rights in connection therewith and notices of exercise
of call and put options written by the Fund and the maturity of
futures contracts purchased or sold by the Fund) received by the
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Custodian from issuers of the domestic securities being held for the
Fund. With respect to tender or exchange offers, the Custodian shall
transmit promptly to the Fund all written information received by the
Custodian from issuers of the domestic securities whose tender or
exchange is sought and from the party (or his agents) making the
tender or exchange offer. If the Fund desires to take action with
respect to any tender offer, exchange offer or any other similar
transaction, the Fund shall notify the Custodian at least three
business days prior to the date on which the Custodian is to take such
action.
2.15 REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS
The Custodian shall provide the Fund, at such times as the Fund may
reasonably require, with reports by independent public accountants on
the accounting system, internal accounting control and procedures for
safeguarding securities, futures contracts and options on futures
contracts, including domestic securities deposited and/or maintained
in a Securities System, relating to the services provided by the
Custodian under this Contract; such reports shall be of sufficient
scope and in sufficient detail, as may reasonably be required by the
Fund to provide reasonable assurance that any material inadequacies
would be disclosed by such examination, and, if there are no such
inadequacies, the reports shall so state.
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<PAGE>
3. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE
FUND HELD OUTSIDE OF THE UNITED STATES
3.1 APPOINTMENT OF FOREIGN SUB-CUSTODIANS
The Fund hereby authorizes and instructs the Custodian to employ as
sub-custodians for the Fund's securities and other assets maintained
outside the United States the foreign banking institutions and foreign
securities depositories designated on Schedule A hereto ("foreign
sub-custodians"). Upon receipt of "Proper Instructions", as defined in
Section 5 of this Contract, together with a certified resolution of
the Fund's Board of Trustees, the Custodian and the Fund may agree to
amend Schedule A hereto from time to time to designate additional
foreign banking institutions and foreign securities depositories to
act as sub-custodian. Upon receipt of Proper Instructions, the Fund
may instruct the Custodian to cease the employment of any one or more
such sub-custodians for maintaining custody of the Fund's assets.
3.2 ASSETS TO BE HELD. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c)(1) of Rule 17f-5
under the Investment Company Act of 1940, and (b) cash and cash
equivalents in such amounts as the Custodian or the Fund may determine
to be reasonably necessary to effect the Fund's foreign securities
transactions.
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<PAGE>
3.3 FOREIGN SECURITIES DEPOSITORIES. Except as may otherwise be agreed
upon in writing by the Custodian and the Fund, assets of the Fund
shall be maintained in foreign securities depositories only through
arrangements implemented by the foreign banking institutions serving
as sub-custodians pursuant to the terms hereof. where possible, such
arrangements shall include entry into agreements containing the
provisions set forth in Section 3.5 hereof.
3.4 SEGREGATION OF SECURITIES
The Custodian shall identify on its books as belonging to the Fund,
the foreign securities of the Fund held by each foreign sub-custodian.
Each agreement pursuant to which the Custodian employs a foreign
banking institution shall require that such institution establish a
custody account for the Custodian on behalf of the Fund and physically
segregate in that account, securities and other assets of the Fund,
and, in the event that such institution deposits the Fund's securities
in a foreign securities depository, that it shall identify on its
books as belonging to the Custodian, as agent for the Fund, the
securities so deposited.
3.5 AGREEMENTS WITH FOREIGN BANKING INSTITUTIONS. Each agreement with a
foreign banking institution shall be substantially in the form set
forth in Exhibit 1 hereto and shall provide that: (a) the Fund's
assets will not be subject to any right, charge, security interest,
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<PAGE>
lien or claim of any kind in favor of the foreign banking institution
or its creditors or agent, except a claim of payment for their safe
custody or administration; (b) beneficial ownership of the Fund's
assets will be freely transferable without the payment of money or
value other than for custody or administration; (c) adequate records
will be maintained identifying the assets as belonging to the Fund;
(d) officers of or auditors employed by, or other representatives of
the Custodian, including to the extent permitted under applicable law
the independent public accountants for the Fund, will be given access
to the books and records of the foreign banking institution relating
to its actions under its agreement with the Custodian; and (e) assets
of the Fund held by the foreign sub-custodian will be subject only to
the instructions of the Custodian or its agents.
3.6 ACCESS OF INDEPENDENT ACCOUNTANTS OF THE FUND. Upon request of the
Fund, the Custodian will use its best efforts to arrange for the
independent accountants of the Fund to be afforded access to the books
and records of any foreign banking institution employed as a foreign
sub-custodian insofar as such books and records relate to the
performance of such foreign banking institution under its agreement
with the Custodian.
3.7 REPORTS BY CUSTODIAN. The Custodian will supply to the Fund from time
to time, as mutually agreed upon, statements in respect of the
securities and other assets of the Fund held by foreign
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<PAGE>
sub-custodians, including but not limited to an identification of
entities having possession of the Fund's securities and other assets
and advices or notifications of any transfers of securities to or from
each custodial account maintained by a foreign banking institution for
the Custodian on behalf of the Fund indicating, as to securities
acquired for the Fund, the identity of the entity having physical
possession of such securities.
3.8 TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT
(a) Except as otherwise provided in paragraph (b) of this Section 3.8,
the provision of Sections 2.2 and 2.7 of this Contract shall apply,
MUTATIS MUTANDIS to the foreign securities of the Fund held outside
the United States by foreign sub-custodians.
(b) Notwithstanding any provision of this Contract to the contrary,
settlement and payment for securities received for the account of the
Fund and delivery of securities maintained for the account of the Fund
may be effected in accordance with the customary established
securities trading or securities processing practices and procedures
in the jurisdiction or market in which the transaction occurs,
including, without limitation, delivering securities to the purchaser
thereof or to a dealer therefor (or an agent for such purchaser or
dealer) against a receipt with the expectation of receiving later
payment for such securities from such purchaser or dealer.
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<PAGE>
(c) Securities maintained in the custody of a foreign sub-custodian
may be maintained in the name of such entity's nominee to the same
extent as set forth in Section 2.3 of this Contract, and the Fund
agrees to hold any such nominee harmless from any liability as a
holder of record of such securities.
3.9 LIABILITY OF FOREIGN SUB-CUSTODIANS. Each agreement pursuant to which
the Custodian employs a foreign banking institution as a foreign
sub-custodian shall require the institution to exercise reasonable
care in the performance of its duties and to indemnify, and hold
harmless, the Custodian and each Fund from and against any loss,
damage, cost, expense, liability or claim arising out of or in
connection with the institution's performance of such obligations. At
the election of the Fund, it shall be entitled to be subrogated to the
rights of the Custodian with respect to any claims against a foreign
banking institution as a consequence of any such loss, damage, cost,
expense, liability or claim if and to the extent that the Fund has not
been made whole for any such loss, damage, cost, expense, liability or
claim.
3.10 LIABILITY OF CUSTODIAN. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set
forth with respect to sub-custodians generally in this Contract and,
regardless of whether assets are maintained in the custody of a
foreign banking institution, a foreign securities depository or a
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<PAGE>
branch of a U.S. bank as contemplated by paragraph 3.13 hereof, the
Custodian shall not be liable for any loss, damage, cost, expense,
liability or claim resulting from nationalization, expropriation,
currency restrictions, or acts of war or terrorism or any loss where
the sub-custodian has otherwise exercised reasonable care.
Notwithstanding the foregoing provisions of this paragraph 3.10, in
delegating custody duties to State Street London Ltd., the Custodian
shall not be relieved of any responsibility to the Fund for any loss
due to such delegation, except such loss as may result from (a)
political risk (including, but not limited to, exchange control
restrictions, confiscation, expropriation, nationalization,
insurrection, civil strife or armed hostilities) or (b) other losses
(excluding a bankruptcy or insolvency of State Street London Ltd. not
caused by political risk) due to Acts of God, nuclear incident or
other losses under circumstances where the Custodian and State Street
London Ltd. have exercised reasonable care.
3.11 REIMBURSEMENT FOR ADVANCES. If the Fund requires the Custodian to
advance cash or securities for any purpose including the purchase or
sale of foreign exchange or of contracts for foreign exchange, or in
the event that the Custodian or its nominee shall incur or be assessed
any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Contract, except such as may
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arise from its or its nominee's own negligent action, negligent
failure to act or willful misconduct, any property at any time held
for the account of the Fund shall be security therefor and should the
Fund fail to repay the Custodian promptly, the Custodian shall be
entitled to utilize available cash and to dispose of the Fund assets
to the extent necessary to obtain reimbursement.
3.12 MONITORING RESPONSIBILITIES. The Custodian shall furnish annually to
the Fund, during the month of June, information concerning the foreign
sub-custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund in connection
with the initial approval of this Contract. In addition, the Custodian
will promptly inform the Fund in the event that the Custodian learns
of a material adverse change in the financial condition of a foreign
sub-custodian or any material loss of the assets of the Fund or in the
case of any foreign sub-custodian not the subject of an exemptive
order from the Securities and Exchange Commission is notified by such
foreign sub-custodian that there appears to be a substantial
likelihood that its shareholders' equity will decline below $200
million (U.S. dollars or the equivalent thereof) or that its
shareholders' equity has declined below $200 million (in each case
computed in accordance with generally accepted U.S. accounting
principles).
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<PAGE>
3.13 BRANCHES OF U.S. BANKS
(a) Except as otherwise set forth in this Contract, the provisions
hereof shall not apply where the custody of the Fund assets are
maintained in a foreign branch of a banking institution which is a
"bank" as defined by Section 2(a)(5) of the Investment Company Act of
1940 meeting the qualification set forth in Section 26(a) of said Act.
The appointment of any such branch as a sub-custodian shall be
governed by paragraph 1 of this Contract.
(b) Cash held for the Fund in the United Kingdom shall be maintained
in an interest bearing account established for the Fund with the
Custodian's London branch, which account shall be subject to the
direction of the Custodian, State Street London Ltd. or both.
3.14 TAX LAW
The Custodian shall have no responsibility or liability for any
obligations now or hereafter imposed on the Fund or the Custodian as
custodian of the Fund by the tax law of the United States of America
or any state or political subdivision thereof. It shall be the
responsibility of the Fund to notify the Custodian of the obligations
imposed on the Fund or the Custodian as custodian of the Fund by the
tax law of jurisdictions other than those mentioned in the above
sentence, including responsibility for withholding and other taxes,
assessments or other governmental charges, certifications and
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governmental reporting. The sole responsibility of the Custodian with
regard to such tax law shall be to use reasonable efforts to assist
the Fund with respect to any claim for exemption or refund under the
tax law of jurisdictions for which the Fund has provided such
information.
4. PAYMENTS FOR REPURCHASES OR REDEMPTIONS AND SALES OF SHARES OF THE
FUND
From such funds as may be available for the purpose but subject to the
limitations of the Declaration of Trust and any applicable votes of the Board of
Trustees of the Fund pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for payment to
holders of Shares who have delivered to the Transfer Agent a request for
redemption or repurchase of their Shares. In connection with the redemption or
repurchase of Shares of the Fund, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the redemption
or repurchase of Shares of the Fund, the Custodian shall honor checks drawn on
the Custodian by a holder of Shares, which checks have been furnished by the
Fund to the holder of Shares, when presented to the Custodian in accordance with
such procedures and controls as are mutually agreed upon from time to time
between the Fund and the Custodian.
The Custodian shall receive from the distributor for the Fund's Shares
or from the Transfer Agent of the Fund and deposit into the Fund's account such
payments as are received for Shares of the Fund issued or sold from time to time
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by the Fund. The Custodian will provide timely notification to the Fund and the
Transfer Agent of any receipt by it of payments for Shares of the Fund.
5. PROPER INSTRUCTIONS
Proper Instructions as used herein means a writing signed or initialed
by one or more person or persons as the Board of Trustees shall have from time
to time authorized. Each such writing shall set forth the specific transaction
or type of transaction involved, including a specific statement of the purpose
for which such action is requested. Oral instructions will be considered Proper
Instructions if the Custodian reasonably believes them to have been given by a
person authorized to give such instructions with respect to the transaction
involved. The Fund shall cause all oral instructions to be confirmed in writing.
Upon receipt of a certificate of the Secretary or an Assistant Secretary as to
the authorization by the Board of Trustees of the Fund accompanied by a detailed
description of procedures approved by the Board of Trustees, Proper Instructions
may include communications effected directly between electro-mechanical or
electronic devices provided that the Board of Trustees and the Custodian are
satisfied that such procedures afford adequate safeguards for the Fund's assets.
For purposes of this Section, Proper Instructions shall include instructions
received by the Custodian pursuant to any three party agreement which requires a
segregated asset account in accordance with Section 2.11.
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6. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY
The Custodian may in its discretion, without express authority from
the Fund:
1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its duties under this
Contract, PROVIDED that all such payments shall be accounted for to the Fund;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Fund, checks, drafts
and other negotiable instruments; and
4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase, transfer and other
dealings with the securities and property of the Fund except as otherwise
directed by the Board of Trustees of the Fund.
7. EVIDENCE OF AUTHORITY
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper believed by
it to be genuine and to have been properly executed by or on behalf of the Fund.
The Custodian may receive and accept a certified copy of a vote of the Board of
Trustees of the Fund as conclusive evidence (a) of the authority of any person
to act in accordance with such vote or (b) of any determination or of any action
by the Board of Trustees pursuant to the Declaration of Trust as described in
such vote, and such vote may be considered as in full force and effect until
receipt by the Custodian of written notice to the contrary.
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8. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT
AND CALCULATION OF NET ASSET VALUE AND NET INCOME
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of Trustees of the Fund to keep
the books of account of the Fund and/or compute the net asset value per share of
the outstanding shares of the Fund or, if directed in writing to do so by the
Fund, shall itself keep such books of account and/or compute such net asset
value per share. If so directed, the Custodian shall also calculate daily the
net income of the Fund as described in the Fund's currently effective prospectus
and shall advise the Fund and the Transfer Agent daily of the total amounts of
such net income and, if instructed in writing by an officer of the Fund to do
so, shall advise the Transfer Agent periodically of the division of such net
income among its various components. The calculations of the net asset value per
share and the daily income of the Fund shall be made at the time or times
described from time to time in the Fund's currently effective prospectus.
9. RECORDS
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will meet the
obligations of the Fund under the Investment Company Act of 1940, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder.
All such records shall be the property of the Fund and shall at all times during
the regular business hours of the Custodian be open for inspection by duly
authorized officers, employees or agents of the Fund and employees and agents of
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the Securities and Exchange Commission. The Custodian shall, at the Fund's
request, supply the Fund with a tabulation of securities owned by the Fund and
held by the Custodian and shall, when requested to do so by the Fund and for
such compensation as shall be agreed upon between the Fund and the Custodian,
include certificate numbers in such tabulations.
10. OPINION OF FUND'S INDEPENDENT ACCOUNTANT
The Custodian shall take all reasonable action, as the Fund may from
time to time request, to obtain from year to year favorable opinions from the
Fund's independent accountants with respect to its activities hereunder in
connection with the preparation of the Fund's Form N-1A, and Form N-SAR or other
annual reports to the Securities and Exchange Commission and with respect to any
other requirements of such Commission.
11. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between the
Fund and the Custodian.
12. RESPONSIBILITY OF CUSTODIAN
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties,
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including any futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. The Custodian shall be held to the
exercise of reasonable care in carrying out the provisions of this Contract, but
shall be kept indemnified by and shall be without liability to the Fund for any
action taken or omitted by it in good faith without negligence. It shall be
entitled to rely on and may act upon advice of counsel (who may be counsel for
the Fund) on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice.
The Custodian shall be liable for the acts or omissions of a foreign
banking institution appointed pursuant to the provisions of Article 3 to the
same extent as set forth in Article 1 hereof with respect to sub-custodians
located in the United States and, regardless of whether assets are maintained in
the custody of a foreign banking institution, a foreign securities depository or
a branch of a U.S. bank as contemplated by paragraph 3.11 hereof, the Custodian
shall not be liable for any loss, damage, cost, expense, liability or claim
resulting from, or caused by, the direction of or authorization by the Fund to
maintain custody or any securities or cash of the Fund in a foreign country
including, but not limited to, losses resulting from nationalization,
expropriation, currency restrictions, or acts of war or terrorism.
If the Fund requires the Custodian to take any action with
respect to securities, which action involves the payment of, money or which
action may, in the opinion of the Custodian,
- 35 -
<PAGE>
result in the Custodian or its nominee assigned to the Fund being liable
for the payment of money or incurring liability of some other form,
the Fund, as a prerequisite to requiring the Custodian to take such
action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
If the Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not limited
to securities settlements, foreign exchange contracts and assumed settlement) or
in the event that the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
the performance of this Contract, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the Fund shall be security
therefor and should the Fund fail to repay the Custodian promptly, the Custodian
shall be entitled to utilize available cash and to dispose of the Fund assets to
the extent necessary to obtain reimbursement.
13. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided, may
be amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than thirty (30) days after the date of such delivery or mailing; PROVIDED,
- 36-
<PAGE>
however that the Custodian shall not act under Section 2.10 hereof in the
absence of receipt of an initial certificate of the Secretary or an Assistant
Secretary that the Board of Trustees of the Fund has approved the initial use of
a particular Securities System and the receipt of an annual certificate of the
Secretary or an Assistant Secretary that the Board of Trustees has reviewed the
use by the Fund of such Securities System, as required in each case by Rule
17f-4 under the Investment Company Act of 1940, as amended and that the
Custodian shall not act under Section 2.10A hereof in the absence of receipt of
an initial certificate of the Secretary or an Assistant Secretary that the Board
of Trustees has approved the initial use of the Direct Paper System and the
receipt of an annual certificate of the Secretary or an Assistant Secretary that
the Board of Trustees has reviewed the use by the Fund of the Direct Paper
System; PROVIDED FURTHER, however, that the Fund shall not amend or terminate
this Contract in contravention of any applicable federal or state regulations,
or any provision of the Declaration of Trust, and further provided, that the
Fund may at any time by action of its Board of Trustees (i) substitute another
bank or trust company for the Custodian by giving notice as described above to
the Custodian, or (ii) immediately terminate this Contract in the event of the
appointment of a conservator or receiver for the Custodian by the Comptroller of
the Currency or upon the happening of a like event at the direction of an
appropriate regulatory agency or court of competent jurisdiction.
- 37 -
<PAGE>
Upon termination of the Contract, the Fund shall pay to the Custodian
such compensation as may be due as of the date of such termination and shall
likewise reimburse the Custodian for its costs, expenses and disbursements.
14. SUCCESSOR CUSTODIAN
If a successor custodian shall be appointed by the Board of Trustees
of the Fund, the Custodian shall, upon termination, deliver to such successor
custodian at the office of the Custodian, duly endorsed and in the form for
transfer, all securities then held by it hereunder and shall transfer to an
account of the successor custodian all of the Fund's securities held in a
Securities System.
If no such successor custodian shall be appointed, the Custodian
shall, in like manner, upon receipt of a certified copy of a vote of the Board
of Trustees of the Fund, deliver at the office of the Custodian and transfer
such securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian
or certified copy of a vote of the Board of Trustees shall have been delivered
to the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company Act of 1940,
doing business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all securities, funds and other
- 38 -
<PAGE>
properties held by the Custodian and all instruments held by the Custodian
relative thereto and all other property held by it under this Contract and to
transfer to an account of such successor custodian all of the Fund's securities
held in any Securities System. Thereafter, such back or trust company shall be
the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Trustees to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
15. INTERPRETIVE AND ADDITIONAL PROVISIONS
In connection with the operation of this Contract, the Custodian and
the Fund may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Contract as may in their joint opinion be
consistent with the general tenor of this Contract. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall be
annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision of
the Declaration of Trust of the Fund. No interpretive or additional provisions
- 39 -
<PAGE>
made as provided in the preceding sentence shall be deemed to be an amendment of
this Contract.
16. MASSACHUSETTS LAW TO APPLY
This Contract shall be construed and the provisions thereof
interpreted under and in accordance with laws of the Commonwealth of
Massachusetts.
17. LIMITATIONS OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of the Commonwealth of Massachusetts, and notice is hereby given that
this instrument is executed on behalf of the Trustees of the Trust as Trustees
and not individually and that the obligations of this instrument are not binding
upon any of the Trustees or Shareholders individually but are binding only upon
the assets and property of the Fund.
18. PRIOR CONTRACTS
This Contract supersedes and terminates, as of the date hereof, all
prior contracts between the Fund and the Custodian relating to the custody of
the Fund's assets.
- 40 -
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the 16th day of January 1991.
ATTEST THE GLOBAL HEALTH SCIENCES FUND
/s/ Glen A. Payne By:/s/ John J. Kaweske
- ----------------------------- -------------------------------
Glen A. Payne John J. Kaweske
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/ Maureen A. Rodriguez By:/s/ Charles N. Whittemore, Jr.
- ----------------------------- --------------------------------
Assistant Secretary Vice President
- 41 -
<PAGE>
SCHEDULE A
----------
The following foreign banking institutions and foreign securities depositories
have been approved by the Board of Trustees of The Global Health Sciences Fund
(the "Fund") for use as sub-custodians for the Fund's securities and other
assets:
FOREIGN
COUNTRY SUB-CUSTODIAN BANK APPLICABLE DEPOSITORY
- ------- ------------------ ---------------------
Argentina Citibank, N.A. Caja de Valores
Australia Australia and New Zealand Austraclear Limited
Banking Group Limited
Austria Girozentrale Und Bank Oesterreichischen
Der Osterreichischen Kontrollbank AG
Sparkassen AG Wertpapiersammelbank
Beider (OeKB-WSb)
Belgium Banque Bruxelles Caisse
Lambert Interprofessionelle
de Depots et de
Virements de Titres
S.A. (C.I.K.)
Brazil Citibank, N.A. Bolsa de Valores de
Sao Paulo (Bovespa)
Canada Canada Trust Company The Canadian
Depository for
Securities Ltd. (CDS)
Chile Citibank, N.A.
Denmark Den Danske Bank Vaerdipapircentralen
(VP-Centralen)
Finland Kansallis-Osake Pankki
France Credit Commercial de Societe
France Interprofessionnelle
pour la Compensation
des Valeurs
Mibilieres (SICOVAM)
Germany Berliner Handels-und The Kassenverein AG
Frankfurter Bank
Greece National Bank of Greece The Depository of
Registered Securities
<PAGE>
FOREIGN
COUNTRY SUB-CUSTODIAN BANK APPLICABLE DEPOSITORY
- ------- ------------------ ---------------------
Hong Kong Standard Chartered Bank
Indonesia Standard Chartered Bank
Ireland Bank of Ireland The Gilts Settlement
Office
Italy Credito Italiano Monte Titoli, SpA
Japan Sumitomo Trust &
Banking Company, Ltd.
Malaysia Standard Chartered Bank
Mexico Citibank Mexico Instituto para el
Deposito de Valores
(INDEVAL)
Netherlands Bank Mees & Hope, N.V. Netherlands Clearing
Institute for Giro
Securities Deliveries
(NECIGEF)
New Zealand Westpac Banking Corp.
Norway Christiania Bank OG The Norwegian
Kreditkasse Registry of
Securities,
Verdipapirsentralen
(VPS )
Philippines Standard Chartered Bank
Portugal Banco Comercial Portugues
Singapore The Development Bank of
Singapore Ltd.
Spain Banko Hispano Americano
Sweden Skandinaviska Enskilda Vardepapperscentralen
Banken (VPS)
Switzerland Union Bank of Switzerland Schweizerische Effekten
Giro A.G. (SEGA)
<PAGE>
FOREIGN
COUNTRY SUB-CUSTODIAN BANK APPLICABLE DEPOSITORY
- ------- ------------------ ---------------------
Taiwan Central Trust of China
Thailand Standard Chartered Bank
Turkey Citibank, N.A.
United State Street London The Central Gilts
Kingdom Limited Office (CGO)
Venezuela Citibank, N.A.
Numerous Cedel
Numerous Euro-Clear
I certify that the above was approved at the Board of Trustees' meeting of The
Global Health Sciences Fund on December 5, 1991.
/s/ Glen A. Payne
------------------------------
Glen A. Payne, Secretary
[SEAL]
January 23, 1992
SPECIAL CUSTODY ACCOUNT AGREEMENT
---------------------------------
(Short Sales)
AGREEMENT, dated as of January 13, 1998, by and among State Street Bank
and Trust Company, in its capacity as custodian hereunder (the "Bank"), INVESCO
Global Health Sciences Fund (the "Customer") and Bear, Sterns Securities Corp.
(the "Broker").
WHEREAS, Broker is a securities broker-dealer and is a member of several
national securities exchanges;
WHEREAS, Customer is a Registered Investment Company pursuant to the
Investment Company Act of 1940 and Rules promulgated thereunder;
WHEREAS, Customer desires from time to time to sell securities "short"
through Broker, such short sales being permitted by Customer's investment
policies, and for that purpose has executed Broker's Professional Account
Agreement (the "Customer Agreement"), which provides for margin transactions;
WHEREAS, to facilitate Customer's transactions in short sales of
securities, Customer and Broker desire to establish procedures for the
compliance by Broker with the provisions of Regulation T of the Board of
Governors of the Federal Reserve System and other applicable requirements
(the "Margin Rules"); and
WHEREAS, to assist Broker and Customer in complying with the Margin Rules,
Bank is prepared to act as custodian to hold Collateral as defined below.
NOW, THEREFORE, be it agreed as follows:
1 . DEFINITIONS
-----------
As used herein, the following terms have the following meanings:
(a) "Adequate Margin" in respect of short sales means such Collateral as
is adequate in Broker's reasonable judgment under the Margin Rules
and the internal policies of Broker.
(b) "Advice from Broker" or "Advice" means a written notice sent to
Customer and Bank or transmitted by a facsimile sending device,
except that the Advice for initial or additional Collateral or with
respect to Broker's ability to effect a short sale for Customer may
be given orally. With respect to any short sale or Closing
Transaction, the Advice from Broker shall mean a standard
confirmation in use by Broker and sent or transmitted to Customer
and Bank. With respect to substitutions or releases of Collateral,
Advice from Broker means a written notice signed by Broker and sent
or transmitted to Customer and Bank. An authorized agent of Broker
will certify to Customer and Bank the names and signatures of those
employees who are authorized to sign Advices from Broker, which
certification may be amended from time to time. When used herein,
the term "Advice" means the act of sending an Advice from Broker.
(c) "Closing Transaction" means a transaction in which Customer
purchases securities which have been sold short.
<PAGE>
(d) "Collateral" means cash or U.S. Government securities or other U.S.
securities acceptable to Broker.
(e) "Custody Agreement" means the agreement for general custodial
services between Bank and Customer.
(f) "Insolvency" means that (A) an order, judgment or decree has been
entered under the bankruptcy, reorganization, compromise,
arrangement, insolvency, readjustment of debt, dissolution or
liquidation or similar law (herein called the "Bankruptcy Law") of
any competent jurisdiction adjudicating the Customer Insolvent; (B)
the Customer has petitioned or applied to any tribunal for, or
consented to the appointment of, or taking possession by, a trustee,
receiver, liquidator or similar official, of the Customer,
commenced a voluntary case under the Bankruptcy Law of the United
States or any proceedings relating to the customer under the
Bankruptcy Law of any other competent jurisdiction, whether now or
hereinafter in affect; or (C) any such petition or application has
been filed, or any such proceedings commenced, against the Customer
and the Customer by any act has indicated its approval thereof,
consent thereto or acquiescence therein, or an order for relief has
been entered in an involuntary case under the Bankruptcy Law of the
United States, as now or hereinafter constituted, or any order,
judgment or decree has been entered appointing any such trust,
receiver, liquidator or similar official, or approving the petition
in any such proceedings, and such order, judgment or decree remains
unseated and in effect for more than 60 days.
(g) "Instructions from Customer" or "Instructions" means a request,
direction or certification in writing signed by Customer and
delivered to Bank and Broker or transmitted by a facsimile sending
device. An officer of Customer will certify to Bank and Broker the
names and signatures of those persons authorized to sign the
instructions, which certification may be amended from time to time.
When used herein, the term "Instruct" shall mean the act of sending
an Instruction from Customer.
(h) "Receipt of Payment" means receipt by Bank of (1) a certified or
official bank check or wire transfer to Bank; (2) a written or
telegraphic advice from a registered clearing agency that funds have
been or will be credited to the account of Bank, or (3) a transfer
of funds from any of Broker's accounts maintained at Bank.
(i) "Receipt of Securities" means receipt by Bank, of (1) securities in
proper form for transfer or (2) a written or telegraphic advice from
a registered clearing agency that securities have been credited to
the account of Bank of the Special Custody Account.
(j) "Special Custody Account" shall have the meaning assigned to that
term in Section 2 hereof.
2. SPECIAL CUSTODY ACCOUNT
-----------------------
(a) OPENING CUSTODY ACCOUNT. Bank shall open an account on its books
entitled "Special Custody Account for Bear, Steams Securities Corp.
as Pledgee of INVESCO Global Health Sciences Fund" (the "Special
Custody Account"), which shall be a sub-account of Customer's
custody account with Bank, and shall hold therein all securities and
similar property as shall be received and accepted by it therein
pursuant to this Agreement. Customer agrees to instruct Bank in
2
<PAGE>
Instructions from Customer as to cash and specific securities which
Bank is to identify on its books and records as pledged to Broker as
Collateral in the Special Custody Account. Customer agrees that the
value of such cash and securities shall be at least equal in value
to what Broker shall initially and from time to time advise Customer
in an Advice from Broker is necessary to constitute Adequate Margin.
Such collateral (i) will be held by Bank for Broker as agent of
Broker, (ii) may be released only in accordance with the terms of
this Agreement and (iii) except as required to be released hereunder
to Broker, shall not be made available to Broker or to any other
person claiming through Broker, including the creditors of the
Broker. In the event Customer wishes to open another Special Custody
Account for another series of the Fund pursuant to this Agreement,
the title of said account shall be appended hereto as a schedule to
this Agreement.
(b) SECURITY INTEREST. Customer hereby grants a continuing security
interest to Broker in the Collateral in the Special Custody Account.
To perfect Broker's security Interest, Bank will hold the Collateral
in the Special Custody Account, subject to the interest therein of
Broker as the pledgee and secured party thereof in accordance with
the terms of this Agreement. Such security interest will terminate
at such time as Collateral is released as provided herein. Bank
shall have no responsibility for the validity or enforceability of
such security interest.
(c) CONFIRMATION. Bank will confirm in writing to Broker and Customer
all pledges, releases or substitutions of Collateral and will supply
Broker and Customer with a monthly statement of Collateral and
transaction in the Special Custody Account for such month. Bank will
also advise Broker upon request of the kind and amount of Collateral
pledged to Broker.
(d) EXCESS COLLATERAL. Upon the request of Customer, Broker shall advise
Bank and customer of any excess of Collateral in the Special Custody
Account. Such excess shall at Customer's request be transferred
therefrom upon Advice from Broker.
(e) ACCOUNTS AND RECORDS. Bank will maintain accounts and records for
the Collateral in the Special Custody Account as more fully
described in subparagraph 5(a) below. The Collateral shall at all
times remain the property of the Customer subject only to the extent
of the interest and rights therein of Broker as the pledgee thereof.
3. ORIGINAL AND VARIATION MARGIN ON SHORT SALES
--------------------------------------------
(a) SHORT SALES. From time to time, Customer may place order with Broker
for the short sale of securities. Prior to the acceptance of such
orders, Broker will advise Customer of Broker's ability to borrow
such securities or other properties and acceptance of short sale
orders will be contingent upon same.
(b) OPEN SHORT SALES BALANCE. Broker shall, based on the closing market
price on each business day, compute the aggregate net credit or
debit balance on Customer's open short sales and advise Customer
and/or Customer's designated agent by 11:00 A.M. New York time on
the next business day (each a "Determination Day"), of the amount of
the net debit or credit, as the case may be. If a net debit balance
exists on a Determination Day, Customer will cause an amount equal
to such net debit balance to be paid to Broker by the close of
3
<PAGE>
business on such Determination Day. If a net credit balance exists
on a Determination Day, Broker will pay such credit balance to
Customer by the close of business on such Determination Day. As
Customer's open short positions are marked-to-market each business
day, payments will be made by or to Customer to reflect changes (if
any) in the credit or debit balances. Broker will charge interest on
any debit balances, and Broker will pay interest on any credit
balances. Balances will be appropriately adjusted when short sales
are closed out.
4. PLACING ORDERS
--------------
It is understood and agreed that Customer, when placing with Broker any
order to sell short for Customer's account, will designate the order as such and
hereby authorizes Broker to mark such order as being "short", and when placing
with Broker any order to sell long for Customer's account, will designate the
order as such and hereby authorizes Broker to mark such order as being "long".
Any sell order which Customer shall designate as being for long account as above
provided is for securities then owned by Customer and, if such securities are
not then deliverable by Broker from any account of Customer, the placing of such
order shall constitute a representation by Customer that it is impracticable for
Customer than to deliver such securities to Broker but that Customer shall
deliver them by the settlement date or as soon as possible thereafter.
5. RIGHTS AND DUTIES OF THE BANK
-----------------------------
(a) GENERALLY. The Bank shall receive and hold in the Special Custody
Account, as custodian upon the terms of this Agreement, all
Collateral deposited and maintained pursuant to the terms of this
Agreement and, except as provided in subparagraph 5(b) below, shall
receive and hold all monies and other property paid, distributed or
substituted in respect of such Collateral or realized on the sale or
other disposition of such Collateral; provided, however, that the
Bank shall have no duty to require any money or securities to be
delivered to it or to determine that the amount and form of assets
delivered to it comply with any applicable requirements. Collateral
held in the Special Custody Account shall be released only in
accordance with this Agreement or as required by applicable law. The
Customer warrants its authority to deposit in such accounts any
money securities and other property received by the Bank.
The Bank may hold the securities in the Special Custody
Account in bearer, nominee, book entry, or other form and in
depository or clearing corporation, with or without indicating that
the securities are held hereunder; provided, however, that all
securities held in the Special Custody Account shall be identified
on the Bank's records as subject to this Agreement and shall be in a
form that permits transfer without additional authorization or
consent of the Customer. The Customer and Broker hereby agree to
hold the Bank and its nominees harmless from any liability as holder
of record.
(b) DIVIDENDS AND INTEREST. Any dividends or interest paid with respect
to the Collateral held in the Special Custody Account shall be
retained therein as additional Collateral.
(c) REPORTS. The Bank shall, as promptly as practical, provide Broker
and the Customer and/or Customer's designated agent with written
confirmation of each transfer into and out of the Special Custody
Account. The Bank also shall render to Broker and Customer and/or
Customers designated agent a monthly statement of the Collateral
held in the Special Custody Account. In addition, the Bank will
advise Broker and Customer and/or Customers designated agent upon
request at any time of the type and amount of Collateral held in
4
<PAGE>
such account; provided, however, that the Bank shall have no
responsibility for making any determination as to the value of such
Collateral.
(d) LIMITATION OF BANK'S LIABILITY. The Bank's duties and
responsibilities are as set forth in this Agreement. The Bank shall
act only upon receipt of Advice from Broker regarding release or
substitution of Collateral. The Bank shall not be liable or
responsible for anything done, or omitted to be done, by it in good
faith and in the absence of negligence and may rely and shall be
protected in acting upon any notice, instruction or other
communication which it reasonably believes to be genuine and
authorized. As between the Bank and Broker, Broker shall indemnify
and hold the Bank harmless with regard to any losses or liabilities
of the Bank (including counsel fees) imposed on or incurred by the
Bank arising out of any action or omission of the Bank in accordance
with any Advice, notice or Instruction of Broker under this
Agreement. In matters concerning or relating to this Agreement, the
Bank shall not be responsible for compliance with any status or
regulation regarding the establishment or maintenance of margin
credit, including but not limited to Regulations T or X of the Board
of Governors of the Federal Reserve System, or with any rules or
regulations of the Office of the Controller of the Currency (or the
Securities and Exchange Commission). The Bank shall not be liable to
any party for any acts or omissions of the other parties to this
Agreement.
(e) Bank shall be paid as compensation for its services pursuant to this
Agreement such compensation as may from time to time be agreed upon
in writing between Customer and Bank.
6. DEFAULT
-------
In the event of any failure by Customer to timely comply with any
obligation on Customer's part to be performed or observed under this Agreement
or the Customer Agreement, including, but not limited to, the obligation to
maintain Adequate Margin, or in the event of Customer's Insolvency, Broker has
the right to give notice (which notice may be by telegraph, facsimile
transmission or hand delivery) to Customer specifying such default and Broker
may, after giving such notice to Customer, effect a Closing Transaction or
buying of any securities of which Customer's account may be short. In the event
of any default as aforesaid, Broker shall also have the right, upon like notice
to Customer, to sell any and all Collateral in the Special Custody Account and
to give Advice to Bank to deliver such Collateral free of payment to Broker,
which Advice shall state that, pursuant to this Agreement, the condition
precedent to Brokers right to receive such Collateral free of payment has
occurred. The Bank will provide immediate telephone notice to Customer of any
receipt by Bank of Advice from Broker to deliver Collateral free of payment, and
shall promptly effect delivery of Collateral to Broker. Such sale or purchase
may be made according to Broker's judgment and at Broker's discretion, on the
principal exchange or other market for such securities, or in the event such
principal market is closed, in a manner commercially reasonable for such
securities.
7. LIMITATION OF BROKER LIABILITY
------------------------------
Broker shall not be liable for any losses, costs, damages, liabilities or
expenses suffered or incurred by Customer as a result of any transaction
executed hereunder, or any other action taken or not taken by Broker hereunder
for Customer's account at Customer's direction or otherwise, except to the
extent that such loss, cost, damage, liability or expense is the result of
Broker's own recklessness, willful misconduct or bad faith.
5
<PAGE>
8. CUSTOMER REPRESENTATION
-----------------------
Customer represents and warrants that the Collateral will not be subject
to any other liens or encumbrances.
9. TERMINATION
-----------
Any of the parties hereto may terminate this Agreement by notice in
writing to the other parties hereto; provided, however, that the status of any
short sales, and of Collateral held at the time of such notice to margin such
short sales shall be not affected by such termination until the release of such
Collateral pursuant to applicable law, regulations or rules of any self
regulatory organization to which Broker is subject. In the event of the release
of Collateral, the Collateral shall be transferred to a proper custody account
of the Customer in the Bank.
10. NOTICE
------
Written communications hereunder shall be telegraphed, sent to facsimile
transmission or hand delivered as required herein, when another method of
delivery is not specified, may be mailed first class postage prepaid, except
that written notice of termination shall be sent by certified mail, addressed:
(a) if to Bank, to:
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
Attn.: Christopher Meyers
Telephone: 617-985-6345
Telecopy: 617-537-6999
(b) if to Customer, to:
INVESCO Funds Group, Inc.
7800 E. Union Ave.
Denver, Colorado 80237
Attn.: Nancy Timm
Telephone: 800-525-8085
Telecopy: 303-930-6377
(c) if to Broker, to:
Bear, Steams Securities Corp.
245 Park Ave.
New York, New York 10167
Attn.: Michael Minikes, Treasurer
Telephone: 212-272-2089
Facsimile: 212-272-3099
11. CONTROLLING LAW
---------------
The construction and enforcement of this Agreement shall be subject to and
governed by the laws of the State of New York.
6
<PAGE>
12. THE AGREEMENT CONTROLS/AMENDMENTS
---------------------------------
Customer and Bank agree that the terms of this Agreement shall supplement
and amend the Custody Agreement dated as of January 16, 1992 between the Bank
and the Customer with respect to the Special Custody Account, and to the extent
inconsistent therewith, the terms of this Agreement shall control. No amendment
of this Agreement shall be effective unless in writing and signed by an
authorized officer of Broker, Customer and Bank.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized officers as of the day and year first above
written.
STATE STREET BANK AND TRUST COMPANY
By: /S/ Charles R. Whittemore Jr.
-----------------------------
Name: Charles R. Whittemore Jr.
Title: Vice President
INVESCO GLOBAL HEALTH SCIENCES FUND
By: /S/ Dan J. Hesser
------------------
Name: Dan J. Hesser
Title: President
BEAR, STEARNS SECURITIES CORP .
By: /S/ Michael Minikes
--------------------
Name: Michael Minikes
Title: Treasurer
7
SPECIAL CUSTODY ACCOUNT AGREEMENT
---------------------------------
(Short Sales)
AGREEMENT, dated as of May 9, 1997, by and among State Street Bank and
Trust Company, in its capacity as custodian hereunder (the "Bank"), The Global
Health Sciences Fund (the "Customer") and Herzog, Heine, Geduld, Inc.
(the "Broker").
WHEREAS, Broker is a securities broker-dealer and is a member of
several national securities exchanges; and
WHEREAS, Customer desires from time to time to sell securities "short"
through Broker, such short sales being permitted by Customer's investment
policies, and for that purpose has executed a margin agreement (the "Margin
Agreement"); and
WHEREAS, to facilitate Customer's transactions in short sales of
securities, Customer and Broker desire to establish procedures for the
compliance by Broker with the provisions of Regulation T of the Board of
Governors of the Federal Reserve System and other applicable law ("Margin
Rules"); and
WHEREAS, to assist Broker and Customer in complying with the Margin Rules,
Bank is prepared to act as custodian to hold Collateral as defined below.
NOW, THEREFORE, be it agreed as follows:
1. DEFINITIONS
-----------
As used herein, the following terms have the following meanings:
(a) "Adequate Margin" in respect of short sales shall mean such Collateral
as is adequate in Broker's reasonable judgment under the Margin Rules
and the internal policies of Broker.
(b) "Advice from Broker" or "Advice" means a written notice sent to
Customer and Bank or transmitted by a facsimile sending device, except
that Advices for initial or additional Collateral or with respect to
Broker's ability to effect a short sale for Customer may be given
orally. With respect to any short sale or Closing Transaction, the
Advice from Broker shall mean a standard confirmation in use by Broker
and sent or transmitted to Customer and Bank. With respect to
substitutions or releases of Collateral, Advice from Broker means a
written notice signed by Broker and sent or transmitted to Customer
and Bank. An authorized agent of Broker will certify to Customer and
<PAGE>
Bank the names and signatures of those employees who are authorized to
sign Advices from Broker, which certification may be amended from time
to time. When used herein, the term "Advise" means the act of sending
an Advice from Broker.
(c) "Closing Transaction" is a transaction in which Customer purchases
securities which have been sold short.
(d) "Collateral" shall mean cash or U.S. Government securities or other
securities acceptable to Broker.
(e) "Insolvency" means that (A) an order, judgment or decree has been
entered under the bankruptcy, reorganization, compromise, arrangement,
insolvency, readjustment of debt, dissolution or liquidation or
similar law (herein called the "Bankruptcy Law") of any jurisdiction
adjudicating the Customer insolvent; or (B) the Customer has
petitioned or applied to any tribunal for, or consented to the
appointment of, or taking possession by, a trustee, receiver,
liquidator or similar official, of the Customer, or commenced a
voluntary case under the Bankruptcy Law of the United States or any
proceedings relating to the Customer under the Bankruptcy Law of any
other jurisdiction, whether now or hereinafter in effect; or (C) any
such petition or application has been filed, or any such proceedings
commenced, against the Customer and the Customer by any act has
indicated its approval thereof, consent thereto or acquiescence
therein, or an order for relief has been entered in an involuntary
case under the Bankruptcy Law of the United States, as now or
hereinafter constituted, or any order, judgment or decree has been
entered appointing any such trust, receiver, liquidator or similar
official, or approving the petition in any such proceedings, and such
order, judgment or decree remains unstayed and in effect for more than
60 days.
(f) "Instructions from Customer" or "Instructions" means a request,
direction or certification in writing signed by Customer and delivered
to Bank and Broker or transmitted by a facsimile sending device. An
officer of Customer will certify to Bank and Broker the names and
signatures of those persons authorized to sign the instructions, which
certification may be amended from time to time. When used herein, the
term "Instruct" shall mean the act of sending an Instruction from
Customer.
(g) "Receipt of Payment" means receipt by Bank of (1) a certified or
official bank check or wire transfer to Bank; (2) a written or
telegraphic advice from a registered clearing agency that funds have
been or will be credited to the account of Bank, or (3) a transfer of
funds from any of Broker's accounts maintained at Bank.
(h) "Receipt of Securities" means receipt by Bank, of (1) securities in
proper form for transfer or (2) a written or telegraphic advice from a
-2-
<PAGE>
registered clearing agency that securities have been credited to the
account of Bank for the Special Custody Account.
(i) "Special Custody Account" shall have the meaning assigned to that term
in Section 2 hereof.
2. SPECIAL CUSTODY ACCOUNT
-----------------------
(a) Bank shall open an account on its books entitled "Special Custody
Account for Herzog, Heine, Geduld, Inc. as Pledgee of The Global
Health Sciences Fund" ("Special Custody Account") and shall hold
therein all securities and similar property as shall be received and
accepted by it therein pursuant to this Agreement. Customer agrees to
instruct Bank in Instructions from Customer as to cash and specific
securities which Bank is to identify on its books and records as
pledged to Broker as Collateral in the Special Custody Account.
Customer agrees that the value of such cash and securities shall be at
least equal in value to what Broker shall initially and from time to
time advise Customer in an Advice from Broker is necessary to
constitute Adequate Margin. Such collateral (i) will be held by Bank
for Broker as agent of Broker, (ii) may be released only in accordance
with the terms of this Agreement and (iii) except as required to be
released hereunder to Broker, shall not be made available to Broker or
to any other person claiming through Broker, including the creditors
of the Broker.
(b) Customer hereby grants a continuing security interest to Broker in the
Collateral in the Special Custody Account. To perfect Broker's
security interest, Bank will hold the Collateral in the Special
Custody Account, subject to the interest therein of Broker as the
pledgee and secured party thereof in accordance with the terms of this
Agreement. Such security interest will terminate at such time as
Collateral is released as provided herein. Bank shall have no
responsibility for the validity or enforceability of such security
interest.
(c) Bank will confirm in writing to Broker and Customer all pledges,
releases or substitutions of Collateral and will supply Broker and
Customer with a monthly statement of Collateral and transaction in the
Special Custody Account for such month. Bank will also advise Broker
upon request of the kind and amount of Collateral pledged to Broker.
(d) Upon the request of Customer, Broker shall advise Bank and Customer of
any excess of Collateral in the Special Custody Account. Such excess
shall at Customer's request be transferred therefrom upon Advice from
Broker. Customer represents and warrants to Broker that securities
included at any time in the Collateral shall be in good deliverable
form (or Bank shall have the unrestricted power to put such securities
into good deliverable form) in accordance with the requirements of
-3-
<PAGE>
such exchanges as may be the primary market or markets for such
securities.
(e) Bank will maintain accounts and records for the Collateral in the
Special Custody Account as more fully described in subparagraph 5(a)
below. The Collateral shall at all times remain the property of the
Customer subject only to the extent of the interest and rights therein
of Broker as the pledgee thereof.
3. ORIGINAL AND VARIATION MARGIN ON SHORT SALES
--------------------------------------------
(a) From time to time, Customer may place orders with Broker for the short
sale of securities. Prior to the acceptance of such orders Broker will
advise Customer of Broker's ability to borrow such securities or other
properties and acceptance of short sale orders will be contingent upon
same.
(b) Broker shall, on the last business day of each week, compute the
aggregate net credit or debit balance on Customer's open short sales
and advise Customer by 11:00 A.M. New York time of the amount of the
net debit or credit, as the case may be. If a net debit balance exists
on such day, Customer will cause an amount equal to such net debit
balance to be paid to Broker by the close of business on such day. If
a net credit balance exists on such day, Broker will pay such credit
balance to Customer by the close of business on such day. As
Customer's open short positions are marked-to-market each week,
payments will be made by or to Customer to reflect changes (if any) in
the credit or debit balances. Broker will charge interest on debit
balances, and Broker will pay interest on credit balances. Balances
will be appropriately adjusted when short sales are closed out.
4. PLACING ORDER
-------------
It is understood and agreed that Customer, when placing with Broker any
order to sell short for Customer's account, will designate the order as such and
hereby authorizes Broker to mark such order as being "short", and when placing
with Broker any order to sell long for Customer's account, will designate the
order as such and hereby authorizes Broker to mark such order as being "long".
Any sell order which Customer shall designate as being for long account as above
provided is for securities then owned by Customer and, if such securities are
not then deliverable by Broker from any account of Customer, the placing of such
order shall constitute a representation by Customer that it is impracticable for
Customer then to deliver such securities to Broker but that Customer shall
deliver them by the settlement date or as soon as possible thereafter.
5. RIGHTS AND DUTIES OF THE BANK
-----------------------------
(a) GENERALLY. The Bank shall receive and hold in the Special Custody
Account, as custodian upon the terms of this Agreement, all Collateral
deposited and maintained pursuant to the terms of this Agreement and,
except as provided in subparagraph 5(b) below, shall receive and hold
-4-
<PAGE>
all monies and other property paid, distributed or substituted in
respect of such Collateral or realized on the sale or other
disposition of such Collateral; provided, however, that the Bank shall
have no duty to require any money or securities to be delivered to it
or to determine that the amount and form of assets delivered to it
comply with any applicable requirements. Collateral held in the
Special Custody Account shall be released only in accordance with this
Agreement or as required by applicable law. The Customer warrants its
authority to deposit in such accounts any money, securities and other
property received by the Bank.
The Bank may hold the securities in the Special Custody
Account in bearer, nominee, book entry, or other form and in
depository or clearing corporation, with or without indicating that
the securities are held hereunder; provided, however, that all
securities held in the Special Custody Account shall be identified
on the Bank's records as subject to this Agreement and shall be in a
form that permits transfer without additional authorization or
consent of the Customer. The Customer and Broker hereby agree to
hold the Bank and its nominees harmless from any liability as holder
of record.
(b) DIVIDENDS AND INTEREST. Any dividends or interest paid with respect to
the Collateral held in the Special Custody Account shall be paid by
the Bank to the Customer when collected unless the Bank has received
contrary instructions from the Customer.
(c) REPORTS. The Bank shall, as promptly as practical, provide Broker and
the Customer with written confirmation of each transfer into and out
of the Special Custody Account. The Bank also shall render to the
Customer and Broker a monthly statement of the Collateral held in the
Special Custody Account. In addition, the Bank will advise the
Customer or Broker upon request at any time of the type and amount of
Collateral held in the account; provided, however, that the Bank shall
have no responsibility for making any determination as to the value of
such Collateral.
(d) LIMITATION OF BANK'S LIABILITY. The Bank's duties and responsibilities
are as set forth in this Agreement. The Bank shall act only upon
receipt of Advice from Broker regarding release of Collateral. The
Bank shall not be liable or responsible for anything done, or omitted
to be done by it in good faith and in the absence of negligence and
may rely and shall be protected in acting upon any notice, instruction
or other communication which it reasonably believes to be genuine and
authorized. As between Customer and the Bank, the terms of the
Custodian Agreement shall apply with respect to any losses or
liabilities of such parties arising out of matters covered by this
Agreement. As between the Bank and Broker, Broker shall indemnify and
hold the Bank harmless with regard to any losses or liabilities of the
Bank (including counsel fees) imposed on or incurred by the Bank
-5-
<PAGE>
arising out of any action or omission of the Bank in accordance with
any notice or instruction of Broker under this Agreement. In matters
concerning or relating to this Agreement, the Bank shall not be
responsible for compliance with any statute or regulation regarding
the establishment or maintenance of margin credit, including but not
limited to Regulations T or X of the Board of Governors of the Federal
Reserve System, or with any rules or regulations of the OCC. The Bank
shall not be liable to any party for any acts or omissions of the
other parties to this Agreement.
(e) Bank shall be paid as compensation for its services pursuant to this
Agreement such compensation as may from time to time be agreed upon in
writing between Customer and Bank.
6. DEFAULT
-------
In the event of a default by Customer of its obligations (i) to maintain
Adequate Margin as herein provided, (ii) to timely comply with any obligation on
Customer's part to be performed or observed under this Agreement or in the
Margin Agreement, (iii) to pay on demand by Broker any losses sustained by
Broker as may occur under circumstances contemplated in paragraph 3 above; or
(iv) in the event of Customer's Insolvency, Broker has the right to give notice
(which notice may be by telegraph, facsimile transmission or hand delivery) to
Customer specifying such default and Broker may, no sooner than 2:00 P.M., New
York time on the next business day after giving such notice to Customer, if
Customer continues to be in default or insolvent at the end of such period,
effect a Closing Transaction or buy-in of any securities of which Customer's
account may be short. In the event of a default specified in subparagraphs (i),
(ii) or (iii) above, Broker shall also have the right, upon like notice and
grace period, to sell any and all Collateral in the Special Custody Account and
to give Advice to Bank to deliver such Collateral free of payment to Broker,
which Advice shall state that, pursuant to this Agreement, the condition
precedent to Broker' s right to receive such Collateral free of payment has
occurred. The Bank will provide prompt telephone notice to Customer of any
receipt by Bank of Advice from Broker to deliver Collateral free of payment, and
shall effect delivery of Collateral to Broker. Such sale or purchase may be made
according to Broker's judgment and may be made at Broker's discretion, on the
principal exchange or other market for such securities, or in the event such
principal market is closed, in a manner commercially reasonable for such
securities.
7. LIMITATION OF BROKER LIABILITY
------------------------------
Broker shall not be liable for any losses, costs, damages, liabilities or
expenses suffered or incurred by Customer as a result of any transaction
executed hereunder, or any other action taken or not taken by Broker hereunder
for Customer's account at Customer's direction or otherwise, except to the
extent that such loss, cost, damage, liability or expense is the result of
Broker's own recklessness, willful misconduct or bad faith.
-6-
<PAGE>
8. CUSTOMER REPRESENTATION
-----------------------
Customer represents and warrants that the Collateral will not be subject
to any other liens or encumbrances.
9. TERMINATION
-----------
Any of the parties hereto may terminate this Agreement by notice in
writing to the other parties hereto; provided, however, that the status of any
short sales, and of Collateral held at the time of such notice to margin such
short sales shall not be affected by such termination until the release of such
Collateral pursuant to applicable rules of such national securities exchanges of
which Broker may be a member. In the event of the release of Collateral, the
Collateral shall be transferred to Customer.
10. NOTICE
------
Written communications hereunder shall be telegraphed, sent by facsimile
transmission or hand delivered as required herein, when another method of
delivery is not specified, may be mailed first class postage prepaid, except
that written notice of termination shall be sent by certified mail, addressed:
(a) if to Bank, to:
State Street Bank and Trust Company
1776 Heritage Drive
North Quincy, Massachusetts 02171
Attn: Christopher Meyers
Telephone: 617-985-6345
Telecopy: 617-537-6999
(b) if to Customer, to:
INVESCO Funds Group, Inc.
7800 E. Union Avenue
Denver, Colorado 80237
Attn: Glen A. Payne
Telephone: 303-930-6300
Telecopy: 303-930-6307
-7-
<PAGE>
(c) if to Broker, to:
Herzog, Heine, Geduld, Inc.
525 Washington Blvd.
Jersey City, NJ 07310
Attn: Frank Jaeger
Telephone: 201-418-5175
Telecopy: 201-418-5224
11. CONTROLLING LAW
---------------
The construction and enforcement of this Agreement shall be subject to and
governed by the laws of the Commonwealth of Massachusetts.
-8-
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has caused the Agreement to be
executed in its name and on its behalf by a duly authorized representative as of
the aforementioned day and year.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Charles R. Whittemore, Jr.
-----------------------------------
Title: Vice President
-----------------------------------
THE GLOBAL HEALTH SCIENCES FUND
By: /s/ Glen A. Payne
-----------------------------------
Title: Secretary
-----------------------------------
HERZOG, HEINE, GEDULD, INC.
By: /s/ Frank Jaeger
-----------------------------------
Title: Executive Vice President
-----------------------------------
-9-
REGISTRAR,
TRANSFER AGENCY AND SERVICE AGREEMENT
between
THE GLOBAL HEALTH SCIENCES FUND
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
Article 1 Terms of Appointment; Duties of the Bank. . . . . . . . . . . 1
Article 2 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . 3
Article 3 Representations and Warranties of the Bank. . . . . . . . . . 3
Article 4 Representations and Warranties of the Fund. . . . . . . . . . 4
Article 5 Indemnification . . . . . . . . . . . . . . . . . . . . . . . 4
Article 6 Covenants of the Fund and the Bank. . . . . . . . . . . . . . 7
Article 7 Termination of Agreement. . . . . . . . . . . . . . . . . . . 8
Article 8 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . 8
Article 9 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Article 10 Massachusetts Law to Apply. . . . . . . . . . . . . . . . . . 9
Article 11 Merger of Agreement . . . . . . . . . . . . . . . . . . . . . 9
Article 12 Limitations of Liability of the Trustees
and Shareholders . . . . . . . . . . . . . . . . . . . . . . 9
2
<PAGE>
REGISTRAR, TRANSFER AGENCY AND SERVICE AGREEMENT
------------------------------------------------
AGREEMENT made as of the 16th day of January, 1992, by and between THE
GLOBAL HEALTH SCIENCES FUND, a Massachusetts business trust, having its
principal office and place of business at 7800 E. Union Avenue, Denver, Colorado
80237, (the "Fund"), and STATE STREET BANK AND TRUST COMPANY, a Massachusetts
trust company having its principal office and place of business at 225 Franklin
Street, Boston, Massachusetts 02110 (the "Bank").
WHEREAS, the Fund desires to appoint the Bank as its registrar, transfer
agent, dividend disbursing agent, custodian of certain retirement plans and
agent in connection with certain other activities and the Bank desires to accept
such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
Article 1 TERMS OF APPOINTMENT; DUTIES OF THE BANK
----------------------------------------
1.01 Subject to the terms and conditions set forth in this
Agreement, the Fund hereby employs and appoints the Bank to act as, and the Bank
agrees to act as registrar, transfer agent for the Fund's authorized and issued
shares of its common stock ("Shares"), dividend disbursing agent, custodian of
certain retirement plans and agent in connection with any dividend reinvestment
plan as set out in the prospectus of the Fund, corresponding to the date of this
Agreement.
1.02 The Bank agrees that it will perform the following services:
3
<PAGE>
(a) In accordance with procedures established from time to time
by agreement between the Fund and the Bank, the Bank shall:
(i) Issue and record the appropriate number of Shares as
authorized and hold such Shares in the appropriate
Shareholder account;
(ii) Effect transfers of Shares by the registered owners
thereof upon receipt of appropriate documentation;
(iii) Execute transactions directly with broker-dealers
authorized by the Fund who shall thereby be deemed to
be acting on behalf of the Fund;
(iv) Prepare and transmit payments for dividends and
distributions declared by the Fund;
(v) Act as agent for Shareholders pursuant to the dividend
reinvestment and cash purchase plan as amended from
time to time in accordance with the terms of the
agreement to be entered into between the Shareholders
and the Bank in substantially the form attached as
Exhibit A hereto;
(vi) Issue replacement certificates for those
certificates alleged to have been lost, stolen or
destroyed upon receipt by the Bank of
indemnification satisfactory to the Bank and
protecting the Bank and the Fund, and the Bank at
4
<PAGE>
its option, may issue replacement certificates in
place of mutilated stock certificates upon
presentation thereof and without such indemnity; and
(vii) Report abandoned property to the various states as
authorized by the Fund per policies and principles
agreed upon by the Fund and the Bank.
(b) In addition to and neither in lieu nor in contravention of
the services set forth in the above paragraph (a), the Bank shall: (i) perform
all of the customary services of a registrar, transfer agent, dividend
disbursing agent, custodian of certain retirement plans and agent of the
dividend reinvestment and cash purchase plan as described in Article 1
consistent with those requirements in effect as at the date of this Agreement.
The detailed definition, frequency, limitations and associated costs (if any)
set out in the attached fee schedule, include but not limited to: maintaining
all Shareholder accounts, preparing Shareholder meeting lists, mailing proxies,
receiving and tabulating proxies and mailing Shareholder reports to current
Shareholders, withholding taxes on U.S. resident and non-resident alien accounts
where applicable, preparing and filing U.S. Treasury Department Forms 1099 and
other appropriate forms required with respect to dividends and distributions by
federal authorities for all registered Shareholders.
Article 2 FEES AND EXPENSES
-----------------
2.01 For the performance by the Bank pursuant to this Agreement,
the Fund agrees to pay the Bank an annual maintenance fee as set out in the
initial fee schedule attached hereto. Such fees and out-of-pocket expenses and
5
<PAGE>
advances identified under Section 2.02 below may be changed from time to time
subject to mutual written agreement between the Fund and the Bank.
2.02 In addition to the fee paid under Section 2.01 above, the
Fund agrees to reimburse the Bank for out-of-pocket expenses or advances
incurred by the Bank for the items set out in the fee schedule attached hereto.
In addition, any other expenses incurred by the Bank at the request or with the
consent of the Fund, will be reimbursed by the Fund.
2.03 The Fund agrees to pay all fees and reimbursable expenses
within five days following the receipt of the respective billing notice. Postage
and the cost of materials for mailing of dividends, proxies, Fund reports and
other mailings to all Shareholder accounts shall be advanced to the Bank by the
Fund at least seven (7) days prior to the mailing date of such materials.
Article 3 REPRESENTATIONS AND WARRANTIES OF THE BANK
------------------------------------------
The Bank represents and warrants to the Fund that:
3.01 It is a trust company duly organized and existing and
in good standing under the laws of the Commonwealth of Massachusetts.
3.02 It is duly qualified to carry on its business in the
Commonwealth of Massachusetts.
3.03 It is empowered under applicable laws and by its Charter
and By-Laws to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
6
<PAGE>
3.05 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.
Article 4 REPRESENTATIONS AND WARRANTIES OF THE FUND
------------------------------------------
The Fund represents and warrants to the Bank that:
4.01 It is a business trust duly organized and existing
and in good standing under the laws of Massachusetts.
4.02 It is empowered under applicable laws and by its
Declaration of Trust and By-Laws to enter into and perform this Agreement.
4.03 All corporate proceedings required by said
Declaration of Trust and By-Laws have been taken to authorize it to enter into
and perform this Agreement.
4.04 It is a closed-end, diversified investment company
registered under the Investment Company Act of 1940, as amended.
4.05 To the extent required by federal securities laws a
registration statement under the Securities Act of 1933, as amended is currently
effective and appropriate state securities law filings have been made with
respect to all Shares of the Fund being offered for sale; information to the
contrary will result in immediate notification to the Bank.
4.06 It shall make all required filings under federal and
state securities laws.
Article 5 INDEMNIFICATION
---------------
5.01 The Bank shall not be responsible for, and the Fund shall
indemnify and hold the Bank harmless from and against, any and all losses,
7
<PAGE>
damages, costs, charges, counsel fees, payments, expenses and liability arising
out of or attributable to:
(a) All actions of the Bank or its agents or subcontractors
required to be taken pursuant to this Agreement, provided that such actions are
taken in good faith and without negligence or willful misconduct.
(b) The Fund's lack of good faith, negligence or willful
misconduct which arise out of the breach of any representation or warranty of
the Fund hereunder.
(c) The reliance on or use by the Bank or its agents or
subcontractors of information, records and documents which (i) are received or
relied upon by the Bank or its agents or subcontractors and/or furnished to it
or performed by or on behalf of the Fund, and (ii) have been prepared,
maintained and/or performed by the Fund or any other person or firm on behalf of
the Fund.
(d) The reliance on, or the carrying out by the Bank or its
agents or subcontractors of any instructions or requests of the Fund.
(e) The offer or sale of Shares in violation of any requirement
under the federal securities laws or regulations or the securities laws or
regulations of any state that such Shares be registered in such state or in
violation of any stop order or other determination or ruling by any federal
agency or any state with respect to the offer or sale of such Shares in such
state.
5.02 The Bank shall indemnify and hold the Fund harmless from and
against any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liability arising out of or attributable to any action or failure
8
<PAGE>
or omission to act by the Bank as a result of the Bank's lack of good faith,
negligence or willful misconduct.
5.03 At any time the Bank may apply to any officer of the Fund
for instructions, and may consult with legal counsel with respect to any matter
arising in connection with the services to be performed by the Bank under this
Agreement, and the Bank and its agents or subcontractors shall not be liable and
shall be indemnified by the Fund for any action taken or omitted by it in
reliance upon such instructions or upon the opinion of such counsel. The Bank,
its agents and subcontractors shall be protected and indemnified in acting upon
any paper or document furnished by or on behalf of the Fund, reasonably believed
to be genuine and to have been signed by the proper person or persons, or upon
any instruction, information, data, records or documents provided the Bank or
its agents or subcontractors by telephone, in person, machine readable input,
telex, CRT data entry or other similar means authorized by the Fund, and shall
not be held to have notice of any change of authority of any person, until
receipt of written notice thereof from the Fund. The Bank, its agents and
subcontractors shall also be protected and indemnified in recognizing stock
certificates which are reasonably believed to bear the proper manual or
facsimile signatures of the officers of the Fund, and the proper
countersignature of any former transfer agent or former registrar, or of a
co-transfer agent or co-registrar.
5.04 In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of God, strikes,
equipment or transmission failure or damage reasonably beyond its control, or
9
<PAGE>
other causes reasonably beyond its control, such party shall not be liable for
damages to the other for any damages resulting from such failure to perform or
otherwise from such causes.
5.05 Neither party to this Agreement shall be liable to the
other party for consequential damages under any provision of this Agreement or
for any consequential damages arising out of any act or failure to act
hereunder.
5.06 In order that the indemnification provisions contained in
this Article 5 shall apply, upon the assertion of a claim for which either party
may be required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
Article 6 COVENANTS OF THE FUND AND THE BANK
----------------------------------
6.01 The Fund shall promptly furnish to the Bank the following:
(a) A certified copy of the resolution of the Board of Trustees
of the Fund authorizing the appointment of the Bank and the execution and
delivery of this Agreement.
(b) A copy of the Declaration of Trust and By-Laws of the Fund
and all amendments thereto.
10
<PAGE>
6.02 The Bank hereby agrees to establish and maintain facilities
and procedures reasonably acceptable to the Fund for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such certificates,
forms and devices.
6.03 The Bank shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable. To the
extent required by Section 31 of the Investment Company Act of 1940, as amended,
and the Rules thereunder, the Bank agrees that all such records prepared or
maintained by the Bank relating to the services to be performed by the Bank
hereunder are the property of the Fund and will be preserved, maintained and
made available in accordance with such Section and Rules, and will be
surrendered promptly to the Fund on and in accordance with its request.
6.04 The Bank and the Fund agree that all books, records,
information and data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation or the carrying out of this
Agreement shall remain confidential, and shall not be voluntarily disclosed to
any other person, except as may be required by law.
6.05 In cases of any requests or demands for the inspection of
the Shareholder records of the Fund, the Bank will endeavor to notify the Fund
and to secure instructions from an authorized officer of the Fund as to such
inspection. The Bank reserves the right, however, to exhibit the Shareholder
records to any person whenever it is advised by its counsel that it may be held
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liable for the failure to exhibit the Shareholder records to such person.
Article 7 TERMINATION OF AGREEMENT
------------------------
7.01 This Agreement may be terminated by either party upon one
hundred twenty (120) days written notice to the other.
7.02 Should the Fund exercise its right to terminate, all
out-of-pocket expenses associated with the movement of records and material will
be borne by the Fund. Additionally, the Bank reserves the right to charge for
any other reasonable expenses associated with such termination and/or a charge
equivalent to the average of three (3) month's fees.
Article 8 ASSIGNMENT
----------
8.01 Except as provided in Section 8.03 below, neither this
Agreement nor any rights or obligations hereunder may be assigned by either
party without the written consent of the other party.
8.02 This Agreement shall inure to the benefit of and be binding
upon the parties and their respective permitted successors and assigns.
8.03 The Bank may, without further consent on the part of the
Fund, subcontract for the performance hereof with (i) Boston Financial Data
Services, Inc., a Massachusetts corporation ("BFDS") which is duly registered as
a transfer agent pursuant to Section 17A(c)(1) of the Securities Exchange Act of
1934, as amended ("Section 17A(c)(1)"), (ii) a BFDS subsidiary duly registered
as a transfer agent pursuant to Section 17A(c)(1) or (iii) a BFDS affiliate;
provided, however, that the Bank shall be as fully responsible to the Fund for
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the acts and omissions of any subcontractor as it is for its own acts and
omissions.
Article 9 AMENDMENT
---------
9.01 This Agreement may be amended or modified by a
written agreement executed by both parties and authorized or approved by a
resolution of the Board of Trustees of the Fund.
Article 10 MASSACHUSETTS LAW TO APPLY
--------------------------
10.01 This Agreement shall be construed and the provisions
thereof interpreted under and in accordance with the laws of the Commonwealth
of Massachusetts.
Article 11 MERGER OF AGREEMENT
-------------------
11.01 This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the subject
hereof whether oral or written.
Article 12 LIMITATIONS OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS
---------------------------------------------------------
12.01 A copy of the Declaration of Trust of the Trust is on
file with the Secretary of the Commonwealth of Massachusetts, and notice is
hereby given that this instrument is executed on behalf of the Trustees of the
Trust as Trustees and not individually and that the obligations of this
instrument are not binding upon any of the Trustees or Shareholders individually
but are binding only upon the assets and property of the Fund.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
THE GLOBAL HEALTH SCIENCES FUND
BY: /s/ John J. Kaweske
----------------------
ATTEST:
/s/ Glen A. Payne
- -------------------------
STATE STREET BANK AND TRUST COMPANY
BY: /s/ Charles N. Whittemore, Jr.
-------------------------------
Vice President
ATTEST:
/s/ Maureen A. Rodriguez
- ---------------------------------
Assistant Secretary
ADMINISTRATION AGREEMENT
Agreement made as of February 28, 1997, between THE GLOBAL HEALTH SCIENCES
FUND, a Massachusetts business trust ("Fund"), and INVESCO FUNDS GROUP, INC., a
Delaware corporation ("INVESCO").
WHEREAS, the Fund operates as a closed end management investment company,
and is so registered under the Investment Company Act of 1940, as amended ("1940
Act"); and
WHEREAS, the Fund wishes to retain INVESCO to provide certain
administrative services to the Fund, under the terms and conditions stated
below, and INVESCO is willing to provide such services for the compensation set
forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties agree as follows:
1. APPOINTMENT. The Fund hereby appoints INVESCO as administrator of the
Fund, and INVESCO accepts such appointment and agrees that it will furnish
the services set forth in paragraph 2 below.
2. SERVICES AND DUTIES OF INVESCO TO THE FUND. Subject to the supervision of
the Fund's Board of Trustees ("Board"), INVESCO will:
(a) Prepare the Fund's financial reports for reporting to the SEC, NYSE,
shareholders and other appropriate parties;
(b) Provide appropriate financial information to outside survey
organizations, the Board, senior Fund management, portfolio
management, and others;
(c) Prepare and file all SEC required filings, including but not limited
to Form NSAR and Form N2, if necessary;
(d) Prepare the Fund's annual tax provision, and prepare and file the
Fund's federal, excise, state and local tax returns;
<PAGE>
(e) Determine the Fund's dividends and total distributions to be made
available to shareholders in accordance with the Fund's Dividend
Reimbursement Plan. Coordinate with the Fund's transfer and dividend
disbursing agent and custodian for payment of such distributions;
(f) Monitor the Fund' s compliance in accordance with the requirements
of the 1940 Act, the Internal Revenue Code, the investment objective
and restrictions of the Fund, the derivatives policy as adopted by
the Board, and attend to other compliance matters, as appropriate.
Assist the portfolio managers in compliance matters when necessary;
(g) In accordance with the annual Quality Control Plan, perform reviews
and testing of the Fund to ensure that transaction and processing
controls are operating reliably. Bring to the attention of Fund
management all appropriate matters;
(h) Assist the independent auditors or other regulatory agencies in
their examinations of the Fund;
(i) Coordinate and disburse to outside parties any payments or items
requiring remittance on behalf of the Fund;
(j) Negotiate and monitor contractual arrangements with the Fund's
agents, including its custodian, transfer agent, and independent
accountant. Report to the Board on an annual basis, or as necessary,
regarding performance and recommendations of such agents;
(k) Monitor the accounting policies of the Fund;
(1) Prepare and review the calculation of the Net Asset Value of the
Fund in accordance with the requirements of the 1940 Act and the
Securities Act of 1933, as amended. Report the Net asset Value to
all appropriate entities, including the New York Stock Exchange; and
(m) Create and maintain the records of the Fund in accordance with Rule
31a1 of the 1940 Act.
3. PUBLIC INQUIRIES. The Fund and INVESCO agree that while INVESCO will not
have any obligation to reply to questions or requests for information
concerning the Fund from shareholders, brokers or the public, such
services will be provided to the Fund by INVESCO Trust Company under the
Investment Advisory Agreement. The Fund will inform INVESCO of the party
or parties to whom any such questions or requests should be directed, and
INVESCO will refer such questions and requests to such party or parties.
2
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4. COMPLIANCE WITH THE FUND'S GOVERNING DOCUMENTS AND APPLICABLE LAW. In all
matters relating to the performance of this Agreement, INVESCO will act in
conformity with the Declaration of Trust, ByLaws and registration
statement of the Fund and with the directions of the Board and Fund
executive officers and will conform to and comply with the requirements of
the 1940 Act and all other applicable Federal or state laws and
regulations.
5. SERVICES NOT EXCLUSIVE. INVESCO's services hereunder are not deemed to be
exclusive, and INVESCO is free to render administrative or other services
to other trusts, funds or clients so long as INVESCO's services under this
Agreement are not impaired thereby and INVESCO submits for review by the
GHS Board of Trustees any proposal under which INVESCO would provide
administrative or other services to another closedend investment company
and the GHS Board of Trustees does not object to any such proposal(s).
6. EXPENSES. During the term of this Agreement, INVESCO will provide such
office space and personnel as are necessary to perform its duties under
the Agreement at its own expense and will assume all other expenses
incurred by it in connection with its services under this Agreement.
7. COMPENSATION. For the services provided and expenses assumed by INVESCO
under this Agreement, the Fund will pay INVESCO a monthly fee computed at
a flat rate of $250,000 per year.
8. LIMITATION OF LIABILITY OF INVESCO. INVESCO will not be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund
or its shareholders in connection with the performance of its duties under
this Agreement, except a loss (as to which it will be liable and will
indemnify and hold harmless the Fund) resulting from willful misfeasance,
bad faith or gross negligence on its part, or on the part of any of its
employees who are serving as officers of the Fund, in the performance of
its duties or from reckless disregard by it of its duties under this
Agreement or from the inaccuracy of any representation or warranty of
INVESCO contained herein.
9. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS OF THE FUND.
Neither the Trustees of the Fund nor the shareholders of the Fund shall be
liable for any obligations of the Fund under this Agreement, and IFG
agrees that, in asserting any rights or claims under this Agreement, it
shall look only to the assets and property of the Fund in settlement of
such right or claim, and not to such Trustees or shareholders. INVESCO
represents that it has notice of the provisions of the Declaration of
Trust of the Fund disclaiming shareholder liability for acts or omissions
of the Fund.
3
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10. DURATION AND TERMINATION. This Agreement will become effective upon the
date hereinabove written and shall continue in effect thereafter until
terminated without penalty by IFG or the Fund upon 60 days' written notice
to the other and shall automatically terminate in the event of its
assignment as that term is defined in the 1940 Act.
11. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be
changed, waived, discharged, or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
12. GOVERNING LAW. This Agreement shall be construed in accordance with the
laws of the State of Colorado and the 1940 Act; provided, however, that
paragraph 9 above will be construed in accordance with the laws of the
Commonwealth of Massachusetts. To the extent that the applicable laws of
the State of Colorado or the Commonwealth of Massachusetts conflict with
the applicable provisions of the 1940 Act, the latter shall control.
13. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
14. REPRESENTATIONS OF INVESCO. INVESCO represents to the Fund as follows:
(a) INVESCO has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of
Delaware, is duly qualified as a foreign corporation and in good
standing in each other jurisdiction in which its ownership of
property or its conduct of business requires such qualification and
in which the failure to qualify would have a material adverse effect
on the business or operations of INVESCO and has full power and
authority to conduct its business as Administrator of Investment
Companies;
(b) The Administration Agreement has been duly and validly authorized,
executed and delivered by INVESCO, complies with all applicable
provisions of the 1940 Act and the rules and regulations adopted by
the SEC under the 1940 Act, and constitutes a legal, valid and
binding obligation of INVESCO enforceable in accordance with its
terms, subject, as to enforcement, to applicable bankruptcy,
reorganization, insolvency or other similar laws relating to or
affecting creditors' rights generally; and
4
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(c) Neither the execution and delivery of the Administration Agreement
nor the consummation by INVESCO of the transactions contemplated by
the Administration Agreement conflicts with, or results in a breach
of, (i) the charter or Bylaws of INVESCO, (ii) any agreement or
instrument to which INVESCO is a party or by which IFG is bound, or
(iii) any law, rule, regulation, or order of any court, governmental
instrumentality, securities exchange or association or arbitrator.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
Attest: THE GLOBAL HEALTH SCIENCES FUND
/s/ Glen A. Payne By /s/ Dan J. Hesser
- ----------------- ----------------------
Glen A. Payne Dan J. Hesser
Secretary President
Attest: INVESCO FUNDS GROUP, INC.
/s/ Glen A. Payne By /s/ Ronald L. Grooms
- ----------------- ----------------------
Glen A. Payne Ronald L. Grooms
Secretary Senior Vice President
6
Amendment to Administration Agreement
This is an Amendment to the Administration Agreement (the "Agreement") made and
entered into between the INVESCO Global Health Sciences Fund, a Massachusetts
business trust (the "Fund"), and INVESCO Funds Group, Inc., a Delaware
corporation registered with the Securities and Exchange as an investment adviser
(the "Administrator"), effective as of the 1st day of November, 1998.
WHEREAS, the Fund and the Administrator desire to modify the basis on which the
administrative services fee to be paid to the Administrator by the Fund under
the Agreement is computed to provide that such fee will now by computed at the
annual rate of .10% of the Fund's daily net assets.
NOW, THEREFORE, in consideration of the premises and mutual covenants contained
in the Agreement, it is agreed that the provisions of Paragraph 7 of the
Agreement entitled "Compensation" are hereby amended to read as follows:
Compensation. For the services provided and expenses assumed by
IFG under this Agreement, the Fund will pay IFG a monthly fee at
the annual rate of .10% of the Fund's daily net assets. The fee
is provided for hereunder shall be prorated in any month in which
this Agreement is not in effect for the entire month.
IN WITNESS WHEREOF, the parties have executed this Amendment on this 1st day of
November, 1998.
INVESCO GLOBAL HEALTH SCIENCES FUND
Attest:/s/ Glen A. Payne By:/s/ Mark H. Williamson
-------------------- ----------------------
Glen A. Payne Mark H. Williamson
Secretary President
INVESCO FUNDS GROUP, INC.
Attest:/s/ Glen A. Payne By:/s/ Mark H. Williamson
-------------------- ----------------------
Glen A. Payne Mark H. Williamson
Secretary President
