INVESCO
Global Health Sciences Fund
1998 Annual Report
<PAGE>
Highlights
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For the 12 Months Ended October 31
1998 1997 1996 1995
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Net Asset Value--Total Return(1) 20.74% 18.60% 20.10% 49.52%
Share Price--Total Return(1) 40.29% 32.98% 15.25% 47.50%
Total Distributions $3.9248 $4.4727 $ 0.00 $ 0.00
Total Net Assets--End of Period $ 586.3 $ 526.2 $ 455.8 $ 379.5
Ratio of Expenses to Average Net Assets 1.21%* 1.22%* 1.21% 1.33%
Portfolio Turnover 87% 145% 91% 105%
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(1)Past performance is no guarantee of future results.
(*)Ratio is based on Total Expenses of the Fund, which is before any expense
offset arrangements.
<PAGE>
INVESCO Global Health Sciences Fund is an aggressive growth closed-end fund that
focuses on health care, a global industry with unlimited growth potential. The
Fund is managed by INVESCO, which is an industry leader in investment
management.
The Fund is managed by INVESCO through the selective allocation of holdings in
the subsectors of pharmaceuticals, medical devices and supplies, biotechnology,
and health care delivery, and seeks returns that exceed those of the broader
market. The Fund's broad investment charter allows investments in private
companies that represent the next generation in health care technology. These
companies may have the potential to complete an initial public offering and
deliver new-product announcements. Thus, while past performance is no guarantee
of future results, the Fund is designed for long-term net asset value growth.
INVESCO Global Health Sciences Fund's total net assets under management were
more than $586 million as of October 31, 1998.
Letter
from the Chairman
Dear Shareholder:
1998 has been a year that tested the nerves of even the most experienced
investor, with the domestic equity markets reaching unprecedented heights in the
spring, suffering a severe correction in the late summer, and then rallying
again in the fall. But what has really changed in 1998?
Economy: The domestic economy continues to expand even though many other
countries are enduring recessions. With U.S. unemployment at record low levels
and real wages accelerating, consumers have been willing to spend money. It is
important to remember that consumer spending is responsible for approximately
two thirds of Gross Domestic Product. In addition, lower interest rates on
mortgages have enticed homeowners to re?nance, increasing their disposable
income.
Graph:
This graph illustrates the monthly discount/premium for the INVESCO GHS
Fund for the period from 01/31/95 to 11/30/98.
Interest rates: As the global financial crisis intensified during 1998, the
threat of an overheating economy diminished, and interest rates declined
significantly -- with Treasury yields reaching levels not seen since the 1950s
and 1960s.
Corporate Earnings: The strong U.S. dollar, intense price competition worldwide,
and slowing global economies have decreased revenues for many multinationals,
squeezing corporate profits. Furthermore, increasing wages (due to the tight
labor market) are also putting pressure on pro?t margins, and the growth rate in
corporate earnings has slowed.
<PAGE>
Market Volatility: Investors have enjoyed an unusual market, as domestic equity
markets produced above-average returns with limited volatility. This year,
volatility returned to the markets and August 1998 marked the worst month for
equities since October 1987. For the long-term investor, volatility is just part
of the price of doing business when investing in equities.
As we move into 1999, the market environment for domestic equities has
changed to some extent, but in many respects, it remains similar to the last
four years. Low inflation, declining interest rates, and positive domestic
economic growth lend support to the underlying fundamentals for equities.
Granted, the slowdown in many international economies may retard growth here at
home, but it appears that our economy remains strong.
Narrowing of the Fund's discount and structural changes
Like most closed-end funds, INVESCO Global Health Sciences Fund's share price
has traded at a discount to its net asset value. After thorough research, the
Fund's Board of Trustees concluded that a managed distribution policy was in the
best interest of shareholders. Under this policy, the Fund will pay shareholders
a quarterly distribution of 2.5% of the Fund's net asset value. Since the
announcement of the new policy, the discount to net asset value has been
reduced, and it is my opinion that this benefit to shareholders can be
attributed to both the Fund's strong performance and the new distribution
policy.
Management of the portfolio has changed only slightly with the new
distribution policy. The distributions are now more predictable and will be made
quarterly instead of annually. This helps the Fund to manage the cash required
to make the distributions, since the amounts are generally smaller and more
regular. The policy eliminates the need to raise potentially large cash
positions required prior to a one-time, year-end distribution. It also
eliminates the changes in equity and industry weightings that would result from
raising the cash required for a single large distribution.
The Fund's closed-capital structure allows us to invest in securities that
it couldn't own to the same degree if it was an open-end investment company. By
investing in illiquid securities, private placements and restricted securities,
the Fund is able to participate in the potentially huge financial upside
associated with innovative companies offering new technology that is on the
cutting edge of the health care industry. These innovations may help determine
the winners and losers in the health care sector during the next three to ?ve
years.
Graph: This graph compares the net asset value and share price value of a
$10,000 investment in the INVESCO Global Health Sciences Fund to the
value of a $10,000 investment in the S&P Health Care Composite Index
for the period from inception (01/31/92) through 10/31/98.
Year 2000 Computer Issue. Many computer systems in use today may not be able to
recognize any date after December 31, 1999. If these systems are not fixed by
that date, it is possible that they could generate erroneous information or fail
altogether. As investment advisor and administrator of the Fund, INVESCO has
committed substantial resources in an effort to make sure that its own major
computer systems will continue to function on and after January 1, 2000. Of
course, INVESCO cannot fix systems that are beyond its control. If INVESCO's own
systems, or the systems of third parties upon which it relies, do not perform
properly after December 31, 1999, the Fund could be adversely affected.
<PAGE>
In addition, the markets for, or values of, securities in which the Fund
invests may possibly be hurt by computer failures affecting portfolio
investments or trading of securities beginning January 1, 2000. For example,
improperly functioning computer systems could result in securities trade
settlement problems and liquidity issues, production issues for individual
companies and overall economic uncertainties. Individual issuers may incur
increased costs in making their own systems Year 2000 compliant. The combination
of market uncertainty and increased costs means that there is a possibility that
Year 2000 computer issues may adversely affect the Fund's investments.
Fund Performance
For the one-year period ended October 31, 1998, the Fund had a total return of
20.74%, based on net asset value, and a return of 40.29%, based on market
value.(1) During this period, both the net asset value and market return
significantly outperformed the average open-end fund return of 5.38% in the
Lipper Health/Biotechnology category. (Lipper Analytical Services, Inc., is an
independent fund analyst, that tracks total return unadjusted for commissions.)
For the three-year period ended October 31, 1998, the Fund had an average
annual return of 19.81%, based on net asset value, and 29.07%, based on market
price performance.(1) Both of these returns also outperformed the average
open-end fund return of 17.68% for the Lipper Health/Biotechnology category.
Thank you for your continued support, and we look forward to assisting you with
your future investment needs.
Sincerely,
/s/ Charles W. Brady
Charles W. Brady
Chairman
(1)Total return assumes reinvestment of dividends and capital gain distributions
for the periods indicated. Past performance is not a guarantee of future
results.
<PAGE>
Review & Outlook
A Conversation with Senior Vice President
and Portfolio Manager John Schroer
Q: Can you discuss the factors responsible for the Fund's strong relative and
absolute performance in 1998?
A: The Fund has performed very well this year for two reasons.(1)
First, health care stocks in general have been strong relative performers
versus the broader market averages. For the last 12 months, global economic
uncertainty and financial market turmoil have been the backdrop for investors.
However, due to the nature of health care demand, business trends in the
industry are relatively immune to short-term changes in the economic
environment. This stability and safety has accounted for much of the relative
outperformance of health care this past year.
Second, the portfolio has been overweighted in the pharmaceutical and
medical devices and supplies sectors. The pharmaceutical sector posted another
strong year of absolute returns, as a result of strong unit volume growth and
increasing visibility on the future product pipelines. Medical devices and
supplies posted returns that, albeit volatile, were quite positive for the
portfolio. Conversely, the portfolio has been underweighted in the biotechnology
sector and the health care service sector. While these sectors underperformed
the market, our selective investments within these sectors contributed
meaningfully to the overall performance of the Fund.
Q: The Fund has approximately 60% of its assets in large pharmaceutical
companies. This group has been one of the best performing segments of the
health care industry for the last two years. Why do you have the weighting
so high and do you expect any changes?
A: There are two driving forces creating value for shareholders in the
pharmaceutical industry long-term. First is the well-documented effect of
demographics. The baby boom generation currently averages between 35 to 50 years
old. During this period of an individual's life, the most pronounced increase in
pharmaceutical consumption takes place. These therapies are generally chronic
treatments for illnesses ranging from cardiovascular disease through depression,
and represent the largest categories within the pharmaceutical industry. This
driver of unit volume growth should continue for the industry into the
foreseeable future.
Graph:
Annual Pharmaceutical Expenditures by Age Group: this graph shows the
expenditures of each age group in the United States as a percentage of
total expenditures and in dollars.
Second, the new product introductions experienced by the industry over the
last 18 months continue to drive revenues and earnings in the near-term. The
pharmaceutical industry, which has historically spent a high percentage of
revenues on research and development, continues to grow its research and
development budgets faster than industry revenue growth. This growing commitment
has, and is expected to continue to, result in new products. The pipeline of new
products is full of promising technology, which should drive industry revenue
growth into the next century.
<PAGE>
Importantly, the fundamental structure of the industry and what is required
to effectively compete is changing. The threshold for critical mass in the
pharmaceutical industry is rising. This "critical mass" is measured in the size
and scope of research and development effort, expertise in running successful
clinical trials, experience in navigating the regulatory pathways globally, and
the sales force presence necessary for a large product launch. As this threshold
increases, and the barriers to entry rise, larger companies will benefit
disproportionately.
Graph:
U.S. and Global Pharmaceutical R&D Spending: This graph shows the actual
and estimated U.S. and global spending on pharmaceutical research and
development for the years 1990 through 2002.
The powerful demand created by the demographic phenomena and the continual
supply of novel new therapeutics created through the research and development
efforts, coupled with an accelerated regulatory review timeline, has fostered an
environment for the pharmaceutical industry that has rarely been more favorable.
We remain comfortable with the investments and the current weighting in this
sector.
Q: The financial markets have been very volatile due to concerns over global
economic stability and growth. In this environment, why has the
pharmaceutical sector performed so well?
A: Pharmaceuticals are products whose demand is largely unrelated to the general
direction of the economy. Consumption of medications is based on biologic need
rather than changes in income. Furthermore, many of the regions of the world,
such as Southeast Asia and Latin America, which have experienced the most
instability, are not meaningful markets for the pharmaceutical industry. As a
result, unit volumes, revenues and operating earnings in this sector have not
been significantly affected. Therefore, pharmaceutical share prices have not
been significantly affected by negative global developments.
Q: What are a few of your favorite drug companies?
A: We concentrate the Fund's investments in pharmaceutical companies that have
strong new product pipelines, clinically superior products in commercially
attractive categories, and strong research and development activities. A
sampling of our favorite pharmaceutical companies today are:
o Merck & Co.
o Lilly (Eli) & Co.
o Warner-Lambert Co.
o Schering-Plough Corp.
o Pfizer, Inc.
Historical Drug Progression Probability
- --------------------------------------------------------------------------
Phase I Phase II Phase III
- --------------------------------------------------------------------------
Entering Phase I 100%
- --------------------------------------------------------------------------
Entering Phase II 74% 100%
- --------------------------------------------------------------------------
Entering Phase III 36% 49% 100%
- --------------------------------------------------------------------------
Approved 23% 31% 64%
- --------------------------------------------------------------------------
Source: Tufts University
Q: What new drugs are coming to market in the near-term that offer
exceptional potential?
A: There is a novel new class of drugs scheduled to launch into the market in
1999 called Cox-2 inhibitors. This new class of drugs is a breakthrough in the
treatment of pain and inflammation. Cox-2 inhibitors will compete against
existing non-steroidal anti-inflammatory drugs. Existing drug therapies that
treat these ailments such as aspirin, naproxen, and ibuprofen can interfere with
the body's natural mucus lining, and may lead to stomach discomfort and
potentially ulcers. However, the Cox-2 inhibitors reduce pain and in?ammation
without disturbing this lining. The Cox-2 inhibitor class has the potential to
be a multi-billion dollar market.
<PAGE>
The first drug of this class in early 1999 should be Celebrex. Celebrex was
developed by Monsanto and will be co-promoted with Pfizer. The second Cox-2
inhibitor to reach market should be Merck's Vioxx, also in 1999.
Q: The Fund's returns were enhanced by exposure to medical devices and
supplies companies. What is happening within this sector?
A: The medical devices and supplies sector is one of the more diverse and
fragmented within health care. We continue to focus on those sub-sectors that
have the best industry growth prospects and the companies in those sub-sectors
that have the best long-term return potential. Consistent with our high-quality
growth philosophy, we look for high barriers to entry, and clinically
value-added products with high profitability in sub-sectors growing faster than
overall health care spending. We then focus on the companies with strong
franchise presence - high market share, significant research and development
effort, strong sales force and proven management teams.
This process has resulted in the Fund investing in sub-sectors such as
cardiac devices and spinal orthopedics.
Two of our favorite companies in this sub-sector today are:
o Medtronic, Inc.
o Sofamor/Danek Group
Medtronic is a leading company in the design, development, and
manufacturing of products for use in cardiac rhythm management, such as
defibrillators and pacemakers. Sofamor/Danek Group is the market leader for
implantable devices used in the surgical treatment of spinal conditions. Its
primary products include support rods, locking bolts, spinal rods, hooks, and
traction devices. Impressive management is evident in the consistent financial
returns and conservative financial position posted by both companies.
Q: What about the biotechnology and health care delivery sectors?
A: The Fund has limited the exposure to both the biotechnology and health care
delivery sectors--less than 10% to each in the past year. Biotechnology
continues to offer tremendous clinical potential and lucrative returns for
investors. Unfortunately, one must also assume a similar amount of risk for the
high returns. Historically, for every compound that enters Phase 1 research and
ultimately becomes commercially successful, there are approximately nine others
that will fail. Because of this risk, we maintain very selective criteria for
investing in biotechnology companies.
Graph:
Percent of Fund's Total Net Assets by Subsector: This graph shows the
percentage of the INVESCO Global Health Sciences Fund's total net assets
held in the following subsectors: biotechnology, health care delivery,
medical devices and supplies, pharmaceuticals and other/short term as of
October 31, 1998 and 1997.
<PAGE>
During the past year, share prices of the larger, mature, biotechnology
companies significantly outperformed smaller companies. One of the strongest
performers for the Fund and the sector was MedImmune, Inc.
We continue to be less than optimistic for the future of health care
delivery firms. As the federal government becomes more cost-conscience,
reimbursements to health care providers (hospitals, health maintenance
organizations and preferred provider organizations) have become incrementally
more negative, pressuring their revenue and therefore earnings growth. Because
of these regulatory constraints, we have avoided hospitals, health maintenance
organizations and preferred provider organizations.
Because the health care service sector is extremely heterogeneous, we have
been able to research and invest in less traditional companies with very good
investment profiles, like IMS Health. Formerly known as Cognizant Corporation,
IMS Health tracks prescription drug volumes at the pharmacy and hospital level
and sells this data to pharmaceutical companies and other users. With a near
monopoly in this market, IMS continues to post consistent recurring revenue,
strong return on capital invested and strong earnings growth.
Q: There appears to have been a great deal of merger/acquisition activity in
the health care sector during the last year. How has the Fund been affected
by this activity?
A: There has been an increase in the number of transactions announced;
unfortunately, there also has been a decrease in the number of transactions
closed. During the past year, the pharmaceutical industry witnessed the
announcement of American Home Products merging with SmithKline Beecham PLC only
to have this deal fall through. This was replaced by the announcements of Glaxo
Wellcome PLC merging with SmithKline Beecham PLC and American Home Products
merging with Monsanto Co. Subsequently, both of these mergers collapsed as well.
The medical device industry continues with the divestiture and consolidation
trends that have been ongoing for the past few years. Limited activity has
occurred in the health care services sector, while acquisition activity has been
accelerating within the biotechnology sector.
Health care companies have historically sought the merger/acquisition
solution for several reasons.
o Companies are rapidly striving to achieve critical mass in an industry where
the threshold required to effectively compete is rising. Specifically, this
applies to companies looking to fill a void in their product pipeline, broaden
product line offerings or access deeper financial resources. For shareholders,
the effect of merger/acquisitions has generally been positive over time, more so
if the investment happens to be in the target company.
o The predominant financial rationale for consummating mergers/acquisitions
is the cutting of costs associated with duplicative administrative
responsibilities, while leveraging research and development efforts in addition
to held sales forces. In some instances, this has led to higher earnings growth
rates for the new company than either company generated independently. While in
others, earnings projections might not change, but the value the market was
willing to apply increases, as those earnings are now higher quality.
<PAGE>
As mentioned, there has been an increase in merger/acquisition activity
over the past year. The Fund has generally benefited from the activity through
holdings in both targets and acquirers. The philosophy and strategy of the Fund
does not call for a specific focus on mergers/acquisitions. The drivers of
mergers/acquisitions for the health care sector are not expected to change in
the near-term. We would expect to see continued merger/acquisition activity
within the health care sector over time, and we would hope that the Fund
benefits.
Q: During the last year, what areas were disappointing?
A: 1998 was a very good year for the Fund. If I had to identify one area that
was a disappointment during the last year, it would be the performance of the
Fund's private placements. Although fundamentally many of the companies are
progressing and meeting business milestones, the state of the capital markets
has had more impact on value in 1997 and 1998. For many reasons, smaller
capitalization companies have underperformed the market averages for almost two
years. This has had the effect of limiting the number of initial public
offerings. Furthermore, 90% of private investments ultimately exit the Fund's
portfolio through an IPO, and as this window has closed, so has the ability of
the Fund to realize the increased values resulting from the business progress
demonstrated by our investments.
During the past two years, the Fund has continued to research new private
placement investments but has not meaningfully committed new funds. It is the
opinion of Fund management that as valuations continue to contract, more
opportunities will exist and the Fund will again increase the financial
commitment to private company investments. We remain confident in the long-term
potential of private placements.
Q: Have you added any private placements to the Fund in 1998?
A: Of several new investments made by the Fund in the past year, I would like to
highlight two:
o Aerogen, Inc. Aerogen is focused on the creation, development and
commercialization of unique therapeutic products for human use, through
innovation of controlled drug delivery to the upper respiratory tract and lungs
via aerosols. Their drug delivery products may be used in the treatment of
respiratory diseases, and for the deployment of drugs into the circulatory
system.
o Fidus Medical Technology. Fidus is a leading developer of catheter-based,
microwave systems for minimally invasive electrophysiology procedures. The
company is also developing and testing a number of products to treat cardiac
arrhythmias.
<PAGE>
Q: What is your strategy for private placements in the near future?
A: We will continue to be very selective in the next 6 to 12 months, looking to
improve the quality of the portfolio while being cognizant of the difficult
market environment. Once that situation changes, we intend to increase the
Fund's assets in private placements over the long-term, since we believe that
these securities provide the potential for significant appreciation. However,
until the market environment changes for private placements, we will remain
cautious with our investment approach.
Q: Does the Fund engage in short selling?
A: Yes, a "short sale" is the selling of shares in a company that the Fund does
not own with the intent to repurchase those shares later at a lower price. This
is a very useful feature in the management of the portfolio. We have used
short-selling for specific company circumstances rather than industry hedging or
market bets. We are very selective in the stocks we short. We try to limit the
short-sale exposure in the portfolio to less than 10% of the Fund's total
assets, but could increase the exposure to as much as 25%.
Q: Have the underlying fundamentals supporting the growth of health care
spending changed?
A: Industry fundamentals have changed very little, if at all. Health care should
continue to be driven by demographics and new technology. In the long-term,
demographics will drive industry demand; yet in the short-to intermediate-term,
the emergence of new technologies will drive shareholder value. Although the
health care industry continues to change, much remains the same. Therefore, the
successful investment philosophy and discipline employed by Fund management will
not change. We continue to be optimistic about the potential for investment
returns in the health care industry.
(1)Total return assumes reinvestment of dividends and capital gain distributions
for the periods indicated. Past performance is not a guarantee of future
results.
<PAGE>
Financial Report
Ten Largest Common Stock Holdings
INVESCO Global Health Sciences Fund
October 31, 1998
Percent of
Description Value Net Assets
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Merck & Co $ 34,407,600 5.87 %
American Home Products 31,785,000 5.42
Schering-Plough Corp 31,088,825 5.30
Sofamor/Danek Group 30,993,084 5.29
Pfizer Inc 30,079,694 5.13
Medtronic Inc 29,890,250 5.10
Lilly (Eli) & Co 29,507,789 5.03
Glaxo Wellcome PLC Sponsored
ADR Representing 2 Ord Shrs 29,453,588 5.02
Bristol-Myers Squibb 28,961,847 4.94
Johnson & Johnson 27,889,300 4.76
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TOTAL $304,056,977 51.86 %
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Composition of holdings is subject to change.
Index
13 Ten Largest Common Stock Holdings
14 Statement of Investment Securities
19 Statement of Assets and Liabilities
20 Statement of Operations
21 Statement of Cash Flows
22 Statement of Changes in Net Assets
23 Notes to Financial Statements
27 Financial Highlights
28 Report of Independent Accountants
29 Other Information
31 Trustees and Officers
31 Shareholder Information
<PAGE>
Statement Of Investment Securities
INVESCO Global Health Sciences Fund
October 31, 1998
Shares, Units
or Principal
Description Amount Value
- --------------------------------------------------------------------------------
COMMON STOCKS & WARRANTS 88.19%
Biotechnology 4.83%
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Alexion Pharmaceuticals(a) 155,050 $ 1,279,162
Cadus Pharmaceutical(a)(b) 354,000 929,250
Centocor Inc(a) 134,350 5,978,575
Ecogen Technologies I(a)(b)(e) 60 1
Genentech Inc(a) 185,825 13,309,716
Genomica Corp Warrants (Exp 2003)(a)(b)(c)(e) 1 0
GenoPlex Inc Warrants (Exp 2003)(a)(b)(c)(e) 1 0
MedClone Trust(a)(c)(e) 216,608 1
MedImmune Inc(a) 75,275 5,062,244
Titan Pharmaceuticals(a) 488,215 1,342,591
Trimeris Inc(a)(e) 313,726 1,207,844
Unisyn Technologies(a)(b)(e) 20,754 1
Unisyn Technologies Warrants (Exp 2001)(a)
(b)(c)(e) 333,773 0
Xenometrix Inc(a)(b)(e) 261,007 29,363
-----------
29,138,748
-----------
Health Care Delivery 1.33%
-------------------------------------------------------------------------------
Bergen Brunswig Class A 164,100 8,010,131
-----------
Medical Devices & Supplies 26.13%
-------------------------------------------------------------------------------
Allegiance Corp 587,100 21,832,781
Baxter International 119,075 7,137,058
Becton Dickinson 242,950 10,234,269
Cambridge Heart(a) 131,263 853,210
Clarus Medical Systems Warrants (Exp 2000)(a)
(b)(c)(e) 2,224 0
Emisphere Technologies(a) 96,825 714,084
Fidus Medical Technology Warrants (Exp 2001)
(a)(b)(e) 1,000,000 1,000
Guidant Corp 83,575 6,393,488
IMS Health 131,400 8,738,100
IDEXX Laboratories(a) 195,200 4,453,000
Johnson & Johnson 342,200 27,889,300
Lynx Therapeutics(a)(b) 345,700 3,370,575
Medtronic Inc 459,850 29,890,250
Nanogen Inc(a)(e) 416,666 1,874,997
Sofamor/Danek Group(a) 304,975 30,993,084
SOMNUS Medical Technologies(a)(b/ 1,000,000 3,125,000
VidaMed Inc Warrants (Exp 2000)(a)(b)(c)(e) 263,158 0
-----------
157,500,196
-----------
Pharmaceuticals 55.90%
-------------------------------------------------------------------------------
Abbott Laboratories 492,800 23,130,800
Allergan Inc 140,325 8,761,542
American Home Products 652,000 31,785,000
Bristol-Myers Squibb(d) 261,950 28,961,847
<PAGE>
Shares, Units
or Principal
Description Amount Value
- --------------------------------------------------------------------------------
Glaxo Wellcome PLC Sponsored ADR
Representing 2 Ord Shrs 473,150 $ 29,453,588
Lilly (Eli) & Co 364,575 29,507,789
Merck & Co(d) 254,400 34,407,600
Novartis AG Registered Shrs 7,325 13,198,198
Pfizer Inc(d) 280,300 30,079,694
Pharmacia & Upjohn 418,925 22,176,842
Roche Holdings AG Non-Voting Shrs 1,000 11,667,405
Schering-Plough Corp 302,200 31,088,825
Shire Pharmaceuticals Group PLC(a) 121,125 864,133
SmithKline Beecham PLC Sponsored ADR
Representing 5 Ord Shrs 283,575 18,077,906
Warner-Lambert Co 302,350 23,696,681
-----------
336,857,850
-----------
Total Common Stocks & Warrants (Cost $406,605,897) 531,506,925
-------------------------------------------------------------------------------
PREFERRED STOCKS 5.91%
Biotechnology 2.38%
-------------------------------------------------------------------------------
Exelixis Pharmaceuticals, Series C, Pfd(a)
(e) 1,125,000 2,250,000
Genomica Corp, Series A, Pfd(a)(b)(e) 2,490,075 1,500,000
GenoPlex Inc, Series A, Pfd(a)(b)(e) 200,000 200,000
Ingenex Inc, Series B, Pfd(a)(e) 103,055 62,864
MedClone Trust, Series G, Conv Pfd(a)(e) 872,096 113,372
Ontogeny Inc, Series E, Pfd(a)(e) 1,000,000 2,500,000
Orchid Biocomputer, Series C, Conv Pfd(a)
(b)(e) 450,450 5,000,000
Osiris Therapeutics, Series C, Conv Pfd(a)
(e) 352,941 1,199,999
Physiome Sciences, Series B, Pfd(a)(b)(e) 909,090 1,499,999
Unisyn Technologies
Series A, Conv Pfd(a)(b)(e) 758,258 1
Series B, Pfd(a)(b)(e) 499,500 1
Series C, Pfd(a)(b)(e) 696,710 1
-----------
14,326,237
-----------
Health Care Delivery 0.57%
-------------------------------------------------------------------------------
Caresoft Inc, Series A, Pfd(a)(b)(e) 540,541 1,000,001
Physicians Online
Series A, Pfd(a)(b)(e) 361,500 1,955,715
Series C, Pfd(a)(b)(e) 55,558 500,022
-----------
3,455,738
-----------
Medical Devices & Supplies 2.96%
-------------------------------------------------------------------------------
Adeza Biomedical, Series II, Conv Pfd(a)(e) 416,666 1,216,665
Aerogen Inc, Series D, Pfd(a)(e) 1,142,858 2,000,001
Clarus Medical Systems
Series I, Pfd(a)(b)(e) 106,664 533,320
Series II, Pfd(a)(b)(e) 77,239 386,196
Fidus Medical Technology, Series F, Pfd(a)
(b)(e) 1,500,000 3,000,000
Instrumentation Metrics, Series C, Conv
Pfd(a)(b)(e) 500,000 5,057,500
<PAGE>
Shares, Units
or Principal
Description Amount Value
- --------------------------------------------------------------------------------
InterVentional Technologies, Series
F, Pfd(a)(e) $ 250,000 $ 2,125,000
Janus Biomedical, Series A, Conv Pfd(a)
(b)(e) 400,000 1,000,000
Masimo Corp, Series C, Pfd(a)(e) 125,000 1,000,000
Norian Corp, Series D, Pfd(a)(e) 267,857 1,499,999
-----------
17,818,681
-----------
Total Preferred Stocks (Cost $39,786,365) 35,600,656
- --------------------------------------------------------------------------------
FIXED INCOME SECURITIES 0.12%
Biotechnology 0.06%
- --------------------------------------------------------------------------------
Genomica Corp, Bridge Notes, 8.000%,
10/9/2000(a)(b)(e) $ 362,500 362,500
-----------
Health Care Delivery 0.06%
- --------------------------------------------------------------------------------
Physicians Online, Bridge Notes, 11.000%,
10/31/2000(a)(b)(e) $ 337,390 337,390
-----------
Total Fixed Income Securities (Cost $699,890) 699,890
-------------------------------------------------------------------------------
OTHER SECURITIES 0.12%
Medical Devices & Supplies 0.12%
-------------------------------------------------------------------------------
Axogen Ltd, Units(a)(Each unit consists
of one cmn shr of Axogen Ltd and one wrnt
to purchase ELAN Corp representing one
ADR) (Cost $205,200) 11,400 735,300
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS 5.66%
- --------------------------------------------------------------------------------
CORPORATE BONDS 0.07%
Biotechnology 0.07%
- --------------------------------------------------------------------------------
GenoPlex Inc, Notes, 8.000%, 1/31/1999(a)(b)
(e)(Cost $400,000) $ 400,000 400,000
-----------
REPURCHASE AGREEMENTS 5.59%
Repurchase Agreement with State Street
dated 10/30/1998 due 11/2/1998 at 5.350%,
repurchased at $33,719,026
(Collateralized by US Treasury Bonds,
due 5/15/2017
at 8.750%, value $34,300,014)(Cost
$33,704,000) $ 33,704,000 33,704,000
-----------
Total Short-Term Investments
(Cost $34,104,000) 34,104,000
-------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES AT VALUE 100.00%
(Cost $481,401,352)
(Cost for Income Tax Purposes $483,374,477) $ 602,646,771
-------------------------------------------------------------------------------
(a) Security is non-income producing .
(b) Security is an affiliated company (See Notes).
(c) Security has no market value at October 31, 1998.
(d) Security has been designated as collateral for Short Sales.
<PAGE>
(e) The following are restricted securities at October 31, 1998:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Schedule of Restricted or Illiquid Securities
Acquisition Acquisition Fair Value as a
Description Date(s) Cost Fair Value % of Net Assets
---------------------------------------------------------------------------------------------------------
Adeza Biomedical, Series II, Conv Pfd 12/21/1994 $ 999,998 $1,216,665 0.21%
Aerogen Inc, Series D, Pfd 8/25/1998 2,000,001 2,000,001 0.34
Caresoft Inc, Series A, Pfd 7/21/1997 1,000,001 1,000,001 0.17
Clarus Medical Systems
Series I, Pfd 12/23/1992 2,000,000 533,320 0.09
Series II, Pfd 11/9/1994-
2/9/1996 386,196 386,196 0.06
Warrants (Exp 2000) 5/2/1992 0 0 0.00
Ecogen Technologies I 11/16/1992-
1/28/1994 684,000 1 0.00
Exelixis Pharmaceuticals, Series C, Pfd 4/9/1997 2,250,000 2,250,000 0.38
Fidus Medical Technology
Series F, Pfd 8/14/1998 3,000,000 3,000,000 0.51
Warrants (Exp 2001) 8/14/1998 1,000 1,000 0.00
Genomica Corp
Bridge Notes, 8.000%, 10/9/2000 10/9/1998 362,500 362,500 0.06
Series A, Pfd 10/6/1997 1,500,000 1,500,000 0.26
Warrants (Exp 2003) 10/9/1998 0 0 0.00
GenoPlex Inc
Notes, 8.000%, 1/31/1999 6/25/1998 400,000 400,000 0.07
Series A, Pfd 9/15/1997 200,000 200,000 0.03
Warrants (Exp 2003) 6/25/1998 0 0 0.00
Ingenex Inc, Series B, Pfd 9/27/1994 600,000 62,864 0.01
Instrumentation Metrics, Series C, Conv
Pfd 2/25/1998 5,057,500 5,057,500 0.86
InterVentional Technologies, Series F,
Pfd 10/19/1992 2,000,000 2,125,000 0.36
Janus Biomedical, Series A, Conv Pfd 3/2/1994 1,000,000 1,000,000 0.17
Masimo Corp, Series C, Pfd 10/7/1998 1,000,000 1,000,000 0.17
MedClone Trust 9/30/1997 151,965 1 0.00
MedClone Trust, Series G, Conv Pfd 10/21/1993-
7/20/1994 1,500,005 113,372 0.02
Nanogen Inc (b) 12/19/1996 2,499,996 1,874,997 0.32
Norian Corp, Series D, Pfd 8/5/1992 1,499,999 1,499,999 0.26
Ontogeny Inc, Series E, Pfd 3/13/1997 2,500,000 2,500,000 0.43
Orchid Biocomputer, Series C, Conv Pfd 3/27/1998 5,000,000 5,000,000 0.85
Osiris Therapeutics, Series C, Conv Pfd 5/26/1994 1,199,999 1,199,999 0.20
Physicians Online
Bridge Note, 11.000%, 10/31/2000 6/10/1998 337,390 337,390 0.06
Series A, Pfd 8/31/1993 964,000 1,955,715 0.33
Series C, Pfd 2/29/1996 500,022 500,022 0.09
Physiome Sciences, Series B, Pfd 11/7/1997 1,499,999 1,499,999 0.26
Trimeris Inc (a) 6/27/1997 2,000,000 1,207,844 0.21
Unisyn Technologies 2/28/1994 999,961 1 0.00
Unisyn Technologies
Series A, Conv Pfd 12/27/1994 758,258 1 0.00
Series B, Pfd 2/6/1996 499,500 1 0.00
Series C, Pfd 4/25/1997 870,888 1 0.00
Warrants (Exp 2001) 7/27/1994 0 0 0.00
<PAGE>
Acquisition Acquisition Fair Value as a
Description Date(s) Cost Fair Value % of Net Assets
- ---------------------------------------------------------------------------------------------------------
VidaMed Inc Warrants (Exp 2000) 9/22/1997 $ 0 $ 0 0.00%
Xenometrix Inc/(b)/ 7/28/1992-
12/2/1994 2,099,978 29,363 0.01
- ---------------------------------------------------------------------------------------------------------
$49,323,156 $39,813,753 6.79%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(a) Fair value represents 80% of the security's publicly traded value.
(b) Fair value represents 90% of the security's publicly traded value.
Short Sells
INVESCO Global Health Sciences Fund
Open at October 31, 1998:
Current Unrealized
Market Appreciation
Security Shares Proceeds Value(Depreciation)
- --------------------------------------------------------------------------------
Arterial Vascular Engineering 100,000 $3,506,443 $3,075,000 $ 431,443
Immunex Corp 75,000 4,425,168 5,179,688 (754,520)
Omnicare Inc 200,000 6,172,794 6,912,500 (739,706)
Pediatrix Medical Group 100,000 4,296,987 4,662,500 (365,513)
VISX Inc 75,000 4,892,053 3,759,375 1,132,678
- --------------------------------------------------------------------------------
550,000 $23,293,445 $23,589,063 $ (295,618)
- --------------------------------------------------------------------------------
See Notes to Financial Statements
<PAGE>
Statement of Assets and Liabilities
INVESCO Global Health Sciences Fund
October 31, 1998
Assets
- --------------------------------------------------------------------------------
Investment Securities at Value (Cost $481,401,352)(a) $ 602,646,771
Cash 294,734
Receivables:
Investment Securities Sold 23,614,199
Dividends and Interest 314,217
Prepaid Expenses 41,837
-----------
Total Assets 626,911,758
-------------------------------------------------------------------------------
Liabilities
-------------------------------------------------------------------------------
Payables:
Investment Securities Purchased 16,885,901
Securities Sold Short 23,589,063
Depreciation on Forward Foreign Currency Contracts 130,878
Accrued Expenses 43,082
-----------
Total Liabilities 40,648,924
-------------------------------------------------------------------------------
Net Assets at Value $ 586,262,834
-------------------------------------------------------------------------------
Net Assets
-------------------------------------------------------------------------------
Paid-in Capital(b) $ 393,793,797
Accumulated Undistributed Net Realized Gain on
Investment Securities and Foreign
Currency Transactions 71,517,826
Net Appreciation of Investment Securities and Foreign
Currency Transactions 120,951,211
-----------
Net Assets at Value $ 586,262,834
- --------------------------------------------------------------------------------
Net Asset Value per Share $ 21.08
- --------------------------------------------------------------------------------
(a) Investment securities at cost and value at October 31, 1998 include a
repurchase agreement of $33,704,000.
(b) The Fund has an unlimited number of authorized shares of common stock, par
value of $0.01 per share, of which 27,812,476 were outstanding at October 31,
1998.
See Notes to Financial Statements
<PAGE>
Statement of Operations
INVESCO Global Health Sciences Fund
Year Ended October 31, 1998
Investment Income
-------------------------------------------------------------------------------
Income
Dividends $ 4,365,692
Interest 1,577,774
Foreign Taxes Withheld (75,974)
-----------
Total Income 5,867,492
-------------------------------------------------------------------------------
Expenses
Investment Advisory Fees 5,556,255
Administrative Fees 250,000
Custodian Fees and Expenses 110,696
NYSE Listing Fee 51,782
Professional Fees and Expenses 286,588
Transfer Agent Fees 50,369
Trustees' Fees and Expenses 62,665
Reports to Shareholders 404,089
Other Expenses 49,655
-----------
Total Expenses 6,822,099
Fees and Expenses Paid Indirectly (4,783)
-----------
Net Expenses 6,817,316
- --------------------------------------------------------------------------------
Net Investment Loss (949,824)
- --------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss) on Investment Securities
- --------------------------------------------------------------------------------
Net Realized Gain (Loss) on:
Investment Securities 105,708,608
Foreign Currency Transactions (1,390,490)
Short Sale Transactions 3,986,825
-----------
Total Net Realized Gain 108,304,943
-----------
Change in Net Appreciation of:
Investment Securities 1,425,203
Foreign Currency Transactions 1,418,090
-----------
Total Net Appreciation 2,843,293
-----------
Net Gain On Investment Securities 111,148,236
- --------------------------------------------------------------------------------
Net Increase in Net Assets from Operations $ 110,198,412
- --------------------------------------------------------------------------------
See Notes to Financial Statements
<PAGE>
Statement of Cash Flows
INVESCO Global Health Sciences Fund
For the Year Ended October 31, 1998
Increase (Decrease) In Cash
-------------------------------------------------------------------------------
Cash Flows From Operating Activities:
Dividends and Interest Received, Net of Foreign Withholding Taxes $ 6,021,192
Expenses Paid (6,812,658)
Sales Net of Purchases of Short-Term Portfolio Investments (9,911,095)
Purchases of Long-Term Portfolio Investments (454,296,874)
Sales of Long-Term Portfolio Investments 512,852,257
Proceeds of Securities Sold Short 79,080,619
Purchases of Short Sale Securities (75,093,795)
Realized Loss from Foreign Currency Transactions (145,340)
Other (9,717)
-----------
Net Cash Flows From Operating Activities 51,684,589
-----------
Cash Flows Used for Financing Activities:
Distributions Paid to Common Shareholders (50,150,186)
-----------
Net Increase in Cash 1,534,403
Cash at Beginning of Year (1,239,669)
-----------
Cash at End of Year $ 294,734
- --------------------------------------------------------------------------------
Reconciliation of Net Increase in Net Assets from
Operations to Net Cash Flows from Operating Activities
-------------------------------------------------------------------------------
Net Increase in Net Assets from Operations $110,198,412
-----------
Increase in Investments 29,590,965
Net Realized Gain (108,304,943)
Increase in Appreciation of Investment Securities (1,838,947)
Increase in Receivable for Investment Securities Sold (16,115,615)
Increase in Payable for Investment Securities Purchased 16,280,686
Decrease in Depreciation of Foreign Currency Transactions (1,004,346)
Decrease in Dividends and Interest Receivable 153,690
Increase in Prepaid Expenses and Other Assets (9,717)
Decrease in Accrued Expenses and Other Payables 22,734,404
-----------
Total Adjustments (58,513,823)
-----------
Net Cash Flows From Operating Activities $ 51,684,589
- --------------------------------------------------------------------------------
See Notes to Financial Statements
<PAGE>
Statement of Change in Net Assets
INVESCO Global Health Sciences Fund
Year Ended October 31
1998 1997
- --------------------------------------------------------------------------------
OPERATIONS
- --------------------------------------------------------------------------------
Net Investment Loss $ (949,824) $ (698,116)
Net Realized Gain on Investment Securities,
Foreign Currency Transactions and
Short Sale Transactions 108,304,943 64,895,920
Change in Net Appreciation of Investment
Securities and Foreign Currency
Transactions 2,843,293 35,661,374
------------------------------------
Net Increase in Net Assets from Operations 110,198,412 99,859,178
-------------------------------------------------------------------------------
Distributions To Shareholders
Net Realized Gain on Investment Securities
and Foreign Currency Transactions (100,476,287) (91,697,472)
-------------------------------------
Fund Share Transactions
Reinvestment of Distributions 50,326,101 62,210,610
-------------------------------------
Total Increase in Net Assets 60,048,226 70,372,316
- --------------------------------------------------------------------------------
Beginning of Period 526,214,608 455,842,292
-------------------------------------
End of Period $ 586,262,834 $ 526,214,608
- --------------------------------------------------------------------------------
FUND SHARE TRANSACTIONS
-------------------------------------------------------------------------------
Shares Issued from Reinvestment of
Distributions and Net Increase in Fund
Shares 3,049,909 4,255,367
-------------------------------------------------------------------------------
See Notes to Financial Statements
<PAGE>
Notes to Financial Statements
INVESCO Global Health Sciences Fund
NOTE 1 -- Organization And Significant Accounting Policies. INVESCO Global
Health Sciences Fund (the "Fund") was organized as a Massachusetts Business
Trust on November 18, 1991 and commenced investment operations on January 24,
1992. The investment objective of the Fund is to seek capital appreciation
through investments in the health sciences related business sectors. The Fund is
registered under the Investment Company Act of 1940 (the "Act") as a
diversified, closed-end management investment company.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.
A. Security Valuation -- Equity securities traded on national securities
exchanges or in the over-the-counter market are valued at the last sales price
in the market where such securities are primarily traded. If last sales prices
are not available, securities are valued at the highest closing bid price
obtained from one or more dealers making a market for such securities or by a
pricing service approved by the Fund's board of trustees.
Debt securities are valued at evaluated bid prices as determined by a
pricing service approved by the Fund's board of trustees. If evaluated bid
prices are not available, debt securities are valued by averaging the bid prices
obtained from one or more dealers making a market for such securities.
Foreign securities are valued at the closing price on the principal stock
exchange on which they are traded. In the event that closing prices are not
available for foreign securities, prices will be obtained from the principal
stock exchange at or prior to the close of the New York Stock Exchange. Foreign
currency exchange rates are determined daily prior to the close of the New York
Stock Exchange.
If market quotations or pricing service valuations are not readily
available, securities are valued at a fair value as determined in good faith by
the Fund's board of trustees. Restricted securities are valued in accordance
with procedures established by the Fund's board of trustees.
Short-term securities are stated at amortized cost (which approximates
market value) if maturity is 60 days or less at the time of purchase, or market
value if maturity is greater than 60 days.
Assets and liabilities initially expressed in terms of foreign currencies
are translated into U.S. dollars at the prevailing market rates as quoted by one
or more banks or dealers on the date of valuation.
B. Repurchase Agreements -- Repurchase agreements held by the Fund are
fully collateralized by U.S. Government securities and such collateral is in the
possession of the Fund's custodian. The collateral is evaluated daily to ensure
its market value exceeds the current market value of the repurchase agreements
including accrued interest. In the event of default on the obligation to
repurchase, the Fund has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation. In the event of default or
bankruptcy by the other party to the agreement, realization and/or retention of
the collateral or proceeds may be subject to legal proceedings.
C. Options -- The Fund may hold options for investment purposes with the
intent to hedge the portfolio against ongoing exposure to market value and
interest rate fluctuations.
The use of such instruments may involve certain risks as a result of
unanticipated movements in the market. A lack of correlations between the value
of an instrument underlying an option and the asset being hedged, or expected
adverse price movements could render the Fund's hedging strategy unsuccessful.
In addition, there can be no assurance that a liquid secondary market will exist
for any option purchased or sold. The Fund will realize a gain or loss upon the
<PAGE>
expiration or closing of the option transaction. When an option is exercised,
the proceeds on sales for a written call option, the purchase cost for a written
put option, or the cost of the security for a purchased put or call option is
adjusted by the amount of premium received or paid. Options written are reported
as a liability in the Statement of Assets and Liabilities and are marked to
market on a daily basis. Realized gains or losses on purchased option
transactions are included in Net Realized Gain (Loss) on Investment Securities
in the Statement of Operations.
D. Security Transactions And Related Investment Income -- Security transactions
are accounted for on the trade date and dividend income is recorded on the ex
dividend date. Certain dividends from foreign securities will be recorded as
soon as the Fund is informed of the dividend if such information is obtained
subsequent to the ex dividend date. Interest income, which may be comprised of
stated coupon rate, market discount, original issue discount and amortized
premium, is recorded on the accrual basis. The cost of securities is translated
into U.S. dollars at the rates of exchange prevailing when such securities are
acquired. Discounts and premiums on debt securities purchased are amortized over
the life of the respective security as adjustments to interest income. Cost is
determined on the specific identification basis. Income and expenses are
translated into U.S. dollars at rates of exchange prevailing when accrued.
The Fund may have elements of risk due to concentrated investments in specific
industries or foreign issuers located in a specific country. Such concentrations
may subject the Fund to additional risks resulting from future political or
economic conditions and/or possible impositions of adverse foreign governmental
laws or currency exchange restrictions. Net realized and unrealized gain or loss
from investment securities includes fluctuations from currency exchange rates
and fluctuations in market value.
The Fund's use of short-term forward foreign currency contracts may subject it
to certain risks as a result of unanticipated movements in foreign exchange
rates. The Fund does not hold short-term forward foreign currency contracts for
trading purposes. The Fund may hold foreign currency in anticipation of settling
foreign security transactions and not for investment purposes.
The Fund's use of short sell instruments may involve certain risks as a result
of unanticipated movements in the market. Although the potential for gain is
limited to the difference between the price at which the Fund sold the security
short and the cost of borrowing the security, its potential for loss could be
unlimited because there is no limit to the replacement cost of the borrowed
security.
Restricted securities held by the Fund may not be sold except in exempt
transactions or in a public offering registered under the Securities Act of
1933. The risk of investing in such securities is generally greater than the
risk of investing in the securities of widely held, publicly traded companies.
Lack of a secondary market and resale restrictions may result in the inability
of the Fund to sell a security at a fair price and may substantially delay the
sale of the security which the Fund seeks to sell. In addition, these securities
may exhibit greater price volatility than securities for which secondary markets
exist. The Fund has demand registration rights for certain restricted securities
held at October 31, 1998, which can be exercised upon the registration of a
qualifying public offering by each company in the future. The Fund may incur
registration costs associated with these public offerings. There is no assurance
such offerings will occur.
E. Federal And State Taxes -- The Fund has complied, and continues to comply,
with the provisions of the Internal Revenue Code applicable to regulated
investment companies and, accordingly, has made or intends to make sufficient
distributions of net investment income and net realized capital gains, if any,
to relieve it from all federal and state income taxes and federal excise taxes.
To the extent future capital gains are offset by capital loss carryovers, such
gains will not be distributed to shareholders.
Dividends paid by the Fund from net investment income and distributions of net
realized short-term capital gains are, for federal income tax purposes, taxable
as ordinary income to shareholders. For the fiscal year ended October 31, 1998,
100.00% of the Fund's distributions were from long-term capital gains.
Investment income received from foreign sources may be subject to foreign
withholding taxes. Dividend and interest income is shown gross of foreign
withholding taxes in the accompanying financial statements.
<PAGE>
F. Dividends And Distributions To Shareholders -- Dividends and distributions to
shareholders are recorded by the Fund on the ex dividend/distribution date. The
Fund distributes net realized capital gains, if any, to its shareholders
quarterly at a rate of 2.5% of net asset value, with an additional year-end
distribution depending on the amount of the Fund's yearly net realized capital
gains, if not offset by capital loss carryovers. Income distributions and
capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for market
discounts, amortized premiums, foreign currency transactions, non-taxable
dividends, net operating losses and expired capital loss carryforwards. For the
year ended October 31, 1998, the Fund reclassified $949,824 from accumulated
undistributed net realized gain to accumulated undistributed net investment
income. Net investment income, net realized gains and net assets were not
affected.
G. Short Sales -- Short sales are transactions in which the Fund sells a
security it does not own in anticipation of an expected decline in the price of
that security. The Fund is obligated to replace the borrowed security. A
separate asset account is created for the proceeds retained by the broker, and
an offsetting liability account is established until the short sale is closed.
The liability account is marked-to-market to reflect the current value of the
security sold short and is presented in the Statement of Assets and Liabilities.
At October 31, 1998, the Fund had outstanding short sells. Short sells are
fully collateralized by other securities which are notated in the Statement of
Investment Securities and such collateral is in the possession of the Fund's
Custodian. The collateral is evaluated daily to ensure its market value exceeds
the current value of the short sell.
H. Forward Foreign Currency Contracts -- The Fund enters into short-term forward
foreign currency contracts in connection with planned purchases or sales of
securities as a hedge against fluctuations in foreign exchange rates pending the
settlement of transactions in foreign securities. A forward foreign currency
contract is an agreement between contracting parties to exchange an amount of
currency at some future time at an agreed upon rate. These contracts are
marked-to-market daily and the related appreciation or depreciation of the
contracts is presented in the Statement of Assets and Liabilities.
I. Cash Flows -- The cash amount shown in the Statement of Cash Flows is the
amount reported as cash in the Statement of Assets and Liabilities and
represents cash on hand in its custodian bank and does not include any
short-term investments at October 31, 1998.
J. Expenses -- Under an agreement between the Fund and the Fund's custodian,
agreed upon Custodian Fees and Expenses are reduced by credits granted by the
custodian from any temporarily uninvested cash. Such credits are included in
Fees and Expenses Paid Indirectly in the Statement of Operations.
NOTE 2 -- Investment Advisory And Other Agreements. INVESCO Trust Company
("ITC") served as the Fund's investment adviser. As compensation for its
services to the Fund, ITC received an investment advisory fee which is accrued
daily at the applicable rate and paid monthly. The fee was based on the annual
rate of 1.00% on the first $500 million of ending weekly net assets and 0.90% on
ending weekly net assets in excess of $500 million. Effective November 2, 1998,
the fee is based on the annual rate 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.
Effective February 4, 1998, such responsibilities were transferred to INVESCO
Funds Group, Inc. ("IFG").
<PAGE>
In accordance with an Administrative Agreement, the Fund paid IFG an annual
fee of $250,000 to provide administrative, accounting and clerical services. The
fee is accrued daily and paid monthly. Effective November 2, 1998, the Fund pays
IFG a fee based on the annual rate of 0.10% on ending daily net assets.
NOTE 3 -- Purchases And Sales Of Investment Securities. For the year ended
October 31, 1998, the aggregate cost of purchases and proceeds from sales of
investment securities (excluding all U.S. Government securities and short-term
securities) were $470,577,561 and $506,032,385, respectively.
There were no purchases or sales of U.S. Government securities.
NOTE 4 -- Appreciation And Depreciation. At October 31, 1998, the gross
appreciation of securities in which there was an excess of value over tax cost
amounted to $133,981,467 and the gross depreciation of securities in which there
was an excess of tax cost over value amounted to $14,709,173, resulting in net
appreciation of $119,272,294.
NOTE 5 -- Transactions With Affiliates And Affiliated Companies. Certain of the
Fund's officers and trustees are also officers and directors of IFG.
An affiliated company represents ownership by the Fund of at least 5% of the
voting securities of the issuer during the period, as defined in the Act. A
summary of the transactions during the year ended October 31, 1998, in which the
issuer was an affiliate of the Fund, is as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Realized
Gain (Loss)
Purchases Sales on Investment Value
--------------------- --------------------
Affiliate Shares Cost Shares Cost Securities at 10/31/98
-------------------------------------------------------------------------------------------------------
Cadus Pharmaceutical -- -- 375,395 $514,666 $1,619,165 $ 929,250
Caresoft Inc, Series A, Pfd -- -- -- -- -- 1,000,001
Clarus Medical Systems
Series I, Pfd -- -- -- -- -- 533,320
Series II, Pfd -- -- -- -- -- 386,196
Warrants (Exp 2000) -- -- -- -- -- 0
Ecogen Technologies I -- -- -- -- -- 1
Realized
Gain (Loss)
Purchases Sales on Investment Value
--------------------- --------------------
Affiliate Shares Cost Shares Cost Securities at 10/31/98
------------------------------------------------------------------------------------------------------
Electroscope Inc -- -- 380,000 $990,000 $ (610,000) $ 0
Fidus Medical Technology
Series F, Pfd 1,500,000 $3,000,000 -- -- -- 3,000,000
Warrants (Exp 2001) 1,000,000 1,000 -- -- -- 1,000
Genomica Corp
Bridge Notes 8.000%,
10/9/2000 362,500 362,500 -- -- -- 362,500
Series A, Pfd -- -- -- -- -- 1,500,000
Warrants (Exp 2003) 1 0 -- -- -- 0
GenoPlex Inc
Notes, 8.000%
1/31/1999 400,000 400,000 -- -- -- 400,000
Series A, Pfd -- -- -- -- -- 200,000
Warrants (Exp 2003) 1 0 -- -- -- 0
Instrumentation Metrics
Series C, Conv Pfd 500,000 5,057,500 -- -- -- 5,057,500
Janus Biomedical Series
A, Conv Pfd -- -- -- -- -- 1,000,000
Lynx Therapeutics -- -- 4,300 43,000 6,448 3,370,575
Multum Information Services
<PAGE>
Series B, Pfd -- -- 1,000,000 1,000,000 (1,000,000) 0
Series E, Pfd -- -- 250,294 851,000 (715,592) 0
OrbTek Inc 101,645 0 190,030 216,849 (189,312) 0
OrbTek Inc Conv Promissory Notes 10.000%
6/30/2000 -- -- 500,000 500,000 (447,460) 0
11/22/2000 -- -- 1,000,000 1,000,000 (894,920) 0
11/24/2000 -- -- 1,000,000 1,000,000 (894,920) 0
Zero Coupon,
11/24/2000 -- -- 250,000 250,000 (223,730) 0
Secured Conv Promissory
Notes, Zero Coupon
12/31/1998 -- -- 1,000,000 1,000,000 (894,920) 0
Series A, Conv Pfd -- -- 714,286 1,500,001 (1,312,358) 0
Warrants (Exp 2001) -- -- 50,000 0 13,135 0
Warrants (Exp 2002) -- -- 200,000 0 52,540 0
Orchid Biocomputer Series
C, Conv Pfd 450,450 5,000,000 -- -- -- 5,000,000
Physicians Online
Bridge Notes, 11.000%
10/31/2000 337,390 337,390 -- -- -- 337,390
Series A, Pfd -- -- -- -- -- 1,955,715
Series C, Pfd -- -- -- -- -- 500,022
Physiome Sciences Series
B, Pfd 909,090 1,499,999 -- -- -- 1,499,999
SOMNUS Medical Technologies -- -- -- -- -- 3,125,000
Unisyn Technologies -- -- -- -- -- 1
Unisyn Technologies
Series A, Conv Pfd -- -- -- -- -- $ 1
Series B, Pfd -- -- -- -- -- 1
Series C, Pfd -- -- -- -- -- 1
Warrants (Exp 2001) -- -- -- -- -- 0
Vidamed Inc -- -- 1,052,632 $5,000,002$ (4,049,268) 0
Vidamed Inc Warrants
(Exp 2000) -- -- -- -- -- 0
Xenometrix Inc -- -- -- -- -- 29,363
------------------------------------------------------------------------------------------------------
$30,187,836
------------------------------------------------------------------------------------------------------
</TABLE>
Options associated with securities may be included in sales figures.
No dividend income was received from any affiliated companies.
<PAGE>
Report of Independent Accountants
To the Board of Trustees and Shareholders of
INVESCO Global Health Sciences Fund
In our opinion, the accompanying statement of assets and liabilities, including
the statement of investment securities, and the related statements of
operations, of cash flows and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
INVESCO Global Health Sciences Fund at October 31, 1998, the results of its
operations and cash flows for the year then ended, the changes in its net assets
for each of the two years in the period then ended and the financial highlights
for each of the five years in the period then ended, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits of these financial statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at October 31, 1998 by correspondence with the custodian and
brokers, provide a reasonable basis for the opinion expressed above.
As disclosed in the Statement of Investment Securities and the accompanying
Schedule of Restricted or Illiquid Securities, securities valued at $39,813,753
(6.79 percent of net assets), have been estimated by the Board of Trustees in
the absence of readily ascertainable market values. Those estimated values may
differ significantly from the values that would have been used had a ready
market for the securities existed, and the differences could be material.
PricewaterhouseCoopers LLP
Denver, Colorado
December 8, 1998
<PAGE>
Other Information
INVESCO Global Health Sciences Fund
Unaudited
Dividends and Capital Gains Distribution History
Net Investment Long-Term Short-Term
Income Capital Gains Capital Gains
Ex Date Payable Date (per share) (per share) (per share)
- --------------------------------------------------------------------------------
December 24, 1992 January 15, 1993 $0.075 -- --
December 23, 1993 January 14, 1994 $0.200 -- --
November 29, 1996 December 23, 1996 -- $3.8925 $0.5802
November 14, 1997 December 19, 1997 -- $2.8470 --
May 15, 1998 June 3, 1998 -- $0.5389 --
August 7, 1998 August 25, 1998 -- $0.5389 --
November 13, 1998 December 18, 1998 -- $2.2689 $0.3615
- --------------------------------------------------------------------------------
Financial Highlights
INVESCO Global Health Sciences Fund
(For a Fund Share Outstanding Throughout Each Period)
Year Ended October 31
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------
Per Share Data
Net Asset Value -- Beginning of Period $21.250 $22.230 $18.506 $12.378 $12.121
-----------------------------------------
Income from Investment Operations
Net Investment Loss 0.000 (0.071) (0.097) (0.107) (0.085)
Net Gains on Securities
(Both Realized and Unrealized) 3.755 3.564 3.821 6.235 0.542
-----------------------------------------
Total from Investment Operations 3.755 3.493 3.724 6.128 0.457
- --------------------------------------------------------------------------------
Less Distributions
Dividends from Net Investment Income 0.000 0.000 0.000 0.000 0.200
Distributions from Capital Gains 3.925 4.473 0.000 0.000 0.000
-----------------------------------------
Total Distributions 3.925 4.473 0.000 0.000 0.200
- --------------------------------------------------------------------------------
Net Asset Value, End of Period 21.080 $21.250 $ 22.230 $18.506 $ 12.378
- --------------------------------------------------------------------------------
Share Price, End of Period $19.500 $17.313 $ 17.000 $14.750 $ 10.000
- --------------------------------------------------------------------------------
Total Return(a) 40.29% 32.98% 15.25% 47.50% (11.49%)
-------------------------------------------------------------------------------
Ratios
Net Assets -- End of Period
($000 Omitted) $ 586,263 $ 526,215 $ 455,842 $ 379,503 $ 253,834
Ratio of Expenses to
Average Net Assets 1.21%(b) 1.22%(b) 1.21% 1.33% 1.41%
Ratio of Net Investment
Loss to Average Net Assets (0.17%) (0.15%) (0.44%) (0.72%) (0.70%)
Portfolio Turnover Rate 87% 145% 91% 105% 121%
- --------------------------------------------------------------------------------
(a) Total investment return is calculated assuming a purchase of common stock
at the current market price on the first day and a sale at the current
market price on the last day of each period reported. Dividends and
distributions, if any, are assumed, for purposes of this calculation, to be
reinvested at prices obtained under the Fund's dividend reinvestment plan.
Total investment return does not reflect sales charges or brokerage
commissions.
(b) Ratio is based on Total Expenses of the Fund, which is before any expense
offset arrangements.
<PAGE>
DIVIDEND REINVESTMENT PLAN
Shareholders of the Fund who have Shares registered directly in their own names
automatically participate in the Fund's Dividend Reinvestment Plan (the "Plan"),
unless and until an election is made to withdraw from the Plan as herein
provided. State Street Bank and Trust Company (the "Agent"), acts as agent under
the Plan on behalf of participating shareholders. Shareholders who do not wish
to have distributions automatically reinvested should so notify the fund c/o
State Street Bank and Trust Company, P.O. Box 366, Boston, Massachusetts 02101.
Under the Plan, all of the Fund's dividends and capital gains and other
distributions to shareholders will be reinvested in full and fractional Shares
as described below. A shareholder who owns Shares registered in his/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 Plan. Shareholders wishing to
participate in the Plan whose Shares are held in the name of a broker or nominee
should consult their brokers as to how to accomplish dividend reinvestment.
Whenever the Fund declares an income dividend or a capital gain or other
distribution (collectively, "Dividends") in cash, non-participants in the Plan
will receive cash and participants in the Plan will receive the equivalent in
Shares. Whenever the Fund declares Dividends in additional unissued but
authorized shares ("Newly Issued Shares") non-participants in the Plan will
receive Newly Issued Shares and participants in the Plan will receive shares. In
either instance, the Shares received by Plan participants will be acquired by
the Agent for the participant's account, depending upon the circumstances
described below, either (i) through receipt of Newly Issued Shares or (ii) by
the purchase of outstanding Shares on the open market ("Open-Market Purchases")
on the New York Stock Exchange or elsewhere. Open-Market Purchases will be made
only in the event that the Fund declares an income dividend or a capital gain or
other distribution payable only in cash.
If on the payment date for a Dividend the net asset value per share is equal
to or less than the market price per Share plus estimated brokerage commissions
(such condition being referred to herein as "Market Premium"), the Agent will
purchase from the Fund Newly Issued Shares on behalf of the participant at a
price per Share equal to the greater of the net asset value per Share or 95% of
the then current market price per Share. This discount from the current market
price reflects savings in underwriting and other costs which the Fund would
otherwise incur to raise additional capital.
If on the payment date for a Dividend the net asset value per Share is greater
than the market price per Share (such condition being referred to herein as
"Market Discount"), the Agent will endeavor to invest the Dividend amount in
Shares acquired on behalf of the participant in Open-Market Purchases. In the
event of a Market Discount on the payment date, the Agent will have up to 30
days after the payment date to invest the Dividend amount in Shares acquired in
Open-Market Purchases.
Registered shareholders who acquire their Shares in open-market transactions
and who do not wish to have their Dividends automatically reinvested should so
notify the Fund in writing. If a shareholder has not previously elected to
receive cash Dividends and the Agent does not receive notice of an election to
receive cash Dividend prior to the record date of any Dividends, the Shareholder
will automatically receive such Dividends in additional Shares.
Participants in the Plan may withdraw from the Plan by providing written
notice to the Agent at least 30 days prior to the applicable Dividend payment
date. When a participant withdraws from the Plan, or upon termination of the
Plan as provided below, certificates for whole Shares credited to his/her
account under the Plan will, upon request, be issued. Whether or not a
participant requests that certificates for whole Shares be issued, a cash
payment will be made for any fraction of a Share credited to such account.
The Agent will maintain all shareholder accounts in the Plan and furnish
written confirmations of all transactions in the accounts, including information
needed by shareholders for personal and tax records. Shares in the account of
each Plan participant will be held by the Agent in non-certificated form in the
name of the participant, and each shareholder's proxy will include those shares
purchased pursuant to the Plan. Each participant, nevertheless, has the right to
receive certificates for whole Shares owned. The Agent will distribute all proxy
solicitation materials to participating shareholders.
<PAGE>
In the case of shareholders, such as banks, brokers or nominees, which hold
Shares for others who are the beneficial owners participating in the Plan, the
Agent will administer the Plan on the basis of the number of Shares certified
from time to time by the shareholder as representing the total amount of Shares
registered in the shareholders name and held for the account of beneficial
owners participating in the Plan.
There will be no charge to participants for reinvesting Dividends other than
their share of brokerage commissions as discussed below. The Agent's fees for
administering the Plan and handling the reinvestment of Dividends will be paid
by the Fund. Each participant's account will be charged a pro-rata share of
brokerage commissions incurred with respect to the Agent's Open-Market Purchases
in connection with the reinvestment of Dividends. Brokerage charges for
purchasing small amounts of Shares for individual accounts through the Plan are
expected to be less than the usual brokerage charges for such transactions
because the Agent will be purchasing Shares for all the participants in blocks
and prorating the lower commission that may be attainable.
The automatic reinvestment of Dividends will not relieve participants of any
income tax which may be payable on such Dividends. In the case of non-U.S.
participants whose Dividends are subject to United States income tax withholding
and in the case of any participants subject to 30% federal backup withholding,
the Agent will reinvest Dividends after deduction of the amount required to be
withheld.
The Fund reserves the right to amend or terminate the Plan by written notice
to participants. All correspondence concerning the Plan should be directed to
the Agent at the address referred to in the first paragraph of this section.
ANNUAL SHAREHOLDERS MEETING
The Fund's annual meeting of shareholders was held on August 27, 1998.
Shareholders voted to re-elect Larry Soll, Ph.D. as Trustee, ratify the
appointment of PricewaterhouseCoopers LLP as the Fund's independent accountants
and rejected two shareholder proposals. The resulting vote count for each
proposal is listed in the next column:
1. Election of one Trustee:
Larry Soll, Ph.D. For: 22,514,479
Withheld Authority: 984,025
2. Ratification of Appointment of PricewaterhouseCoopers LLP as the Fund's
Independent Accountants: For: 22,810,965
Against: 213,069
Abstain: 474,470
3A.Shareholder proposal to terminate investment advisory contract with INVESCO
Funds Group, Inc.: For: 2,424,934
Against: 11,793,933
Abstain: 1,260,140
Broker Non-Votes: 8,029,497
3B.Shareholder proposal to convert to open-end fund or merge with open-end fund:
For: 3,522,250
Against: 10,789,651
Abstain: 1,157,102
Broker Non-Votes: 6,029,600
In addition to Mr. Soll, the following persons serve as Trustees of the Fund:
Messrs. Fred A. Deering, Charles W. Brady and John McIntyre.
Miscellaneous
For the year ended October 31, 1998, there were no changes to the Fund's charter
or by-laws and no material changes in the principal risk factors associated with
investment in the Fund. There were no material changes in the Fund's investment
objectives or policies other than adoption of the fixed distribution policy. The
policy requires the Fund to make quarterly distributions at a rate of 2.5% of
NAV -- 10% annually -- to Fund shareholders. Mr. Charles W. Brady was selected
to serve as Chairman of the Board of Trustees and Mr. Mark Williamson was
selected to serve as President and Chief Operating Officer of the Fund. Mr.
Hubert L. Harris, Jr. resigned as a Fund Trustee, and Mr. Dan J. Hesser resigned
as President.
Mr. Schroer joined INVESCO Funds Group, Inc. ("IFG") in 1992 and became a
Senior Vice President of IFG in 1996. In addition to Mr. Schroer's
responsibilities as portfolio manager of the Fund, he also manages the INVESCO
Strategic Health Sciences Fund. Mr. Schroer has been an officer of The Global
Health Sciences Fund since January 1996.
Mr. Schroer received his B.S. and M.B.A. degrees from the University of
Wisconsin-Madison. He began his investment management career in 1990 with the
Trust Company of the West as an investment analyst. He was eventually given
additional responsibilities by the Trust Company of the West in Los Angeles as
Assistant Vice President with analytical responsibilities in the health care
industry.
<PAGE>
Trustees and Officers
Trustees Officers
Charles W. Brady Mark H. Williamson
Chairman of the Board President and
Chief Operating Officer
Fred A. Deering John R. Schroer
Trustee Vice President
John W. McIntyre Glen A. Payne
Trustee Secretary
Larry Soll, Ph.D. Ronald L. Grooms
Trustee Treasurer, Principal Financial
and Accounting Officer
Shareholder Information
<TABLE>
<CAPTION>
<S> <C> <C>
Investment Adviser Shareholder Servicing Agent For information about
INVESCO Funds Group, Inc. Boston Equiserve, Inc. The Global Health Sciences Fund or
7800 East Union Avenue 150 Royall Street current net asset values, please call toll-
Denver, Colorado 80237 Mail Stop 45-02-62 free 1-800-528-8765 or visit our website
Canton, Massachusetts 02021 at ghs.invesco.com
Administrator Independent Accountants For questions on dividend
INVESCO Funds Group, Inc. PricewaterhouseCoopers LLP reinvestment, please call toll-free
7800 East Union Avenue 950 Seventeenth Street 1-800-426-5523
Denver, Colorado 80237 Denver, Colorado 80202
Custodian Counsel
State Street Bank and Trust Kirkpatrick & Lockhart
Company 1800 M Street, N.W.
225 Franklin Street South Lobby, 9th Floor
Boston, Massachusetts 02110 Washington, D.C. 20036
</TABLE>
<PAGE>
INVESCO Global Health Sciences Fund
INVESCO Funds Group, Inc.
7800 East Union Avenue
Denver, Colorado 80237
