As filed with the Securities and Exchange Commission on July 1, 1997
1933 Act Registration No. ________
1940 Act Registration No. 811-7787
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. [ ]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No.
GT GLOBAL ASSET ALLOCATION TRUST
(Exact name of registrant as specified in charter)
50 California Street, 27th Floor
San Francisco, California 94111
(Address of principal executive offices)
Registrant's telephone number, including area code: (415) 392-6181
Phillip S. Gillespie, Esq.
Chancellor LGT Asset Management, Inc.
50 California Street, 27th Floor
San Francisco, California 94111
(Name and address of agent for service)
Copies to:
ARTHUR J. BROWN, Esq.
R. DARRELL MOUNTS, Esq.
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W., Second Floor
Washington, D.C. 20036-1800
Telephone: (202) 778-9000
Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of this Registration Statement.
Pursuant to the provisions of Rule 24f-2 under the Investment Company Act of
1940, an indefinite number of shares of beneficial interest is being registered
by this Registration Statement.
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until the 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 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
GT GLOBAL ASSET ALLOCATION TRUST
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement consists of the following papers and documents:
Cover Sheet
Contents of Registration Statement
Cross Reference Sheet
Part A - Prospectuses
Part B - Statements of Additional Information
Part C - Other Information
Signature Pages
Exhibits
<PAGE>
GT GLOBAL ASSET ALLOCATION TRUST
FORM N-1A CROSS REFERENCE SHEET
PROSPECTUS---CLASS A AND CLASS B
Item No. of
Part A Of Form N-1A Prospectus Caption
------------------- ------------------
1. Cover Page Cover Page
2. Synopsis Prospectus Summary
3. Condensed Financial Performance
Information
4. General Description of Investment Objective and Policies;
Registrant Description of the Underlying Theme
Funds; Risk Factors and Special
Considerations; Management; Other
Information
5. Management of the Fund Management
5A. Management's Discussion of Not Applicable
Fund Performance
6. Capital Stock and Other Dividends, Other Distributions and
Securities Federal Income Taxation; Other
Information
7. Purchase of Securities Being Alternative Purchase Plan; How to
Offered Invest; How to Make Exchanges;
Calculation of Net Asset Value;
Management
8. Redemption or Repurchase Alternative Purchase Plan; How to Redeem
Shares; Calculation of Net Asset Value
9. Pending Legal Proceedings Not Applicable
PROSPECTUS---ADVISOR CLASS
Item No. of
Part A Of Form N-1A Prospectus Caption
------------------- ------------------
1. Cover Page Cover Page
2. Synopsis Prospectus Summary
3. Condensed Financial Performance
Information
4. General Description of Investment Objectives and Policies;
Registrant Description of the Underlying Theme
Funds; Risk Factors and Special
Considerations; Management; Other
Information
<PAGE>
5. Management of the Fund Management
5A. Management's Discussion of Not Applicable
Fund Performance
6. Capital Stock and Other Dividends, Other Distributions and
Securities Federal Income Taxation; Other
Information
7. Purchase of Securities Being How to Invest; How to Make Exchanges;
Offered Calculation of Net Asset Value;
Management
8. Redemption or Repurchase How to Redeem Shares; Calculation of Net
Asset Value
9. Pending Legal Proceedings Not Applicable
STATEMENT OF ADDITIONAL INFORMATION---CLASS A AND CLASS B
Item No. Of Statement of Additional
Part B Of Form N-1A Information Caption
------------------- -----------------------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and Cover Page; Additional Information
History
13. Investment Objectives and Investment Objectives and Policies;
Policies Investment Limitations; Options, Futures
and Currency Strategies; Risk Factors of
the Underlying Theme Funds; Execution of
Portfolio Transactions
14. Management of the Registrant Trustees and Executive Officers;
Management
15. Control Persons and Principal Trustees and Executive Officers;
Holders of Securities Management
16. Investment Advisory and Management; Additional Information
Other Services
17. Brokerage Allocation and Execution of Portfolio Transactions
Other Practices
18. Capital Stock and Other Not Applicable
Securities
19. Purchase, Redemption and Valuation of Fund Shares; Information
Pricing of Securities Being Relating to Sales and Redemptions
Offered
<PAGE>
Item No. Of Statement of Additional
Part B Of Form N-1A Information Caption
------------------- -----------------------
20. Tax Status Taxes
21. Underwriters Management
22. Calculation of Performance Investment Results
Data
23. Financial Statements To Be Supplied
STATEMENT OF ADDITIONAL INFORMATION---ADVISOR CLASS
Item No. Of Statement of Additional Information
Part B Of Form N-1A Caption
-------------------- -------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and Cover Page; Additional Information
History
13. Investment Objectives and Investment Objectives and Policies;
Policies Investment Limitations; Options, Futures
and Currency Strategies; Risk Factors of
the Underlying Theme Funds; Execution of
Portfolio Transactions
14. Management of the Registrant Trustees and Executive Officers;
Management
15. Control Persons and Principal Trustees and Executive Officers;
Holders of Securities Management
16. Investment Advisory and Management; Additional Information
Other Services
17. Brokerage Allocation and Execution of Portfolio Transactions
Other Practices
18. Capital Stock and Other Not Applicable
Securities
19. Purchase, Redemption, and Valuation of Fund Shares; Information
Pricing of Securities Being Relation to Sales and Redemptions
Offered
20. Tax Status Taxes
21. Underwriters Management
22. Calculation of Performance Investment Results
Data
<PAGE>
23. Financial Statements To Be Supplied
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.
GT GLOBAL NEW DIMENSION FUND
Prospectus -- ________ __, 1997
- --------------------------------------------------------------------------------
GT Global New Dimension Fund (the "Fund") is a diversified series of GT Global
Asset Allocation Trust (the "Trust"), an open-end management investment company.
The Fund seeks long-term growth of capital. Unlike a typical mutual fund, which
invests directly in portfolio securities, the Fund will invest primarily in
shares of other GT Global mutual funds. The Fund seeks its objective by
investing in the following global theme mutual funds: GT Global Consumer
Products and Services Fund; GT Global Financial Services Fund; GT Global Health
Care Fund; GT Global Infrastructure Fund; GT Global Natural Resources Fund; and
GT Global Telecommunications Fund (collectively, the "Underlying Theme Funds").
There is no assurance that the Fund will achieve its investment objective.
FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR GUARANTEED BY,
ANY BANK, NOR ARE THEY FEDERALLY INSURED OR OTHERWISE PROTECTED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
The Fund is managed by Chancellor LGT Asset Management, Inc. (the "Manager").
The Manager and its worldwide affiliates are part of Liechtenstein Global Trust,
a provider of global asset management and private banking products and services
to individual and institutional investors.
This Prospectus sets forth concisely the information an investor should know
before investing and should be read carefully and retained for future reference.
A Statement of Additional Information, dated ________ __, 1997, has been filed
with the Securities and Exchange Commission ("SEC") and, as supplemented or
amended from time to time, is incorporated by reference. The Statement of
Additional Information is available without charge by writing to the Fund at 50
California Street, 27th Floor, San Francisco, California 94111, or by calling
(800) 824-1580.
FOR FURTHER INFORMATION, CALL (800) 824-1580 OR CONTACT YOUR FINANCIAL ADVISOR.
GT GLOBAL
A Member of Liechtenstein Global Trust
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED ON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
T A B L E O F C O N T E N T S
PAGE
Prospectus Summary................................................
Alternative Purchase Plan ........................................
Investment Objective and Policies.................................
Description of the Underlying Theme Funds.........................
Risk Factors and Special Considerations...........................
How to Invest.....................................................
How to Make Exchanges.............................................
How to Redeem Shares .............................................
Shareholder Account Manual........................................
Calculation of Net Asset Value....................................
Dividends, Other Distributions and Federal Income Taxation .......
Management........................................................
Performance.......................................................
Other Information.................................................
Prospectus Page 2
<PAGE>
GT GLOBAL NEW DIMENSION FUND
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------
The following summary is qualified in its entirety by the more detailed
information appearing in the body of this Prospectus. Cross-references in the
summary are to headings in the body of the Prospectus.
Investment Objective: The Fund seeks long-term growth of capital.
Principal Investments: The Fund seeks its investment objective by
investing its assets in the following global
theme mutual funds: GT Global Consumer
Products and Services Fund ("Consumer
Products and Services Fund"); GT Global
Financial Services Fund ("Financial Services
Fund"); GT Global Health Care Fund ("Health
Care Fund"); GT Global Infrastructure Fund
("Infrastructure Fund"); GT Global Natural
Resources Fund ("Natural Resources Fund");
and GT Global Telecommunications Fund
("Telecommunications Fund"). The allocation
of the Fund's assets among the six Underlying
Theme Funds is governed strictly by a formula
described herein. See "Investment Objective
and Policies."
There is no assurance that the Fund will
achieve its investment objective. The Fund's
net asset value will fluctuate, reflecting
fluctuations in the net asset value of the
shares of the Underlying Theme Funds.
Investors should review the investment
objectives and policies of the Fund and the
Underlying Theme Funds carefully and consider
their ability to assume these and other risks
involved in purchasing shares of the Fund.
See "Investment Objective and Policies" and
"Description of the Underlying Theme Funds."
As a newly organized entity, the Fund has no
operating history.
Investment Manager: The Manager is part of Liechtenstein Global
Trust, a provider of global asset management
and private banking products and services to
individual and institutional investors,
entrusted with approximately $___ billion in
total assets as of June 30, 1997. The Manager
and its worldwide asset management affiliates
maintain fully staffed investment offices in
Frankfurt, Hong Kong, London, New York, San
Francisco, Singapore, Sydney, Tokyo and
Toronto. See "Management."
Alternative Purchase Plan: Investors may select Class A or Class B
shares, each subject to different expenses
and a different sales charge structure.
Class A Shares: Offered at net asset value plus any
applicable sales charge (maximum is 4.75% of
public offering price) and subject to service
and distribution fees at the annualized rate
of up to 0.50% of the average daily net
assets of the Fund's Class A shares.
Prospectus Page 3
<PAGE>
GT GLOBAL NEW DIMENSION FUND
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------
Class B Shares: Offered at net asset value (a maximum
contingent deferred sales charge of 5% of the
lesser of the shares' net asset value or the
original purchase price is imposed on certain
redemptions made within six years of date of
purchase) and subject to service and
distribution fees at the annualized rate of
up to 1.00% of the average daily net assets
of the Fund's Class B shares.
Shares Available Through: Class A and Class B shares of the Fund are
available through broker/dealers who have
entered into agreements to sell shares with
the Fund's distributor, GT Global, Inc. ("GT
Global"). Shares also may be acquired
directly through GT Global or through
exchanges of shares of the other GT Global
Mutual Funds, which are open-end management
investment companies advised and/or
administered by the Manager. See "How to
Invest" and "Shareholder Account Manual."
Exchange Privileges: Shares of a class of the Fund may be
exchanged without a sales charge for shares
of the corresponding class of other GT Global
Mutual Funds. See "How to Make Exchanges" and
"Shareholder Account Manual."
Redemptions: Shares may be redeemed either through
broker/dealers or the Fund's transfer agent,
GT Global Investor Services, Inc. ("Transfer
Agent"). See "How to Redeem Shares" and
"Shareholder Account Manual."
Dividends and Other
Distributions: Dividends and capital gain distributions, if
any, are paid annually.
Reinvestment: Dividends and other distributions may be
reinvested automatically in Fund shares of
the distributing class or in shares of the
corresponding class of other GT Global Mutual
Funds without a sales charge.
First Purchase: $500 minimum ($100 for individual retirement
accounts ("IRAs") and reduced amounts for
certain other retirement plans).
Subsequent Purchases: $100 minimum (reduced amounts for IRAs and
certain other retirement plans).
Net Asset Values: Class A and Class B shares of the Fund are
expected to be quoted daily in the financial
section of most newspapers.
Prospectus Page 4
<PAGE>
GT GLOBAL NEW DIMENSION FUND
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------
Other Features:
Class A Shares Letter of Intent, Dollar Cost Averaging
Program, Quantity Discounts, Automatic
Investment Plan, Right of Accumulation,
Systematic Withdrawal Plan, Reinstatement
Privilege, Portfolio Rebalancing Program
Class B Shares Reinstatement Privilege, Automatic Investment
Plan, Systematic Withdrawal Plan, Dollar Cost
Averaging Program, Portfolio Rebalancing
Program
Prospectus Page 5
<PAGE>
GT GLOBAL NEW DIMENSION FUND
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------
SUMMARY OF INVESTOR COSTS. The expenses and maximum transaction costs associated
with investing in the Class A and Class B shares of the Fund are reflected in
the following tables. Expenses shown below are estimated.
<TABLE>
<CAPTION>
Class A Class B
------- -------
<S> <C> <C>
SHAREHOLDER TRANSACTIONS COSTS*:
Maximum sales charge on purchase of shares............... 4.75% None
Sales charges on reinvested distributions to
shareholders............................................. None None
Deferred sales charges................................... None 5.00%
Redemption charges....................................... None None
Exchange fees
-- On first four exchanges each year........... None None
-- On each additional exchange................. $7.50 $7.50
ANNUAL FUND OPERATING EXPENSES+:
(AS A % OF AVERAGE NET ASSETS)
Investment management fees............................... None None
12b-1 distribution and service fees...................... 0.50% 1.00%
Other expenses (after reimbursements).................... 0.00% 0.00%
----- -----
Total Fund Operating Expenses............................ 0.50% 1.00%
===== =====
</TABLE>
- ---------------------
* Sales charge waivers are available for Class A and Class B shares, and
reduced sales charge purchase plans are available for Class A shares. The
maximum 5% contingent deferred sales charge on Class B shares applies to
redemptions during the first year after purchase. The charge declines
thereafter, reaching zero after six years. See "How to Invest."
+ The Annual Fund Operating Expenses are estimated for the Fund's initial
fiscal period. "Other expenses" include transfer agency, legal, audit and
other operating expenses. Without reimbursements, "Other expenses" and
"Total Fund Operating Expenses" are estimated to be ____% and ____%,
respectively, for Class A shares and ____% and ____%, respectively, for
Class B shares. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales charge permitted by the National
Association of Securities Dealers, Inc. ("NASD") rules regarding investment
companies. See "Management" and the Statement of Additional Information for
more information. The Fund also offers Advisor Class shares to certain
categories of investors. See "Alternative Purchase Plan." Advisor Class
shares are not subject to a distribution or service fee.
In addition to the Annual Fund Operating Expenses shown above, the Fund, as a
shareholder in the Underlying Theme Funds, will indirectly bear its pro rata
share of the fees and expenses incurred by the Underlying Theme Funds. As a
result, the investment returns of the Fund will reflect the expenses of the
Underlying Theme Funds that it holds. The following table shows the expense
ratio applicable to Advisor Class shares of the Underlying Theme Funds, for the
fiscal year ended October 31, 1996. The Fund invests only in Advisor Class
shares of the Underlying Theme Funds and, accordingly, pays no sales charge or
Rule 12b-1 service or distribution fees in connection with these investments.
Prospectus Page 6
<PAGE>
GT GLOBAL NEW DIMENSION FUND
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------
The Fund, however, indirectly bears its pro rata share of the fees and expenses
applicable to Advisor Class shares of the Underlying Theme Funds.
- ----------------------------------------------------------------------------
EXPENSE RATIO OF
ADVISOR CLASS
UNDERLYING THEME FUND SHARES
- ----------------------------------------------------------------------------
GT Global Consumer Products and Services Fund 1.84%
GT Global Financial Services Fund 1.90%
GT Global Health Care Fund 1.34%
GT Global Infrastructure Fund 1.75%
GT Global Natural Resources Fund 1.80%
GT Global Telecommunications Fund 1.29%
- ---------------------------------------------------------------------------
The following table shows the estimated aggregate expense ratio of the Fund
based on a weighted average of the expense ratios of the Underlying Theme Funds
in which the Fund would have invested on , 1997, plus the expense ratio of the
Fund.
- ------------------------------------ -------------------------------------------
ESTIMATED AGGREGATE EXPENSE
GT GLOBAL NEW DIMENSION FUND RATIO
- ------------------------------------ -------------------------------------------
Class A %
Class B %
- ------------------------------------ -------------------------------------------
HYPOTHETICAL EXAMPLE OF EFFECT OF EXPENSES:
An investor would have directly or indirectly paid the following expenses of the
Fund and of the Underlying Theme Funds at the end of the periods shown on a
$1,000 investment in the Fund, assuming a 5.0% annual return:
ONE THREE
YEAR YEARS
---- -----
Class A Shares(1).........................................
Class B Shares
Assuming a complete redemption at end of period(2)........
Assuming no redemption................................
- -------------------------
(1) Assumes payment of maximum sales charge by the investor.
(2) Assumes deduction of the applicable contingent deferred sales charge.
THESE TABLES ARE INTENDED TO ASSIST INVESTORS IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES ASSOCIATED WITH INVESTING IN THE FUND. THE
"HYPOTHETICAL EXAMPLE" IS NOT A REPRESENTATION OF FUTURE EXPENSES. THE
FUND'S ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN. The example
assumes payment by the Fund of operating expenses at the level set forth
under "Annual Fund Operating Expenses" above and of its pro rata share of
the Advisor Class expenses of the Underlying Theme Funds.
The tables and the assumption in the Hypothetical Example of a 5.0%
annual return are required by regulation of the SEC applicable to all
mutual funds. The 5.0% annual return is not a prediction of and does not
represent the Fund's or any Underlying Theme Fund's projected or actual
performance.
Prospectus Page 7
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- -------------------------------------------------------------------------------
ALTERNATIVE PURCHASE PLAN
DIFFERENCES BETWEEN THE CLASSES. The primary distinction between the two classes
of the Fund's shares offered through this Prospectus lies in their sales charge
structures and ongoing expenses, as summarized below. Class A and Class B shares
of the Fund represent interests in the same Fund and have the same rights,
except that each class bears the separate expenses of its Rule 12b-1
distribution plan and has exclusive voting rights with respect to such plan, and
each class has a separate exchange privilege. See "Management" and "How to Make
Exchanges." Each class has distinct advantages and disadvantages for different
investors, and investors should choose the class that better suits their
circumstances and objectives.
CLASS A SHARES. Class A shares of the Fund are sold at net asset value plus an
initial sales charge of up to 4.75% of the public offering price imposed at the
time of purchase. This initial sales charge is reduced or waived for certain
purchases. Purchases of $500,000 or more must be for Class A shares. Class A
shares of the Fund also bear annual service and distribution fees of up to 0.50%
of the average daily net assets of that class.
CLASS B SHARES. Class B shares of the Fund are sold at net asset value with no
initial sales charge at the time of purchase. Therefore, the entire amount of an
investor's purchase payment is invested in the Fund. Class B shares bear annual
service and distribution fees of up to 1.00% of the average daily net assets of
that class, and Class B shareholders pay a contingent deferred sales charge of
up to 5.00% of the lesser of the original purchase price or the net asset value
of such shares at the time of redemption. The higher service and distribution
fees paid by the Class B shares of the Fund should cause that class to have a
higher expense ratio and to pay lower dividends per share than Class A shares of
the Fund.
FACTORS TO CONSIDER IN CHOOSING A CLASS OF SHARES. In deciding which class of
the Fund to purchase, investors should consider the foregoing factors as well as
the following:
INTENDED HOLDING PERIOD. Over time, the cumulative expense of the 1.00% service
and distribution fees on the Class B shares of the Fund will approximate or
exceed the expense of the applicable 4.75% maximum initial sales charge plus the
0.50% service and distribution fees on the Class A shares of the Fund. For
example, if net asset value remains constant, the Class B shares' aggregate
service and distribution fees would be equal to the Class A shares' initial
maximum sales charge and service and distribution fees approximately nine years
after purchase. Thereafter, Class B shares would experience higher cumulative
expenses. Investors who expect to maintain their investment in the Fund over the
long-term but do not qualify for a reduced initial sales charge might elect the
Class A initial sales charge alternative because the indirect expense to the
shareholder of the accumulated service and distribution fees on the Class B
shares eventually will exceed the initial sales charge paid by the shareholder
plus the indirect expense to the shareholder of the accumulated distribution
fees of Class A shares. Class B investors, however, enjoy the benefit of
permitting all their dollars to work from the time an investment is made. Any
positive investment return on this additional invested amount would partially or
wholly offset the higher annual expenses borne by Class B shares. Because the
Fund's future returns cannot be predicted, however, there can be no assurance
that such a positive return will be achieved.
Prospectus Page 8
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- -------------------------------------------------------------------------------
Finally, Class B shareholders pay a contingent deferred sales charge if they
redeem during the first six years after purchase, unless a sales charge waiver
applies. Investors expecting to redeem during this period should consider the
cost of the applicable contingent deferred sales charge in addition to the
annual Class B service and distribution fees, as compared with the cost of the
applicable initial sales charge and annual service and distribution fees
applicable to the Class A shares.
REDUCED SALES CHARGES. Class A share purchases of $50,000 or more and Class A
share purchases made under the Fund's reduced sales charge plans may be made at
a reduced initial sales charge. See "How to Invest" for a complete list of
reduced sales charges applicable to Class A purchases.
WAIVER OF SALES CHARGES. The entire initial sales charge on Class A shares of
the Fund is waived for certain eligible purchasers and these purchasers' entire
purchase price would be immediately invested in the Fund. Investors eligible for
complete initial sales charge waivers should purchase Class A shares. The
contingent deferred sales charge is waived for certain redemptions of Class B
shares of the Fund. A 1% contingent deferred sales charge is imposed on certain
redemptions of Class A shares on which no initial sales charge was assessed.
Investors should understand that the contingent deferred sales charge on the
Class B shares and the initial sales charge on the Class A shares are both
intended to compensate GT Global and selling broker/dealers for their
distribution services. Broker/dealers may receive different levels of
compensation for selling a particular class of shares of the Fund.
See "How to Invest," "How to Redeem Shares" and "Management" for a more complete
description of the initial and contingent deferred sales charges, service fees
and distribution fees for Class A and Class B shares of the Fund and "Dividends,
Other Distributions and Federal Income Taxation" and "Calculation of Net Asset
Value" for other differences between these two classes.
ADVISOR CLASS SHARES. Advisor Class shares are offered through a separate
prospectus to (a) trustees or other fiduciaries purchasing shares for employee
benefit plans which are sponsored by organizations which have at least 1,000
employees; (b) any account with assets of at least $10,000 if (i) a financial
planner, trust company, bank trust department or registered investment adviser
has investment discretion over such account, and (ii) the account holder pays
such person as compensation for its advice and other services an annual fee of
at least .50% on the assets in the account; (c) any account with assets of at
least $10,000 if (i) such account is established under a "wrap fee" program, and
(ii) the account holder pays the sponsor of such program an annual fee of at
least .50% on the assets in the account; (d) accounts advised by one of the
companies composing or affiliated with Liechtenstein Global Trust; and (e) any
of the companies composing or affiliated with Liechtenstein Global Trust.
Prospectus Page 9
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES
The Fund seeks long-term growth of capital. Unlike a typical mutual fund, which
invests directly in portfolio securities, the Fund will invest in shares of
other GT Global mutual funds. The Fund seeks to achieve its investment objective
by investing, under normal circumstances, substantially all of its assets in the
following global theme mutual funds:
o GT Global Consumer Products and Services Fund
o GT Global Financial Services Fund
o GT Global Health Care Fund
o GT Global Infrastructure Fund
o GT Global Natural Resources Fund
o GT Global Telecommunications Fund
The Manager will exercise no discretion in investing the assets of the Fund. The
Manager periodically determines the allocation of assets to the Underlying Theme
Funds according to the industry weightings of the companies comprising the
Morgan Stanley Capital International All Country (AC) World Index ("MSCI"). (The
MSCI is a broad unmanaged index of global stock prices, currently comprising
2500 different issuers, located in 44 countries and grouped in 38 separate
industries.) The Manager assesses which of the Underlying Theme Funds can be
invested, as part of their primary focus, in each of the industries. For
example, Financial Services Fund typically invests primarily in companies
categorized in the MCSI as in the Banking, Financial Services, Insurance and
Real Estate industries. The percentage that those industries comprise in the
MSCI is then used by the Manager as the percentage of new money in the Fund that
will be invested in Financial Services Fund. Where two or more Underlying Theme
Funds can invest in an industry, the weighting of that industry in the MSCI is
split equally among each qualifying Underlying Theme Fund. As a result of the
Manager's analysis of the 38 industries currently comprising the MSCI, the
Underlying Theme Funds are related to all industries. Of course, the Underlying
Theme Funds do not invest necessarily in the same industries or same companies
which comprise the MSCI. Because the industry weighting percentages in the MSCI
change over time and because the percentage that each Underlying Theme Fund will
represent in the Fund will change over time, the Manager will periodically
rebalance the Fund to reflect the current MSCI weighting. This rebalancing will
occur once a year. As of _____________, 1997, the weight assigned to each
Underlying Theme Fund, using the above methodology, was as follows:
Consumer Products and Services Fund ______%
Financial Services Fund ______%
Health Care Fund ______%
Infrastructure Fund ______%
Natural Resources Fund ______%
Telecommunications Fund ______%
The Fund will be a more diversified investment than would be achieved by
investing in any single Underlying Theme Fund. However, because each Underlying
Theme Fund is actively managed without any attempt to reflect the country,
industry or company weightings of the MSCI, those Funds will perform differently
than the corresponding industry components of the MSCI and the Fund will perform
differently than the overall MSCI. While the Fund does not therefore represent
the performance of the MSCI, it does represent a globally diversified portfolio,
with allocations among developed and emerging countries, industries and
companies intended to achieve growth of capital.
Prospectus Page 10
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- -------------------------------------------------------------------------------
The Fund is designed to meet the needs of investors who seek professional money
management services and who appreciate the advantages of diversification. The
Fund by itself should not be considered a complete investment program. As a
newly organized entity, the Fund has no operating history.
OTHER INFORMATION. The investment objective of the Fund may not be changed
without the approval of a majority of the Fund's outstanding voting securities.
As defined in the Investment Company Act of 1940 ("1940 Act") and as used in
this Prospectus, a "majority of the Fund's outstanding voting securities" means
the lesser of (i) 67% of the Fund's shares represented at a meeting at which
more than 50% of the outstanding shares are represented, or (ii) more than 50%
of the outstanding shares. In addition, the Fund has adopted certain investment
limitations as fundamental policies which also may not be changed without
shareholder approval. See "Investment Limitations" in the Statement of
Additional Information. Unless specifically noted, the Fund's investment
policies described in this Prospectus, and in the Statement of Additional
Information, including the policies with respect to investment in the Underlying
Theme Funds, is not a fundamental policy and may be changed by vote of the
Trust's Board of Trustees without shareholder approval.
DESCRIPTION OF THE UNDERLYING THEME FUNDS
The following descriptions summarize the investment objectives and policies of
the Underlying Theme Funds. There is no assurance that any of the Underlying
Theme Funds will achieve their investment objective. The Statement of Additional
Information includes more information about the investment policies of the
Underlying Theme Funds. Investors desiring more information on an Underlying
Theme Fund described below should call (800) 824-1580 or contact their financial
advisor for the Underlying Theme Funds' prospectus.
CONSUMER PRODUCTS AND SERVICES FUND. The Consumer Products and Services Fund's
investment objective is long-term capital growth. The Consumer Products and
Services Fund seeks its objective by investing all of its investable assets in
the Consumer Products and Services Portfolio, that, in turn, invests primarily
in equity securities of companies throughout the world that manufacture, market,
retail or distribute consumer products and services. The Consumer Products and
Services Portfolio's investment objective is identical to that of the Consumer
Products and Services Fund. The Consumer Products and Services Portfolio invests
in consumer products and services companies which, in the opinion of the
Manager, have potential for above average, long-term growth in sales and
earnings.
At least 65% of the Consumer Products and Services Portfolio's total assets
normally will be invested in common and preferred stocks and warrants to acquire
such securities issued by consumer products and services companies. A "consumer
products or services" company is an entity in which (i) at least 50% of either
the revenues or earnings was derived from activities relating to consumer
products or services, or (ii) at least 50% of the assets was devoted to such
activities, based on the company's most recent fiscal year. The remainder of the
Consumer Products and Services Portfolio's assets may be invested in debt
securities issued by consumer products or services companies and/or equity and
debt securities of companies outside the consumer products or services
industries, which, in the opinion of the Manager, stand to benefit from
developments in such industries.
The Consumer Products and Services Portfolio expects that a significant portion
of its assets may be invested in the securities of U.S. issuers from time to
time, particularly those that market their products globally. However, consumer
Prospectus Page 11
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- -------------------------------------------------------------------------------
products and services companies of a particular nation or region of the world
are often operated and owned in their local markets, close to their customers.
These companies, the Manager believes, may offer superior opportunities for
capital growth as compared to their larger, multinational counterparts. Certain
global markets may be more attractive than others from time to time; companies
dependent on U.S. markets, for example, may be outperformed by companies not
dependent on U.S. markets. The Manager also believes that the demand for
consumer products and services worldwide will increase along with rising
disposable incomes in both developed and developing nations.
FINANCIAL SERVICES FUND. The Financial Services Fund's investment objective is
long-term capital growth. The Financial Services Fund seeks its objective by
investing all of its investable assets in the Financial Services Portfolio,
that, in turn, invests primarily in equity securities of companies throughout
the world that operate in the financial services industries. The Financial
Services Portfolio's investment objective is identical to that of the Financial
Services Fund. The Financial Services Portfolio invests in financial services
companies which, in the opinion of the Manager, have potential for above
average, long-term growth in sales and earnings.
At least 65% of the Financial Services Portfolio's total assets normally will be
invested in common and preferred stocks and warrants to acquire such securities
issued by financial services companies. A "financial services" company is an
entity in which (i) at least 50% of either the revenues or earnings was derived
from financial services activities, or (ii) at least 50% of the assets was
devoted to such activities, based on the company's most recent fiscal year. The
remainder of the Financial Services Portfolio's assets may be invested in debt
securities issued by financial services companies and/or equity and debt
securities of companies outside of the financial services industries, which, in
the opinion of the Manager, stand to benefit from developments in the financial
services industries.
The Manager expects that banking and related financial institution consolidation
in the developed countries, increased demand for retail borrowing in developing
countries, a growing need for international trade-based financing, a rising
demand for sophisticated risk management, the proliferating number of liquid
securities markets around the world, and larger concentrations of investable
assets should lead to growth in financial service companies that are positioned
for the future.
HEALTH CARE FUND. The Health Care Fund's investment objective is long-term
capital appreciation. The Health Care Fund seeks its objective by investing
primarily in equity securities of health care companies throughout the world.
The Health Care Fund invests in health care companies, which, in the opinion of
the Manager, have potential for above average, long-term growth in sales and
earnings.
At least 65% of the Health Care Fund's total assets normally will be invested in
common and preferred stocks, and warrants to acquire such securities, issued by
health care companies. A "health care" company is an entity in which (i) at
least 50% of either the revenues or earnings was derived from health care
activities, or (ii) at least 50% of the assets was devoted to such activities,
based on the company's most recent fiscal year. The remainder of the Health Care
Fund's assets may be invested in debt securities issued by health care companies
and/or equity and debt securities of companies outside of the health care
industry, which, in the opinion of the Manager, stand to benefit from
developments in the health care industries.
Prospectus Page 12
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- -------------------------------------------------------------------------------
The Health Care Fund expects that, from time to time, a significant portion of
its assets may be invested in the securities of U.S. issuers. Health care
industries, however, are global industries with significant, growing markets
outside of the United States. A sizeable portion of the companies which comprise
the health care industries are headquartered outside of the United States, and
many important pharmaceutical and biotechnology discoveries and technological
breakthroughs have occurred outside of the United States, primarily in Japan,
the United Kingdom and Western Europe. In addition, the Manager believes that
the rapid and profound change in the United States' health care system offers
investment opportunities in those companies acting as consolidators or otherwise
gaining market share at the expense of less efficient competitors.
INFRASTRUCTURE FUND. The Infrastructure Fund's investment objective is long-term
capital growth. The Infrastructure Fund seeks its objective by investing all of
its investable assets in the Infrastructure Portfolio, that, in turn, invests
primarily in equity securities of companies throughout the world that design,
develop or provide products and services significant to a country's
infrastructure. The Infrastructure Portfolio's investment objective is identical
to that of the Infrastructure Fund. The Infrastructure Portfolio invests in
infrastructure companies which, in the opinion of the Manager, have potential
for above average, long-term growth in sales and earnings.
At least 65% of the Infrastructure Portfolio's total assets normally will be
invested in common and preferred stocks and warrants to acquire such securities
issued by infrastructure companies. An "infrastructure" company is an entity in
which (i) at least 50% of either the revenues or earnings was derived from
infrastructure activities, or (ii) at least 50% of the assets was devoted to
such activities, based on the company's most recent fiscal year. The remainder
of the Infrastructure Portfolio's assets may be invested in debt securities
issued by infrastructure companies and/or equity and debt securities of
companies outside of the infrastructure industries, which, in the opinion of the
Manager, stand to benefit from developments in the infrastructure industries.
The Manager believes that strong economic growth in developing countries and
infrastructure replacement, upgrade, and deregulation in more developed
countries provide an environment for favorable investment opportunities in
infrastructure companies worldwide.
NATURAL RESOURCES FUND. The Natural Resources Fund's investment objective is
long-term capital growth. The Natural Resources Fund seeks its objective by
investing all of its investable assets in the Natural Resources Portfolio, that,
in turn, invests primarily in equity securities of companies throughout the
world that own, explore or develop natural resources and other basic
commodities, or supply goods and services to such companies. The Natural
Resources Portfolio's investment objective is identical to that of the Natural
Resources Fund. The Natural Resources Portfolio invests in natural resource
companies which, in the opinion of the Manager, have potential for above
average, long-term growth in sales and earnings.
At least 65% of the Natural Resources Portfolio's total assets will normally be
invested in common stock and preferred stock, and warrants to acquire such
securities, issued by natural resource companies. A "natural resource" company
is an entity in which (i) at least 50% of either the revenues or earnings was
derived from natural resource activities, or (ii) at least 50% of the assets was
devoted to such activities, based upon the company's most recent fiscal year.
The remainder of the Natural Resources Portfolio's assets may be invested in
debt securities issued by natural resource companies and/or equity and debt
securities of companies outside of the natural resource industries, which, in
Prospectus Page 13
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- -------------------------------------------------------------------------------
the opinion of the Manager, stand to benefit from developments in the natural
resource industries.
The Manager will allocate the Natural Resources Portfolio's investments among
natural resource companies depending on its assessment of their long-term growth
potential. In assessing these companies' long-term growth potential, the Manager
will evaluate, among other factors, their capabilities for expanded exploration
and production, superior exploration programs and production techniques and
facilities, current inventories, expected production and demand levels and the
potential to accumulate new resources. The Manager also believes that
investments in natural resource industries offer an opportunity to protect
wealth against the capital eroding effects of inflation.
TELECOMMUNICATIONS FUND. The Telecommunications Fund's investment objective is
long-term growth of capital. The Telecommunications Fund seeks its objective by
investing primarily in equity securities of companies throughout the world
engaged in the development, manufacture or sale of telecommunications services
or equipment. The Telecommunications Fund invests in telecommunications
companies which, in the opinion of the Manager, have potential for above
average, long-term growth in sales and earnings on a sustained basis.
At least 65% of the Telecommunications Fund's total assets normally will be
invested in common and preferred stocks and warrants to acquire such securities
issued by telecommunications companies. A "telecommunications" company is an
entity in which (i) at least 50% of either its revenues or earnings was derived
from telecommunications activities, or (ii) at least 50% of its assets was
devoted to telecommunications activities, based on the company's most recent
fiscal year. The remainder of the assets of the Telecommunications Fund may be
invested in debt securities issued by telecommunications companies and/or equity
and debt securities of companies outside of the telecommunications industry
which, in the opinion of the Manager, stand to benefit from developments in the
telecommunications industry.
The Manager believes that there are opportunities for continued growth in demand
for components, products, media and systems to collect, store, retrieve,
transmit, process, distribute, record, reproduce and use information. The
pervasive societal impact of communications and information technologies has
been accelerated by the lower costs and higher efficiencies that result from the
blending of computers with telecommunications systems. Accordingly, companies
engaged in the production of methods for using electronic and, potentially,
video technology to communicate information are expected to be important in the
Telecommunications Fund's portfolio. Older technologies, such as photography and
print also may be represented, however.
RISK FACTORS AND SPECIAL CONSIDERATIONS
INVESTING IN THE UNDERLYING THEME FUNDS. The investments of the Fund are
concentrated in the Underlying Theme Funds, so the Fund's investment performance
is directly related to the investment performance of the Underlying Theme Funds.
The ability of the Fund to meet its investment objective is directly related to
the ability of the Underlying Theme Funds to meet their objectives as well as
the allocation among those Underlying Theme Funds. There can be no assurance
that the investment objective of the Fund or any Underlying Theme Fund will be
achieved. The value of the Underlying Theme Funds' domestic and foreign
investments varies in response to many factors. Stock values fluctuate in
response to the activities of individual companies and economic conditions.
Prospectus Page 14
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- -------------------------------------------------------------------------------
Because each Underlying Theme Fund focuses its investments in particular
industries, an investment in each may be more volatile than that of other
investment companies that do not concentrate their investments in such a manner.
Moreover, the value of the shares of each Underlying Theme Fund will be
especially susceptible to factors affecting the industries in which it focuses.
FOREIGN INVESTMENTS. The Underlying Theme Funds' investments in foreign
securities may involve risks in addition to those of U.S. investments, including
increased political and economic risk, as well as exposure to currency
fluctuations.
By investing in foreign securities, the Underlying Theme Funds also have
increased economic and political risks as they are exposed to events and factors
in the various world markets. This is especially true of an Underlying Theme
Fund that invests in emerging markets. Many investments in emerging markets are
considered speculative and therefore may offer higher income and total return
potential, but have significantly greater risk. Also, to the extent that an
Underlying Theme Fund's investments are denominated in foreign currencies,
changes in the value of foreign currencies can significantly affect the Fund's
share price.
INVESTMENT PRACTICES OF THE UNDERLYING THEME FUNDS. In addition to their
principal investments, certain Underlying Theme Funds may enter into forward
currency transactions; lend their portfolio securities; enter into stock index,
interest rate and currency futures contracts, and options on such contracts;
engage in options transactions; purchase restricted and illiquid securities;
purchase securities on a when-issued or delayed delivery basis; enter into
repurchase or reverse repurchase agreements; borrow money; and engage in various
other investment practices.
TEMPORARY DEFENSIVE STRATEGIES. The Underlying Theme Funds retain the
flexibility to respond promptly to changes in market and economic conditions.
Accordingly, in the interest of preserving shareholders' capital and consistent
with the Underlying Theme Funds' investment objective, the Manager may employ a
temporary defensive investment strategy if it determines such a strategy to be
warranted due to market, economic or political conditions. Under a defensive
strategy, the Underlying Theme Funds may invest up to 100% of their total assets
in cash and/or high quality debt securities and money market instruments. To the
extent the Underlying Theme Funds adopt a temporary defensive posture, they will
not be invested so as to achieve directly its investment objective.
In addition, pending investment of proceeds from new sales of the shares or to
meet its ordinary daily cash needs, the Fund may hold cash and/or may invest in
money market instruments. Money market instruments in which the Fund may invest
include, but are not limited to, United States government securities; high-grade
commercial paper; bank certificates of deposit; bankers' acceptances and
repurchase agreements related to any of the foregoing. High-grade commercial
paper refers to commercial paper rated A-l by Standard & Poor's Ratings Group or
P-l by Moody's Investors Service, Inc. or, if not rated, determined by the
Manager to be of comparable quality.
SECURITIES. The Fund may invest in an Underlying Theme Fund that invests in high
yield, high risk securities, commonly known as "junk bonds." As a result, the
Fund may be subject to some of the risks resulting from high yield investing.
The Fund also may invest in Underlying Theme Funds that invest in medium grade
bonds. Lower quality debt instruments generally offer a higher current yield
than that available from higher grade issues, but typically involve greater
Prospectus Page 15
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- -------------------------------------------------------------------------------
risk. Lower rated and comparable unrated securities are especially subject to
adverse changes in general economic conditions, to changes in the financial
condition of their issuers, and to price fluctuation in response to changes in
interest rates. During periods of economic downturn or rising interest rates,
issuers of these instruments may experience financial stress that could
adversely affect their ability to make payments of principal and interest and
increase the possibility of default. Further information on these investment
policies and practices can be found in "Description of the Underlying Theme
Funds," in the Statement of Additional Information as well as the prospectus of
the Underlying Theme Funds.
PURCHASES AND REDEMPTIONS. From time to time, the Underlying Theme Funds may
experience relatively large purchases or redemptions due to rebalancing of the
Fund by the Manager. This transaction may have a material effect on the
Underlying Theme Funds, since Underlying Theme Funds that experience redemptions
as a result of reallocations may have to sell portfolio securities and because
Underlying Theme Funds that receive additional cash will have to invest it.
While it is impossible to predict the overall impact of these transactions over
time, there could be adverse effects on portfolio management to the extent that
Underlying Theme Funds may be required to sell securities at times when they
would not otherwise do so, or receive cash that cannot be invested in an
expeditious manner. There may be tax consequences associated with purchases and
sales of securities, and such sales also may increase transaction costs.
PORTFOLIO TURNOVER. The Fund's portfolio turnover rate is expected to be low and
is not anticipated to exceed __% annually. The turnover rates of the Underlying
Theme Funds in which the Fund will invest and their corresponding Portfolios
have ranged from __% to ___% during their most recent fiscal years. There can be
no assurance that the turnover rates of these Funds will remain within this
range during subsequent fiscal years. Higher turnover rates may result in higher
expenses being incurred by the Underlying Theme Funds.
MASTER-FEEDER STRUCTURE OF CERTAIN UNDERLYING THEME FUNDS. The Financial
Services Fund, Infrastructure Fund, Natural Resources Fund and Consumer Products
and Services Fund, unlike mutual funds which directly acquire and manage their
own portfolios of securities, seek to achieve their investment objective by
investing all of their investable assets in the Financial Services Portfolio,
Infrastructure Portfolio, Natural Resources Portfolio and Consumer Products and
Services Portfolio, respectively, each of which is a separate investment
company. Because its corresponding Fund will invest only in its corresponding
Portfolio, that Fund's shareholders will acquire only an indirect interest in
the investments of that Portfolio.
AFFILIATED PERSONS. The officers and trustees of the Trust and the Manager
currently serve as officers, and trustees and the investment adviser,
respectively, of many of the Underlying Theme Funds. Therefore, conflicts may
arise as these persons fulfill their fiduciary responsibilities to the Fund and
the Underlying Theme Funds.
See the Statement of Additional Information for additional information regarding
the investment policies and risks of the Underlying Theme Funds.
HOW TO INVEST
GENERAL. All purchase orders will be executed at the public offering price next
determined after the purchase order is received, which includes any applicable
sales charge for Class A shares.
Prospectus Page 16
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- -------------------------------------------------------------------------------
Orders received before the close of regular trading on the New York Stock
Exchange ("NYSE") (currently 4:00 p.m. Eastern Time, unless weather, equipment
failure or other factors contribute to an earlier closing time) on any Business
Day will be executed at the public offering price for the applicable class of
shares determined that day. A "Business Day" is any day Monday through Friday on
which the NYSE is open for business. The minimum initial investment is $500
($100 for IRAs and $25 for custodial accounts under Section 403(b)(7) of the
Internal Revenue Code and other tax-qualified employer-sponsored retirement
accounts, if made under a systematic investment plan providing for monthly
payments of at least that amount), and the minimum for additional purchases is
$100 ($25 for IRAs, Code Section 403 (b)(7) custodial accounts and other
tax-qualified employer-sponsored retirement accounts, as mentioned above). All
purchase orders will be executed at the public offering price next determined
after the purchase order is received, which includes any applicable sales charge
for Class A shares. See "Purchasing Class A Shares" and "Purchasing Class B
Shares" below. The Fund and GT Global reserve the right to reject any purchase
order and to suspend the offering of shares for a period of time. In particular,
the Fund and GT Global may reject purchase orders or exchanges by investors who
appear to follow, in the Manager's judgment, a market-timing strategy or
otherwise engage in excessive trading. See "How To Make Exchanges -- Limitations
on Purchase Orders and Exchanges."
WHEN PLACING PURCHASE ORDERS, INVESTORS SHOULD SPECIFY WHETHER THE ORDER IS FOR
CLASS A OR CLASS B SHARES OF THE FUND. ALL PURCHASE ORDERS THAT FAIL TO SPECIFY
A CLASS WILL AUTOMATICALLY BE INVESTED IN CLASS A SHARES.
PURCHASES OF $500,000 OR MORE MUST BE FOR CLASS A SHARES.
PURCHASES THROUGH BROKER/DEALERS. Shares of the Fund may be purchased through
broker/dealers with which GT Global has entered into dealer agreements. Orders
received by such broker/dealers before the close of regular trading on the NYSE
on a Business Day will be effected that day, provided that such order is
transmitted to the Transfer Agent prior to its close of business on such day.
The broker/dealer will be responsible for forwarding the investor's order to the
Transfer Agent so that it will be received prior to such time. After an initial
investment is made and a shareholder account is established through a broker, at
the investor's option subsequent purchases may be made directly through GT
Global. See "Shareholder Account Manual."
Broker/dealers that do not have dealer agreements with GT Global also may offer
to place orders for the purchase of shares. Purchases made through such
broker/dealers will be effected at the public offering price next determined
after the order is received by the Transfer Agent. Such a broker/dealer may
charge the investor a transaction fee as determined by the broker/dealer. That
fee will be in addition to the sales charge payable by the investor, with
respect to Class A shares, and may be avoided if shares are purchased through a
broker/dealer that has a dealer agreement with GT Global or directly through GT
Global.
PURCHASES THROUGH THE DISTRIBUTOR. Investors may purchase shares and open an
account directly through GT Global, the Fund's distributor, by completing and
signing an Account Application accompanying this Prospectus. Investors should
mail to the Transfer Agent the completed Application together with a check to
cover the purchase in accordance with the instructions provided in the
Shareholder Account Manual. Purchases will be executed at the public offering
price next determined after the Transfer Agent has received the Account
Application and check. Subsequent investments do not need to be accompanied by
such an application.
Prospectus Page 17
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- -------------------------------------------------------------------------------
Investors also may purchase shares of the Fund through GT Global by bank wire.
Bank wire purchases will be effected at the next determined public offering
price after the bank wire is received. A wire investment is considered received
when the Transfer Agent is notified that the bank wire has been credited to the
Fund. The investor is responsible for providing prior telephonic or facsimile
notice to the Transfer Agent that a bank wire is being sent. An investor's bank
may charge a service fee for wiring money to the Fund. The Transfer Agent
currently does not charge a service fee for facilitating wire purchases, but
reserves the right to do so in the future. Investors desiring to open an account
by bank wire should call the Transfer Agent at the appropriate toll-free number
provided in the Shareholder Account Manual to obtain an account number and
detailed instructions.
CERTIFICATES. In the interest of economy and convenience, physical certificates
representing the Fund's shares will not be issued unless an investor submits a
written request to the Transfer Agent, or unless the investor's broker requests
that the Transfer Agent provide certificates. Shares of the Fund are recorded on
a register by the Transfer Agent, and shareholders who do not elect to receive
certificates have the same rights of ownership as if certificates had been
issued to them. Redemptions and exchanges by shareholders who hold certificates
may take longer to effect than similar transactions involving non-certificated
shares because the physical delivery and processing of properly executed
certificates is required. Accordingly, the Fund and GT Global recommend that
shareholders do not request issuance of certificates.
Prospectus Page 18
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- -------------------------------------------------------------------------------
PURCHASING CLASS A SHARES
The Fund's public offering price for Class A shares is equal to the net asset
value per share (see "Calculation of Net Asset Value") plus a sales charge
determined in accordance with the following schedule:
Prospectus Page 19
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMOUNT OF PURCHASE AT THE PUBLIC SALES CHARGE AS PERCENTAGE OF DEALER REALLOWANCE
OFFERING PRICE ----------------------------- PERCENTAGE OF THE
OFFERING NET OFFERING PRICE
PRICE INVESTMENT
<S> <C> <C> <C>
Less than $50,000.................. 4.75% 4.99% 4.25%
$50,000 but less than $100,000..... 4.00% 4.17% 3.50%
$100,000 but less than $250,000.... 3.00% 3.09% 2.75%
$250,000 but less than $500,000.... 2.00% 2.04% 1.75%
$500,000 or more................... 0.00% 0.00% *
</TABLE>
* GT Global will pay the following commissions to broker/dealers that initiate
and are responsible for purchases by any single purchaser of Class A shares
of $500,000 or more in the aggregate: 1.00% of the purchase amount up to $3
million, plus 0.50% on the excess over $3 million. For purposes of
determining the appropriate commission to be paid in connection with the
transaction, GT Global will combine purchases made by a broker/dealer on
behalf of a single client so that the broker/dealer's commission, as
outlined above, will be based on the aggregate amount of such client's share
purchases over a rolling twelve month period from the date of the
transaction.
All shares purchased without a sales charge based on the aggregate purchase
amount equalling at least $500,000 will be subject to a contingent deferred
sales charge for the first year after their purchase, as described under
"Contingent Deferred Sales Charge--Class A Shares," equal to 1% of the lower of
the original purchase price or the net asset value of such shares at the time of
redemption.
From time to time, GT Global may reallow to broker/dealers the full amount of
the sales charge or may pay out additional amounts to broker/dealers who sell
Class A shares. In some instances, GT Global may offer these reallowances or
additional payments only to broker/dealers that have sold or may sell
significant amounts of Class A shares. To the extent that GT Global reallows the
full amount of the sales charge to broker/dealers, such broker/dealers may be
deemed to be underwriters under the Securities Act of 1933, as amended.
Commissions also may be paid to broker/dealers and other financial institutions
that initiate purchases of at least $500,000 made pursuant to sales charge
waivers (i) and (vii), and initial purchases made pursuant to sales charge
waiver (xiii) described below under "Sales Charge Waivers--Class A Shares."
The following describes purchases that may be aggregated for purposes of
determining the "Amount of Purchase":
(a) Individual purchases on behalf of a single purchaser, the purchaser's spouse
and their children under the age of 21 years, including purchases in connection
with an employee benefit plan or plans exclusively for the benefit of such
individual(s), such as an IRA, individual Code Section 403(b) plan or
single-participant self-employed individual retirement plan ("Keogh Plan") and
purchases made by a company controlled by such individual(s);
Prospectus Page 20
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- -------------------------------------------------------------------------------
(b) Individual purchases by a trustee or other fiduciary purchasing shares for a
single trust estate or a single fiduciary account, including an employee benefit
plan (such as employer-sponsored pension, profit-sharing and stock bonus plans,
including Code Section 401(k) plans, and medical, life and disability insurance
trusts) other than a plan described in "(a)" above; and
(c) Individual purchases by a trustee or other fiduciary purchasing shares
concurrently for two or more employee benefit plans of a single employer or of
employers affiliated with each other (again excluding an employee benefit plan
described in "(a)" above).
SALES CHARGE WAIVERS--CLASS A SHARES. Class A shares are sold at net asset value
without imposition of sales charges when investments are made by the following
classes of investors:
(i) Trustees or other fiduciaries purchasing shares for employee benefit plans
which are sponsored by organizations which have at least 100 but less than 1,000
employees and trustees or other fiduciaries purchasing shares for employee
benefit plans which are sponsored by organizations with collective retirement
plan assets of $500,000 or more and have less than 100 employees, and purchases
of at least $500,000 by trustees or other fiduciaries of employee benefit plans
with collective retirement plan assets of $100 million or more.
(ii) Current or retired Trustees, Directors and officers of the investment
companies for which the Manager serves as investment manager and/or
administrator; employees or retired employees of the companies composing
Liechtenstein Global Trust or affiliated companies of Liechtenstein Global
Trust; the children, siblings and parents of the persons in the foregoing
categories; and trusts primarily for the benefit of such persons.
(iii) Registered representatives or full-time employees of broker/dealers which
have entered into dealer agreements with GT Global, and the children, siblings
and parents of such persons, and employees of financial institutions that
directly, or through their affiliates, have entered into dealer agreements with
GT Global (or that otherwise have an arrangement with respect to sales of Fund
shares with a broker/dealer that has entered into a dealer agreement with GT
Global) and the children, siblings and parents of such employees.
(iv) Companies exchanging shares with or selling assets to one or more of the GT
Global Mutual Funds pursuant to a merger, acquisition or exchange offer.
(v) Shareholders of any of the GT Global Mutual Funds as of April 30, 1987 who
since that date continually have owned shares of one or more of the GT Global
Mutual Funds.
(vi) Purchases made through the automatic investment of dividends and other
distributions paid by any of the other GT Global Mutual Funds.
(vii) Registered investment advisers, trust companies and bank trust departments
exercising discretionary investment authority with respect to the money to be
invested in the GT Global Mutual Funds provided that the aggregate amount
invested pursuant to this sales charge waiver is at least $500,000, and further
provided that such money is not eligible to be invested in the Advisor Class.
Prospectus Page 21
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- -------------------------------------------------------------------------------
(viii) Clients of administrators of tax-qualified employee benefit plans which
have entered into agreements with GT Global.
(ix) Retirement plan participants who borrow from their retirement accounts by
redeeming GT Global Mutual Fund shares and subsequently repay such loans via a
purchase of the Fund's shares.
(x) Retirement plan participants who receive distributions from a tax-qualified
employer-sponsored retirement plan, which is invested in GT Global Mutual Funds,
the proceeds of which are reinvested in the Fund's shares.
(xi) Accounts not eligible for the Advisor Class as to which a financial
institution or broker/dealer charges an account management fee, provided the
financial institution or broker/dealer has entered into an agreement with GT
Global regarding such accounts.
(xii) Certain former AMA Investment Advisers' shareholders who became
shareholders of the GT Global Health Care Fund in October, 1989, and who have
continuously held shares in the GT Global Mutual Funds since that time.
(xiii) Current shareholders of the GT Global Mutual Funds, provided shares are
purchased within 90 days of the date shares of the Fund are first offered to the
public.
REINSTATEMENT PRIVILEGE. Shareholders who redeem their Class A shares in the
Fund have a onetime privilege of reinstating their investment by investing the
proceeds of the redemption at net asset value without a sales charge in Class A
shares of the Fund and/or one or more of the other GT Global Mutual Funds. The
Transfer Agent must receive from the investor or the investor's broker/dealer
within 180 days after the date of the redemption both a written request for
reinvestment and a check not exceeding the amount of the redemption proceeds.
The reinstatement purchase will be effected at the net asset value per share
next determined after such receipt. Gain on the redemption is taxable
notwithstanding exercise of the reinvestment privilege. See "Dividends, Other
Distributions and Federal Income Taxation--Taxes."
REDUCED SALES CHARGE PLANS--CLASS A SHARES. Class A shares may be purchased at
reduced sales charges either through the Right of Accumulation or under a Letter
of Intent. For more details on these plans, investors should contact their
broker/dealers or the Transfer Agent.
RIGHT OF ACCUMULATION. Pursuant to the Right of Accumulation, investors are
permitted to purchase shares of the Fund at the sales charge applicable to the
total of (a) the dollar amount then being purchased plus (b) the dollar amount
of the investor's concurrent purchases of other GT Global Mutual Funds (other
than GT Global Dollar Fund) plus (c) the price of all shares of GT Global Mutual
Funds (other than shares of GT Global Dollar Fund not acquired by exchange)
already held by the investor. To receive the Right of Accumulation, at the time
of purchase investors must give their broker/dealer, the Transfer Agent or GT
Global sufficient information to permit confirmation of qualification. THE
FOREGOING RIGHT OF ACCUMULATION APPLIES ONLY TO CLASS A SHARES OF THE FUND AND
OTHER GT GLOBAL MUTUAL FUNDS (OTHER THAN GT GLOBAL DOLLAR FUND).
LETTER OF INTENT. In executing a Letter of Intent ("LOI"), an investor indicates
an aggregate investment amount he or she intends to invest in the Class A shares
of the Fund and the Class A shares of other GT Global Mutual Funds (other than
Prospectus Page 22
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- -------------------------------------------------------------------------------
GT Global Dollar Fund) in the following thirteen months. The LOI is included as
part of the Account Application located at the end of this Prospectus. The sales
charge applicable to that aggregate amount then becomes the applicable sales
charge on all purchases made concurrently with the execution of the LOI and in
the thirteen months following that execution. If an investor executes an LOI
within 90 days of a prior purchase of GT Global Mutual Fund Class A shares
(other than shares of GT Global Dollar Fund), the prior purchase may be included
under the LOI and an appropriate adjustment, if any, with respect to the sales
charges paid by the investor in connection with the prior purchase will be made,
based on the then current net asset value(s) of the pertinent Fund(s).
If at the end of the thirteen month period covered by the LOI the total amount
of purchases does not equal the amount indicated, the investor will be required
to pay the difference between the sales charges paid at the reduced rate and the
sales charges applicable to the purchases actually made. Shares having a value
equal to 5% of the amount specified in the LOI will be held in escrow during the
thirteen month period (while remaining registered in the investor's name) and
are subject to redemption to assure any necessary payment to GT Global of a
higher applicable sales charge.
For purposes of an LOI, any registered investment adviser, trust company or bank
trust department which exercises investment discretion and which intends within
thirteen months to invest $500,000 or more can be treated as a single purchaser,
provided further that such entity places all purchase and redemption orders.
Such entities should be prepared to establish their qualifications for such
treatment. THE FOREGOING LOI APPLIES ONLY TO CLASS A SHARES OF THE FUND AND
OTHER GT GLOBAL MUTUAL FUNDS (OTHER THAN GT GLOBAL DOLLAR FUND).
CONTINGENT DEFERRED SALES CHARGE--CLASS A SHARES. Purchases of Class A shares of
$500,000 or more may be made without an initial sales charge. If a shareholder
within one year after the date of purchase redeems any Class A shares that were
purchased without a sales charge by reason of a purchase of $500,000 or more, a
contingent deferred sales charge of 1% of the lower of the original purchase
price or the net asset value of such shares at the time of redemption will be
charged. Class A shares will not be subject to the contingent deferred sales
charge to the extent that the value of such shares represents: (1) reinvestment
of dividends or other distributions or (2) shares redeemed more than one year
after their purchase. Such shares purchased without a sales charge may be
exchanged for Class A shares of another GT Global Mutual Fund (other than GT
Global Dollar Fund) without the imposition of a contingent deferred sales
charge, although the contingent deferred sales charge described above will apply
to the redemption of the shares acquired through an exchange. The waivers set
forth under "Contingent Deferred Sales Charge Waivers" below apply to
redemptions of Class A shares upon which a contingent deferred sales charge
would otherwise be imposed. For federal income tax purposes, the amount of the
contingent deferred sales charge will reduce the gain or increase the loss, as
the case may be, on the amount realized on redemption. The amount of any
contingent deferred sales charge will be paid to GT Global.
PURCHASING CLASS B SHARES
The public offering price of the Class B shares of the Fund is the next
determined net asset value per share. See "Calculation of Net Asset Value." No
initial sales charge is imposed. A contingent deterred sales charge, however, is
imposed on certain redemptions of Class B shares. Because the Class B shares are
sold without an initial sales charge, the Fund receives the full amount of the
investor's purchase payment.
Prospectus Page 23
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- -------------------------------------------------------------------------------
Class B shares will not be subject to a contingent deferred sales charge to the
extent that the value of such shares represents: (1) reinvestment of dividends
or capital gain distributions or (2) shares redeemed more than six years after
their purchase. Redemptions of most other Class B shares will be subject to a
contingent deferred sales charge. See "Contingent Deferred Sales Charge
Waivers." The amount of any applicable contingent deferred sales charge will be
calculated by multiplying the lesser of the original purchase price or the net
asset value of such shares at the time of redemption by the applicable
percentage shown in the table below.
CONTINGENT DEFERRED SALES CHARGE AS A PERCENTAGE
OF THE LESSER OF NET ASSET VALUE AT REDEMPTION OR
REDEMPTION DURING THE ORIGINAL PURCHASE PRICE
----------------- -------------------------------------------------
1st Year Since Purchase...... 5%
2nd Year Since Purchase...... 4%
3rd Year Since Purchase...... 3%
4th Year Since Purchase...... 3%
5th Year Since Purchase...... 2%
6th Year Since Purchase...... 1%
Thereafter................... 0%
In determining whether a contingent deferred sales charge is applicable, it will
be assumed that the redemption is made first of shares acquired pursuant to the
reinvestment of dividends and distributions; then of shares purchased seven
years or more prior to the redemption; and finally, of shares held for the
longest period of time within the applicable six-year period. For shares
acquired in an exchange, the length of the holding period will be measured from
the date of original purchase.
For example, assume an investor purchased 100 shares at $10 per share for a cost
of $1,000. Subsequently, the shareholder acquired 15 additional shares through
dividend reinvestment. During the second year after the purchase the investor
decided to redeem $500 of his or her investment. Assuming at the time of the
redemption a net asset value of $11 per share, the value of the investor's
shares would be $1,265 (115 shares at $11 per share). The contingent deferred
sales charge would not be applied to the value of the reinvested dividend
shares. Therefore, the 15 shares currently valued at $165.00 would be redeemed
without a contingent deferred sales charge. The number of shares needed to fund
the remaining $335 of the redemption would equal 30.455. Using the lower of cost
or market price to determine the contingent deferred sales charge, the original
purchase price of $10.00 per share would be used. The contingent deferred sales
charge calculation would therefore be 30.455 shares times $10.00 per share at
the contingent deferred sales charge rate of 4% (the applicable rate in the
second year after purchase) for a total contingent deferred sales charge of
$12.18.
For federal income tax purposes, the amount of the contingent deferred sales
charge will reduce the gain or increase the loss, as the case may be, on the
amount realized on the redemption. The amount of any contingent deterred sales
charge will be paid to GT Global.
Prospectus Page 24
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- -------------------------------------------------------------------------------
CONTINGENT DEFERRED SALES
CHARGE WAIVERS
The contingent deferred sales charge will be waived for (1) exchanges, as
described below; (2) redemptions in connection with the Fund's systematic
withdrawal plan not in excess of 12% of the value of the account annually; (3)
total or partial redemptions made within one year following the death or
disability of a shareholder; (4) minimum required distributions made in
connection with a GT Global IRA, Keogh Plan or custodial account under Section
403(b) of the Code or other retirement plan following attainment of age 70-1/2;
(5) total or partial redemptions resulting from a distribution following
retirement in the case of a tax-qualified employer-sponsored retirement plan;
(6) when a redemption results from a tax-free return of an excess contribution
pursuant to Section 408(d)(4) or (5) of the Code or from the death or disability
of the employee; (7) a one-time reinvestment in Class B shares of the Fund
within 180 days of a prior redemption; (8) redemptions pursuant to the Fund's
right to liquidate a shareholder's account involuntarily; (9) redemptions
pursuant to distributions from a tax-qualified employer-sponsored retirement
plan, which is invested in GT Global Mutual Funds, which are permitted to be
made without penalty pursuant to the Code, other than tax-free rollovers or
transfers of assets, and the proceeds of which are reinvested in Fund shares;
(10) redemptions made in connection with participant-directed exchanges between
options in an employer-sponsored benefit plan; (11) redemptions made for the
purpose of providing cash to fund a loan to a participant in a tax-qualified
retirement plan; (12) redemptions made in connection with a distribution from
any retirement plan account that is permitted in accordance with the provisions
of Section 72(t)(2) of the Code, and the regulations promulgated thereunder;
(13) redemptions made in connection with a distribution from any retirement plan
or account that involves the return of an excess deferral amount pursuant to
Section 401(k)(8) or Section 402(g)(2) of the Code or the return of excess
aggregate contributions pursuant to Section 401(m)(6) of the Code; (14)
redemptions made in connection with a distribution (from a qualified
profit-sharing or stock bonus plan described in Section 401(k) of the Code) to a
participant or beneficiary under Section 401(k)(2)(B)(IV) of the Code upon
hardship of the covered employee (determined pursuant to Treasury Regulation
Section 1.401(k)-1(d)(2)); and (15) redemptions made by or for the benefit of
certain states, counties or cities, or any instrumentalities, departments or
authorities thereof where such entities are prohibited or limited by applicable
law from paying a sales charge or commission.
PROGRAMS APPLICABLE TO CLASS A
SHARES AND CLASS B SHARES
AUTOMATIC INVESTMENT PLAN. Investors may purchase either Class A or Class B
shares of the Fund through the GT Global Automatic Investment Plan. Under this
Plan, an amount specified by the shareholder of $100 or more ($25 or more for
IRAs, Code Section 403(b)(7) custodial accounts and other tax-qualified
employer-sponsored retirement accounts) on a monthly or quarterly basis will be
sent to the Transfer Agent from the investor's bank for investment in the Fund.
Participants in the Automatic Investment Plan should not elect to receive
dividends or other distributions from the Fund in cash. A sales charge will be
applied to each automatic monthly purchase of Class A shares in an amount
determined in accordance with the Right of Accumulation privilege described
above. To participate in the Automatic Investment Plan, investors should
complete the appropriate portion of the Supplemental Application provided at the
end of this Prospectus. Investors should contact their brokers or GT Global for
more information.
Prospectus Page 25
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- -------------------------------------------------------------------------------
DOLLAR COST AVERAGING PROGRAM. Investors may purchase either Class A or Class B
shares of the Fund through the GT Global Dollar Cost Averaging Program whereby a
shareholder invests the same dollar amount each month. Accordingly, the investor
purchases more shares when the Fund's net asset value is relatively low and
fewer shares when the Fund's net asset value is relatively high. This can result
in a lower average cost-per-share than if the shareholder followed a less
systematic approach. Dollar cost averaging does not assure a profit and does not
protect against loss in declining markets. Because such a program involves
continuous investment in securities regardless of fluctuating price levels of
such securities, investors should consider their financial ability to continue
purchases when prices are declining.
A participant in the GT Global Dollar Cost Averaging Program first designates
the size of his or her monthly investment in the Fund ("Monthly Investment")
after participation in the Program begins. The Monthly Investment must be at
least $1,000. The investor then will make an initial investment of at least
$10,000 in the GT Global Dollar Fund. Thereafter, each month an amount equal to
the specified Monthly Investment automatically will be redeemed from the GT
Global Dollar Fund and invested in Fund shares. A sales charge will be applied
to each automatic monthly purchase of Class A shares of the Fund in an amount
determined in accordance with the Right of Accumulation privilege described
above. Investors should contact their brokers or GT Global for more information.
PORTFOLIO REBALANCING PROGRAM. The GT Global Portfolio Rebalancing Program
("Program") permits eligible shareholders to establish and maintain an
allocation across a range of GT Global Mutual Funds. The Program automatically
rebalances holdings of GT Global Mutual Funds to the established allocation on a
periodic basis. Under the Program, a shareholder may predesignate, on a
percentage basis, how the total value of his or her holdings in a minimum of
two, and a maximum of ten, GT Global Mutual Funds ("Personal Portfolio") is to
be rebalanced on a monthly, quarterly, semiannual, or annual basis.
Rebalancing under the Program will be effected through the exchange of shares of
one or more GT Global Mutual Funds in the shareholder's Personal Portfolio for
shares of the same class(es) or one or more other GT Global Mutual Funds in the
shareholder's Personal Portfolio. See "How to Make Exchanges." If shares of the
Funds in a shareholder's Personal Portfolio have appreciated during a
rebalancing period, the Program will result in shares of Fund(s) that have
appreciated most during the period being exchanged for shares of Fund(s) that
have appreciated least. SUCH EXCHANGES ARE NOT TAX-FREE AND MAY RESULT IN A
SHAREHOLDER'S REALIZING A GAIN OR LOSS, AS THE CASE MAY BE, FOR TAX PURPOSES.
See "Dividends, Other Distributions and Federal Income Taxation." Participation
in the Program does not assure that a shareholder will profit from purchases
under the Program nor does it prevent or lessen losses in a declining market.
The Program will automatically rebalance the shareholder's Personal Portfolio on
the 28th day of the last month of the period chosen (or the immediately
preceding Business Day if the 28th is not a Business Day), subject to any
limitations below. The Program will not execute an exchange if the variance in a
shareholder's Personal Portfolio for a particular Fund would be 2% or less. In
predesignating percentages, shareholders must use whole percentages and totals
must equal 100%. Shareholders participating in the Program may not request
issuance of physical certificates representing a Fund's shares. Exchanges made
under the Program are not subject to the four free exchanges per year
limitation. The Funds and GT Global reserve the right to modify, suspend, or
terminate the Program at any time on 60 days' prior written notice to
shareholders. A request to participate in the Program must be received in good
Prospectus Page 26
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- -------------------------------------------------------------------------------
order at least five business days prior to the next rebalancing date. Once a
shareholder establishes the Program for his or her Personal Portfolio, a
shareholder cannot cancel or change which rebalancing frequency, which Funds or
what allocation percentages are assigned to the Program, unless canceled or
changed in writing and received by the Transfer Agent in good order at least
five business days prior to the rebalancing date. Shareholders participating in
the Program may also participate in the Right of Accumulation, Letter of Intent,
and Dollar Cost Averaging programs. Certain broker/dealers may charge a fee for
establishing accounts relating to the Program. Investors should contact their
broker/dealers or GT Global for more information.
HOW TO MAKE EXCHANGES
Shares of the Fund may be exchanged for shares of any of the other GT Global
Mutual Funds, based on their respective net asset values without imposition of
any sales charges, provided that the registration remains identical. This
exchange privilege is available only in those jurisdictions where the sale of GT
Global Mutual Fund shares to be acquired may be legally made. CLASS A SHARES MAY
BE EXCHANGED ONLY FOR CLASS A SHARES OF OTHER GT GLOBAL MUTUAL FUNDS. CLASS B
SHARES MAY BE EXCHANGED ONLY FOR CLASS B SHARES OF OTHER GT GLOBAL MUTUAL FUNDS.
The exchange of Class B shares will not be subject to a contingent deferred
sales charge. For purposes of computing the contingent deferred sales charge,
the length of time of ownership of Class B shares will be measured from the date
of original purchase and will not be affected by the exchange. Exchanges are not
tax-free and will result in a shareholder realizing a gain or loss, as the case
may be, for tax purposes. See "Dividends, Other Distributions and Federal Income
Taxation." In addition to the Fund, the GT Global Mutual Funds currently
include:
- GT GLOBAL WORLDWIDE GROWTH FUND
- GT GLOBAL INTERNATIONAL GROWTH FUND
- GT GLOBAL EMERGING MARKETS FUND
- GT GLOBAL NEW PACIFIC GROWTH FUND
- GT GLOBAL EUROPE GROWTH FUND
- GT GLOBAL LATIN AMERICA GROWTH FUND
- GT GLOBAL AMERICA SMALL CAP GROWTH FUND
- GT GLOBAL AMERICA MID CAP GROWTH FUND
- GT GLOBAL AMERICA VALUE FUND
- GT GLOBAL JAPAN GROWTH FUND
- GT GLOBAL GROWTH & INCOME FUND
- GT GLOBAL GOVERNMENT INCOME FUND
- GT GLOBAL STRATEGIC INCOME FUND
- GT GLOBAL HIGH INCOME FUND
- GT GLOBAL DOLLAR FUND
- GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
- GT GLOBAL FINANCIAL SERVICES FUND
- GT GLOBAL HEALTH CARE FUND
- GT GLOBAL INFRASTRUCTURE FUND
- GT GLOBAL NATURAL RESOURCES FUND
- GT GLOBAL TELECOMMUNICATIONS FUND
Prospectus Page 27
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- -------------------------------------------------------------------------------
Up to four exchanges each year may be made without charge. A $7.50 service
charge will be imposed on each subsequent exchange. If an investor does not
surrender all of his or her shares in an exchange, the remaining balance in the
investor's account after the exchange must be at least $500. Exchange requests
received in good order by the Transfer Agent before the close of regular trading
on the NYSE on any Business Day will be processed at the net asset value
calculated on that day. The terms of the exchange offer may be modified at any
time, on 60 days' prior written notice.
An investor interested in making an exchange should write or call his or her
broker/dealer or the Transfer Agent to request the prospectus of the other GT
Global Mutual Fund(s) being considered. Certain broker/dealers may charge a fee
for handling exchanges.
EXCHANGES BY TELEPHONE. A shareholder may give exchange instructions to the
shareholder's broker/dealer or the Transfer Agent by telephone at the
appropriate toll-free number provided in the Shareholder Account Manual.
Exchange orders will be accepted by telephone provided that the exchange
involves only uncertificated shares on deposit in the shareholder's account or
for which certificates have previously been deposited. Shareholders
automatically have telephone privileges to authorize exchanges. The Fund, GT
Global and the Transfer Agent will not be liable for any loss or damage for
acting in good faith upon instructions received by telephone and reasonably
believed to be genuine. The Fund employs reasonable procedures to confirm that
instructions communicated by telephone are genuine, prior to acting upon
instructions received by telephone including requiring some form of personal
identification, providing written confirmation of such transactions, and/or tape
recording of telephone instructions. The Fund may be liable for any losses due
to unauthorized or fraudulent instructions if it does not follow reasonable
procedures.
EXCHANGES BY MAIL. Exchange orders should be sent by mail to the investor's
broker/dealer or to the Transfer Agent at the address set forth in the
Shareholder Account Manual.
LIMITATIONS ON PURCHASE ORDERS AND EXCHANGES. The GT Global Mutual Funds are not
intended to serve as vehicles for frequent trading in response to short-term
fluctuations in the market. Due to the disruptive effect that market-timing
investment strategies and excessive trading can have on efficient portfolio
management, each GT Global Mutual Fund and GT Global reserve the right to refuse
purchase orders and exchanges by any person or group, if, in the Manager's
judgment, such person or group was following a market-timing strategy or was
otherwise engaging in excessive trading.
In addition, each GT Global Mutual Fund and GT Global reserve the right to
refuse purchase orders and exchanges by any person or group if, in the Manager's
judgment, the Fund would not be able to invest the money effectively in
accordance with that Fund's investment objective and policies or would otherwise
potentially be adversely affected. Although a GT Global Mutual Fund will attempt
to give investors prior notice whenever it is reasonably able to do so, it may
impose the above restrictions at any time.
Finally, as described above, each GT Global Mutual Fund and GT Global reserve
the right to reject any purchase order.
Prospectus Page 28
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- -------------------------------------------------------------------------------
HOW TO REDEEM SHARES
Fund shares may be redeemed at their net asset value (subject to any applicable
contingent deferred sales charge for Class B shares or, in limited
circumstances, Class A shares) and redemption proceeds will be sent within seven
days of the execution of a redemption request. Other shareholders may redeem
shares through the Transfer Agent. If a redeeming shareholder owns both Class A
and Class B shares of the Fund, the Class A shares will be redeemed first unless
the shareholder specifically requests otherwise.
REDEMPTIONS THROUGH BROKER/DEALERS. Shareholders with accounts at broker/dealers
who sell shares of the Fund may submit redemption requests to such
broker/dealers. If the shares are held in the broker/dealer's "street name," the
redemption must be made through the broker/dealer. Broker/dealers may honor a
redemption request either by repurchasing shares from a redeeming shareholder at
the Fund's shares' net asset value next computed after the broker/dealer
receives the request or, as described below, by forwarding such requests to the
Transfer Agent (see "How to Redeem Shares--Redemptions Through the Transfer
Agent"). Redemption proceeds normally will be paid by check or, if offered by
the broker/dealer, credited to the shareholder's brokerage account at the
election of the shareholder. Broker/dealers may impose a service charge for
handling redemption transactions placed through them and may have other
requirements concerning redemptions. Accordingly, shareholders should contact
their broker/dealers for more details.
REDEMPTIONS THROUGH THE TRANSFER AGENT. Redemption requests may be transmitted
to the Transfer Agent by telephone or by mail, in accordance with the
instructions provided in the Shareholder Account Manual. Redemptions will be
effected at the net asset value next determined after the Transfer Agent has
received the request in good order and any required supporting documentation
(less any applicable contingent deferred sales charge for Class B shares or, in
limited circumstances, Class A shares). Redemption requests received before the
close of regular trading on the NYSE on a Business Day will be effected at the
net asset value calculated on that day. Redemption requests will not require a
signature guarantee if the redemption proceeds are to be sent either: (i) to the
redeeming shareholder at the shareholder's address of record as maintained by
the Transfer Agent, provided the shareholder's address of record has not been
changed within the preceding thirty days; or (ii) directly to a pre-designated
bank, savings and loan or credit union account ("Pre-Designated Account"). ALL
OTHER REDEMPTION REQUESTS MUST BE ACCOMPANIED BY A SIGNATURE GUARANTEE OF THE
REDEEMING SHAREHOLDER'S SIGNATURE. A signature guarantee can be obtained from
any bank, U.S. trust company, a member firm of a U.S. stock exchange or a
foreign branch of any of the foregoing or other eligible guarantor institution.
A notary public is not an acceptable guarantor. A shareholder with questions
concerning the Fund's signature guarantee requirement should contact the
Transfer Agent.
Shareholders may qualify to have redemption proceeds sent to a Pre-Designated
Account by completing the appropriate section of the Account Application at the
end of this Prospectus. Shareholders with Pre-Designated Accounts should request
that redemption proceeds be sent either by bank wire or by check. The minimum
redemption amount for a bank wire is $1,000. Shareholders requesting a bank wire
should allow two Business Days from the time the redemption request is effected
for the proceeds to be deposited in the shareholder's Pre-Designated Account.
See "How to Redeem Shares--Other Important Redemption Information." Shareholders
may change their Pre-Designated Accounts only by a letter of instruction to the
Transfer Agent containing all account signatures, each of which must be
guaranteed. The Transfer Agent currently does not charge a bank wire service fee
for each wire redemption sent, but reserves the right to do so in the future.
The shareholder's bank may charge a bank wire service fee.
Prospectus Page 29
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- -------------------------------------------------------------------------------
REDEMPTIONS BY TELEPHONE. Redemption requests may be made by telephone by
calling the Transfer Agent at the appropriate toll-free number provided in the
Shareholder Account Manual. Shareholders who hold certificates for shares may
not redeem by telephone. REDEMPTION REQUESTS MAY NOT BE MADE BY TELEPHONE FOR
THIRTY DAYS FOLLOWING ANY CHANGE OF THE SHAREHOLDER'S ADDRESS.
Shareholders automatically have telephone privileges to authorize redemptions.
The Fund, GT Global and the Transfer Agent will not be liable for any loss or
damage for acting in good faith upon instructions received by telephone and
reasonably believed to be genuine. The Fund employs reasonable procedures to
confirm that instructions communicated by telephone are genuine, prior to acting
upon instructions received by telephone, including requiring some form of
personal identification providing written confirmation of such transactions,
and/or tape recording of telephone instructions.
REDEMPTIONS BY MAIL. Redemption requests should be mailed directly to the
Transfer Agent at the appropriate address provided in the Shareholder Account
Manual. As discussed above, requests for payment of redemption proceeds to a
party other than the shareholder of record and/or requests that redemption
proceeds be mailed to an address other than the shareholder's address of record
require a signature guarantee. In addition, if the shareholder's address of
record has been changed within the preceding thirty days, a signature guarantee
is required. Redemptions of shares for which certificates have been issued must
be accompanied by properly endorsed share certificates.
SYSTEMATIC WITHDRAWAL PLAN. Shareholders owning shares with a value of $10,000
or more may participate in the GT Global Systematic Withdrawal Plan. A
participating shareholder will receive proceeds from monthly, quarterly or
annual redemptions of Fund shares with respect to either Class A or Class B
shares. No contingent deferred sales charge will be imposed on redemptions made
under the Systematic Withdrawal Plan. The minimum withdrawal amount is $100. The
amount or percentage a participating shareholder specifies to be redeemed may
not, on an annualized basis, exceed 12% of the value of the account, as of the
time the shareholder elects to participate in the Systematic Withdrawal Plan. To
participate in the Systematic Withdrawal Plan, investors should complete the
appropriate portion of the Supplemental Application provided at the end of this
Prospectus. Investors should contact their broker/dealers or the Transfer Agent
for more information. With respect to Class A shares, participation in the
Systematic Withdrawal Plan concurrent with purchases of Class A shares may be
disadvantageous to investors because of the sales charges involved and possible
tax implications, and therefore is discouraged. In addition, shareholders who
participate in the Systematic Withdrawal Plan should not elect to reinvest
dividends or other distributions in additional Fund shares.
OTHER IMPORTANT REDEMPTION INFORMATION. A request for redemption will not be
processed until all of the necessary documentation has been received in good
order. A shareholder in doubt as to what documents are required should contact
his or her broker/dealer or the Transfer Agent.
Except in extraordinary circumstances and as permitted under the 1940 Act,
payment for shares redeemed by telephone or by mail will be made promptly after
receipt of a redemption request, if in good order, but not later than seven days
after the date the request is executed. Requests for redemption which are
subject to any special conditions or which specify a future or past effective
date cannot be accepted.
Prospectus Page 30
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- -------------------------------------------------------------------------------
If the Transfer Agent is requested to redeem shares for which the Fund has not
yet received good payment, the Fund may delay payment of redemption proceeds
until the Transfer Agent has assured itself that good payment has been collected
for the purchase of the shares. In the case of purchases by check it can take up
to 10 Business Days to confirm that the check has cleared and good payment has
been received. Redemption proceeds will not be delayed when shares have been
paid for by wire or when the investor's account holds a sufficient number of
shares for which funds already have been collected.
The Fund may redeem the shares of any shareholder whose account is reduced to
less than $500 in value through redemptions or other action by the shareholder.
Written notice will be given to the shareholder at least 60 days prior to the
date fixed for such redemption, during which time the shareholder may increase
his or her holdings to an aggregate amount of $500 or more (with a minimum
purchase of $100).
SHAREHOLDER ACCOUNT MANUAL
Shareholders are encouraged to place purchase, exchange and redemption orders
through their broker/dealers. Shareholders also may place such orders directly
through the Transfer Agent in accordance with this Manual. See "How to Invest,"
"How to Make Exchanges," "How to Redeem Shares," and "Dividends, Other
Distributions and Federal Income Taxation -- Taxes;" for more information.
The Fund's Transfer Agent is GT GLOBAL INVESTOR SERVICES,INC.
INVESTMENTS BY MAIL
Send the completed Account Application (if initial purchase) or letter stating
Fund name, class of shares, shareholder's registered name and account number (if
subsequent purchase) with a check to:
GT Global
P.O. Box 7340
San Francisco, California 94120-7345
INVESTMENTS BY BANK WIRE
An investor opening a new account should call 1-800-223-2138 to obtain an
account number. WITHIN SEVEN DAYS OF PURCHASE SUCH AN INVESTOR MUST SEND A
COMPLETED ACCOUNT APPLICATION CONTAINING THE INVESTOR'S CERTIFIED TAXPAYER
IDENTIFICATION NUMBER TO GT GLOBAL AT THE ADDRESS PROVIDED ABOVE UNDER
"INVESTMENTS BY MAIL." Wire instructions must state Fund name, class of shares,
shareholder's registered name and account number. Bank wires should be sent
through the Federal Reserve Bank Wire System to:
WELLS FARGO BANK N.A.
ABA 121000248
Attn: GT GLOBAL
ACCOUNT NO. 4023-000701
EXCHANGES BY TELEPHONE
Call GT Global at 1-800-223-2138.
Prospectus Page 31
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- -------------------------------------------------------------------------------
EXCHANGES BY MAIL
Send complete instructions, including name of GT Global Mutual Fund exchanging
from, class of shares, amount of exchange, name of the GT Global Mutual Fund
exchanging into, shareholder's registered name and account number, to:
GT Global
P.O. Box 7893
San Francisco, CA 94120-7893
REDEMPTIONS BY TELEPHONE
Call GT Global at 1-800-223-2138.
REDEMPTIONS BY MAIL
Send complete instructions, including name of the Fund, class of shares, amount
of redemption, shareholder's registered name and account number, to:
GT GLOBAL
P.O. Box 7893
San Francisco, CA 94120-7893
OVERNIGHT MAIL
Overnight mail services do not deliver to post office boxes. To send purchase,
exchange or redemption orders by overnight mail, follow the above instructions
but send the instructions to the following address:
GT Global Investor Services
California Plaza
2121 N. California Boulevard
Suite 450
Walnut Creek, CA 94596
ADDITIONAL QUESTIONS
Shareholders with additional questions regarding purchase, exchange and
redemption procedures should call GT Global at 1-800-223-2138.
CALCULATION OF NET ASSET VALUE
The Fund calculates its net asset value as of the close of regular trading on
the NYSE (currently 4:00 p.m. Eastern Time, unless weather, equipment failure or
other factors contribute to an earlier closing time), each Business Day. The
Fund's net asset value per share is computed by dividing the value of the Fund's
net assets by the total number of shares outstanding. Net asset value is
determined separately for each class of shares of the Fund. The assets of the
Fund consist primarily of the Underlying Theme Funds, which are valued at their
respective net asset values at the time of computation. Other Fund assets are
valued at current market price or, if unavailable, at fair value determined in
good faith by or under the direction of the Trust's Board of Trustees.
The different service and distribution fees borne by each class of shares of the
Fund will result in different net asset values and dividends. The per share net
asset value of the Class B shares of the Fund generally will be lower than that
of the Class A shares of the Fund because of the higher expenses borne by the
Class B shares. The per share net asset value of the Advisor Class shares of the
Fund generally will be higher than that of the Class A and Class B shares of the
Prospectus Page 32
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- -------------------------------------------------------------------------------
Fund because of the absence of any service and distribution fees applicable to
the Advisor Class shares. It is expected, however, that the net asset value per
share of the classes will tend to converge immediately after the payment of
dividends, which will differ by approximately the amount of the service and
distribution fee accrual differential between the classes.
DIVIDENDS, OTHER DISTRIBUTIONS
AND FEDERAL INCOME TAXATION
DIVIDENDS AND OTHER DISTRIBUTIONS. The Fund annually declares as a dividend all
of its net investment income, if any, which includes dividends, accrued interest
and earned discount (including both original issue and market discounts) less
applicable expenses. The Fund also annually distributes substantially all of its
realized net short-term capital gain (the excess of short-term capital gains
over short-term capital losses), net capital gain (the excess of net long-term
capital gain over net short-term capital loss) and net gains from foreign
currency transactions, if any. The Fund may make an additional dividend or other
distribution if necessary to avoid a 4% excise tax on certain undistributed
income and gain.
Dividends and other distributions paid by the Fund with respect to all classes
of its shares are calculated in the same manner and at the same time. The per
share income dividends on Class B shares of the Fund will be lower than the per
share income dividends on Class A shares of the Fund as a result of the higher
service and distribution fees applicable to Class B shares; and the per share
income dividends on both such classes of shares of the Fund will be lower than
the per share income dividends on the Advisor Class shares of the fund as a
result of the absence of any service and distribution fees applicable to Advisor
Class shares. SHAREHOLDERS MAY ELECT:
. to have all dividends and other distributions automatically reinvested in
additional Fund shares of the distributing class (or in shares of the
corresponding class of other GT Global Mutual Funds); or
. to receive dividends in cash and have other distributions automatically
reinvested in additional Fund shares of the distributing class (or in shares
of the corresponding class of other GT Global Mutual Funds); or
. to receive other distributions in cash and have dividends automatically
reinvested in additional Fund shares of the distributing class (or in shares
of the corresponding class of other GT Global Mutual Funds); or
. to receive dividends and other distributions in cash.
Automatic reinvestments in additional shares are made at net asset value without
imposition of a sales charge. IF NO ELECTION IS MADE BY A SHAREHOLDER, ALL
DIVIDENDS AND OTHER DISTRIBUTIONS WILL BE AUTOMATICALLY REINVESTED IN ADDITIONAL
FUND SHARES OF THE DISTRIBUTING CLASS. Reinvestments in another GT Global Mutual
Fund may only be directed to an account with the identical shareholder
registration and account number. These elections may be changed by a shareholder
at any time; to be effective with respect to a distribution, the shareholder or
the shareholder's broker must contact the Transfer Agent by mail or telephone at
least 15 Business Days prior to the payment date. THE FEDERAL INCOME TAX
CONSEQUENCES OF DIVIDENDS AND OTHER DISTRIBUTIONS ARE THE SAME WHETHER THEY ARE
RECEIVED IN CASH OR REINVESTED IN ADDITIONAL SHARES.
Prospectus Page 33
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- -------------------------------------------------------------------------------
Any dividend or other distribution paid by the Fund has the effect of reducing
the net asset value per share on the ex-dividend date by the amount thereof.
Therefore, a dividend or other distribution paid shortly after a purchase of
shares would represent, in substance, a return of capital to the shareholder (to
the extent it is paid on the shares so purchased) even though subject to income
tax, as discussed below.
TAXES. The Fund intends to qualify for treatment as a regulated investment
company under the Code. In each taxable year that the Fund so qualifies, the
Fund (but not its shareholders) will be relieved of federal income tax on that
part of its investment company taxable income (consisting generally of net
investment income and net short-term capital gain) and net capital gain that is
distributed to its shareholders.
Dividends from the Fund's investment company taxable income (whether paid in
cash or reinvested in additional shares) are taxable to its shareholders as
ordinary income to the extent of the Fund's earnings and profits. Distributions
of the Fund's net capital gain, when designated as such, are taxable to its
shareholders as long-term capital gains, regardless of how long they have held
their Fund shares and whether paid in cash or reinvested in additional shares.
The Fund provides federal tax information to its shareholders annually,
including information about dividends and other distributions paid during the
preceding year.
The Fund must withhold 31% from dividends, capital gain distributions and
redemption proceeds payable to any individuals and certain other noncorporate
shareholders who have not furnished to the Fund a correct taxpayer
identification number or a properly completed claim for exemption on Form W-8 or
W-9. Withholding at that rate also is required from dividends and capital gain
distributions payable to such shareholders who otherwise are subject to backup
withholding. Fund accounts opened via a bank wire purchase (see "How to Invest -
Purchases Through the Distributor") are considered to have uncertified taxpayer
identification numbers unless a completed Form W-8 or W-9 or Account Application
is received by the Transfer Agent within seven days after the purchase. A
shareholder should contact the Transfer Agent if the shareholder is uncertain
whether a proper taxpayer identification number is on file with the Fund.
A redemption of Fund shares may result in taxable gain or loss to the redeeming
shareholder, depending upon whether the redemption proceeds are more or less
than the shareholder's adjusted basis for the redeemed shares (which normally
includes any initial sales charge paid on Class A shares). An exchange of Fund
shares for shares of another GT Global Mutual Fund generally will have similar
tax consequences. However, special tax rules apply when a shareholder (1)
disposes of Class A shares of the Fund through a redemption or exchange within
90 days after purchase and (2) subsequently acquires Class A shares of such Fund
or any other GT Global Mutual Fund on which an initial sales charge normally is
imposed without paying that sales charge due to the reinstatement privilege or
exchange privilege. In these cases, any gain on the disposition of the original
Class A shares will be increased, or loss decreased, by the amount of the sales
charge paid when those shares were acquired, and that amount will increase the
adjusted basis of the shares subsequently acquired. In addition, if shares of
the Fund are purchased within 30 days before or after redeeming other shares of
the Fund (regardless of class) at a loss, all or a part of the loss will not be
deductible and instead will increase the basis of the newly purchased shares.
Prospectus Page 34
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- -------------------------------------------------------------------------------
The foregoing is only a summary of some of the important federal tax
considerations generally affecting the Fund and its shareholders. See "Taxes" in
the Statement of Additional Information for a further discussion. There may be
other federal, state, local or foreign tax considerations applicable to a
particular investor. Prospective investors therefore are urged to consult their
tax advisers.
MANAGEMENT
The Trust's Board of Trustees has overall responsibility for the operation of
the Fund and has approved contracts with various financial organizations to
provide certain services required by the Fund. See "Trustees and Executive
Officers" in the Statement of Additional Information for a complete description
of the Trustees of the Trust.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Subject to the supervision and
direction of the Trust's Board of Trustees, the Manager will ensure that the
Fund's assets are invested in the Underlying Theme Funds according to the
formula and pre-determined percentages described in the "Investment Objective
and Policies" section of this Prospectus. The Manager will determine how the
Fund's assets will be invested in short-term investments and place all purchase
and sale orders for such instruments and for the Underlying Theme Funds. The
Manager provides the following administration services to the Fund: furnishing
corporate officers and clerical staff; providing office space, services and
equipment; and supervising all matters relating to the Fund's operation. The
Manager also serves as the Fund's pricing and accounting agent. Finally the
Manager will assume all other costs of the Fund's operation, such as trustee
fees, legal and audit fees, except that the Fund will pay certain distribution
fees, as described below. The Fund, as a shareholder in the Underlying Theme
Funds, indirectly will bear its proportionate share of any investment management
fees and other expenses paid by the Underlying Theme Funds.
The Manager provides investment management and/or administration services to the
GT Global Mutual Funds. The Manager and its worldwide asset management
affiliates have provided investment management and/or administration services to
institutional, corporate and individual clients around the world since 1969.
The Manager and its worldwide affiliates, including the Manager Bank in
Liechtenstein, formerly Bank in Liechtenstein, compose Liechtenstein Global
Trust, formerly BIL GT Group Limited. Liechtenstein Global Trust is a provider
of global asset management and private banking products and services to
individual and institutional investors. Liechtenstein Global Trust is controlled
by the Prince of Liechtenstein Foundation, which serves as the parent
organization for the various business enterprises of the Princely Family of
Liechtenstein. The principal business address of the Prince of Liechtenstein
Foundation is Herrengasse 12, FL-9490, Vaduz, Liechtenstein.
As of June 30, 1996, the Manager and its worldwide affiliates managed
approximately $__ billion. In the United States, as of June 30, 1996, the
Manager managed or administered approximately $__ billion of GT Global Mutual
Funds. As of June 30, 1996, assets entrusted to Liechtenstein Global Trust
totaled approximately $__ billion.
While the Fund will not be actively managed or have a portfolio manager, the
Underlying Theme Funds are actively managed by teams of investment
professionals. At least once a year the Fund will rebalance the percentages of
its assets in each Underlying Theme Fund according to the total industry
Prospectus Page 35
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- -------------------------------------------------------------------------------
weighting of the securities held by the Underlying Theme Funds as represented in
the Morgan Stanley Capital International AC World Index.
DISTRIBUTION OF FUND SHARES. GT Global is the distributor of the Fund's Class A
and Class B shares. Like the Manager, GT Global is a subsidiary of Liechtenstein
Global Trust with offices at 50 California Street, 27th Floor, San Francisco, CA
94111. As distributor, GT Global collects the sales charges imposed on purchases
of Class A shares and any contingent deferred sales charges that may be imposed
on certain redemptions of Class A and Class B shares. GT Global reallows a
portion of the sales charge on Class A shares to broker/dealers that have sold
such shares in accordance with the schedule set forth above under "How to
Invest." In addition, GT Global pays a commission equal to 4.00% of the amount
invested to broker/dealers who sell Class B shares. A commission with respect to
Class B shares is not paid on exchanges or certain reinvestments in Class B
shares.
GT Global, at its own expense, may provide additional promotional incentives to
broker/dealers that sell shares of the Fund and/or shares of the other GT Global
Mutual Funds. In some instances additional compensation or promotional
incentives may be offered to broker/dealers that have sold or may sell
significant amounts of shares during specified periods of time. Such
compensation and incentives may include, but are not limited to, cash,
merchandise, trips and financial assistance to brokers in connection with
preapproved conferences or seminars, sales or training programs for invited
sales personnel, payment for travel expenses (including meals and lodging)
incurred by sales personnel and members of their families or other invited
guests to various locations for such seminars or training programs, seminars for
the public, advertising and sales campaigns regarding one or more of the GT
Global Mutual Funds, and/or other events sponsored by the broker/dealer. In
addition, GT Global makes ongoing payments to brokerage firms, financial
institutions (including banks) and others that facilitate the administration and
servicing of shareholder accounts.
Under a plan of distribution adopted by the Trust's Board of Trustees pursuant
to Rule 12b-1 under the 1940 Act, with respect to the Fund's Class A shares
("Class A Plan"), the Fund may pay GT Global a service fee at the annualized
rate of up to 0.25% of the average daily net assets of the Fund's Class A shares
for its expenditures incurred in servicing and maintaining shareholder accounts,
and may pay GT Global a distribution fee at the annualized rate of up to 0.50%
of the average daily net assets of the Fund's Class A shares, less any amounts
paid by the Fund as the aforementioned service fee for its expenditures incurred
in providing services as distributor. All expenses for which GT Global is
reimbursed under the Class A Plan will have been incurred within one year of
such reimbursement.
Pursuant to a separate plan of distribution adopted with respect to the Fund's
Class B shares ("Class B Plan"), the Fund may pay GT Global a service fee at the
annualized rate of up to 0.25% of the average daily net assets of the Fund's
Class B shares for its expenditures incurred in servicing and maintaining
shareholder accounts, and may pay GT Global a distribution fee at the annualized
rate of up to 0.75% of the average daily net assets of the Fund's Class B shares
for its expenditures incurred in providing services as distributor. Expenses
incurred under the Class B Plan in excess of 1.00% annually may be carried
forward for reimbursement in subsequent years as long as such Plan continues in
effect.
GT Global's service and distribution expenses include the payment of ongoing
commissions; the cost of any additional compensation paid by GT Global to
broker/dealers; the costs of printing and mailing to prospective investors
Prospectus Page 36
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- -------------------------------------------------------------------------------
prospectuses and other materials relating to the Funds; the costs of developing,
printing, distributing and publishing advertisements and other sales literature;
and allocated costs relating to GT Global's distribution activities, including,
among other things, employee salaries, bonuses and other overhead expenses. In
addition, its expenses under the Class B Plan include payment of initial sales
commissions to broker/dealers and interest on any unreimbursed amounts carried
forward thereunder.
The Glass-Steagall Act and other applicable laws, among other things, generally
prohibit federally chartered or supervised banks from engaging in the business
of underwriting or distributing securities. Accordingly, GT Global intends to
engage banks (if at all) only to perform administrative and shareholder
servicing functions. If a bank were prohibited from so acting, its shareholder
clients would be permitted to remain shareholders, and alternative means for
continuing the servicing of such shareholders would be sought. It is not
expected that shareholders would suffer any adverse financial consequences as a
result of any of these occurrences.
PERFORMANCE
PERFORMANCE OF THE UNDERLYING THEME FUNDS. The Fund has no operating history as
of the date of this Prospectus and therefore no performance record. The
following table shows the average annual total returns of Class A SHARES1/ of
each Underlying Theme Fund for the most recent one-, five- and ten-year periods
(or since inception if shorter). The performance information reflects the
maximum applicable sales charges and other distribution-related expenses and
service fees. Returns would be higher if these charges and fees were not
reflected. The Fund invests in Advisor Class shares of the Underlying Theme
Funds, which are not subject to these sales charges and distribution-related
expenses and service fees.
<TABLE>
<CAPTION>
Assets as of Average Annual Total
Underlying Theme Fund 12/31/96 Inception Returns through
($000's) Date 12/31/96
----------------------
One Five Ten
Year Years Years
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GT Global Consumer Products
and Services Fund
GT Global Financial
Services Fund
GT Global Health
Care Fund
GT Global Infrastructure Fund
GT Global Natural Resources Fund
GT Global Telecommunications Fund
</TABLE>
(1) The class outstanding for the longest period. If more than one class is
outstanding for the longest period, the table shows performance for the class
that represents the largest portion of the Underlying Theme Fund's net assets.
The past performance of the Underlying Theme Funds is not a guarantee of future
results for either the Underlying Theme Funds or the Fund. Further information
Prospectus Page 37
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- -------------------------------------------------------------------------------
about each Underlying Theme Fund's performance is contained in its Annual
Report, which may be obtained without charge by calling (800) 824-1580 or
contacting your financial adviser.
OTHER INFORMATION
CONFIRMATIONS AND REPORTS TO SHAREHOLDERS. Each time a transaction is made that
affects a shareholder's account in the Fund, the shareholder will receive from
the Transfer Agent a confirmation statement reflecting the transaction.
Confirmations for transactions effected pursuant to the Fund's Automatic
Investment Plan, Systematic Withdrawal Plan and automatic dividend reinvestment
program may be provided quarterly. Shortly after the end of the Fund's fiscal
year on October 31 and fiscal half-year on April 30 of each year, shareholders
receive an annual and semiannual report, respectively. In addition, the federal
income status of distributions made by the Fund to shareholders will be reported
after the end of the fiscal year on Form 1099-DIV. Under certain circumstances,
duplicate mailings of such reports to the same household may be consolidated.
ORGANIZATION OF THE TRUST. The Trust was organized as a Massachusetts business
trust on August 26, 1996. The Trust currently consists of one series. From time
to time, the Trust may establish other series, each corresponding to a distinct
investment portfolio and a distinct series of the Trust's common stock. Shares
of each series are entitled to one vote per share (with proportional voting for
fractional shares) and are freely transferable. Shareholders have no preemptive
or conversion rights.
On any matter submitted to a vote of shareholders, shares of the Fund will be
voted by the Fund's shareholders individually when the matter affects the
specific interest of the Fund only, such as approval of its investment
management arrangements. In addition, each class of shares of a series has
exclusive voting rights with respect to its distribution plan. The shares of
each series and of all the Trust's series will be voted in the aggregate on
other matters, such as the election of Trustees and ratification of the
selection by the Board of Trustees of the Trust's independent accountants.
Normally there will be no annual meeting of shareholders in any year, except as
required under the 1940 Act. The Fund would be required to hold a shareholders'
meeting in the event that at any time less than a majority of the Trustees
holding office had been elected by shareholders. Trustees shall continue to hold
office until their successors are elected and have qualified. Shares of the Fund
do not have cumulative voting rights, which means that the holders of a majority
of the shares voting for the election of Trustees can elect all the Trustees. A
Trustee may be removed upon a majority vote of the shareholders qualified to
vote in the election. Shareholders holding 10% of the Trust's outstanding voting
shares may call a meeting of shareholders for the purpose of voting upon the
question of removal of any Trustee or for any other purpose. The 1940 Act
requires the Trust to assist shareholders in calling such a meeting.
Pursuant to the Trust's Declaration of Trust, the Trust may issue an unlimited
number of shares. Each share of the Fund represents an equal proportionate
interests in the Fund with other shares of the Fund and is entitled to such
dividends and other distributions out of the income earned and gain realized on
the assets belonging to the Fund as may be declared at the discretion of the
Board of Trustees. Shares of the Fund when issued are fully paid and
nonassessable.
Prospectus Page 38
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- -------------------------------------------------------------------------------
SHAREHOLDER INQUIRIES. Shareholder inquiries may be made by calling the Fund
toll-free at (800) 223-2138 or by writing to the Fund at 50 California Street,
27th Floor, San Francisco, California 94111.
PERFORMANCE INFORMATION. The Fund, from time to time, may include information on
its investment results and/or comparisons of its investment results to various
unmanaged indices or results of other mutual funds or groups of mutual funds in
advertisements, sales literature or reports furnished to present or prospective
shareholders.
In such materials, the Fund may quote its average annual total return
("Standardized Return"). Standardized Return is calculated separately for each
class of shares of the Fund. Standardized Return shows percentage rates
reflecting the average annual change in the value of an assumed investment in
the Fund at the end of a one-year period and at the end of five- and ten-year
periods, reduced by the maximum applicable sales charge imposed on sales of Fund
shares. If a one-, five- and/or ten-year period has not yet elapsed, data will
be provided as of the end of a shorter period corresponding to the life of the
Fund. Standardized Return assumes the reinvestment of all dividends and other
distributions.
In addition, in order to more completely represent the Fund's performance or
more accurately compare such performance to other measures of investment return,
the Fund also may include in advertisements, sales literature and shareholder
reports other total return performance data ("Non-Standardized Return").
Non-Standardized Return reflects percentage rates of return encompassing all
elements of return (i.e., income and capital appreciation or depreciation) and
assumes reinvestment of all dividends and other distributions. Non-Standardized
Return may be quoted for the same or different periods as those for which
Standardized Return is quoted; it may consist of an aggregate or average annual
percentage rate of return, actual year-by-year rates or any combination thereof.
Non-Standardized Return may or may not take sales charges into account;
performance data calculated without taking the effect of sales charges into
account will be higher than data including the effect of such charges.
The Fund's performance data will reflect past performance and will not
necessarily be indicative of future results. The Fund's investment results will
vary from time to time depending upon market conditions, the composition of
their portfolios and their operating expenses. These factors and possible
differences in calculation methods should be considered when comparing the
Fund's investment results with those published for other investment companies,
other investment vehicles and unmanaged indices. The Fund's results also should
be considered relative to the risks associated with its investment objective and
policies. See "Investment Results" in the Statement of Additional Information.
TRANSFER AGENT. Shareholder servicing, reporting and general transfer agent
functions for the Fund are performed by GT Global Investor Services, Inc. The
Transfer Agent is an affiliate of the Manager and GT Global, a subsidiary of
Liechtenstein Global Trust and maintains offices at California Plaza, 2121 N.
California Boulevard, Suite 450, Walnut Creek, CA 94596.
CUSTODIAN. State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, is custodian of the assets of the Fund.
COUNSEL. The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue,
N.W., Washington, D.C. 20036-1800, acts as counsel to the Trust and to the Fund.
Prospectus Page 39
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- -------------------------------------------------------------------------------
Kirkpatrick & Lockhart LLP also acts as counsel to the Manager, GT Global and
the Transfer Agent in connection with other matters.
INDEPENDENT ACCOUNTANTS. The Fund's independent accountants are Coopers &
Lybrand L.L.P., One Post Office Square, Boston, Massachusetts 02109. Coopers &
Lybrand L.L.P. conducts an annual audit of the Fund, assists in the preparation
of the Fund's federal and state income tax returns, and consults with the Trust
and the Fund as to matters of accounting, regulatory filings, and federal and
state income taxation.
MULTIPLE TRANSLATIONS OF THE PROSPECTUS. This Prospectus may be translated into
other languages. In the event of any inconsistency or ambiguity as to the
meaning of any word or phrase contained in a translation, the English text shall
prevail.
Prospectus Page 40
<PAGE>
GT GLOBAL NEW DIMENSION FUND:
ADVISOR CLASS
Prospectus -- ________ __, 1997
- --------------------------------------------------------------------------------
GT Global New Dimension Fund (the "Fund") is a diversified series of GT Global
Asset Allocation Trust (the "Trust"), an open-end management investment company.
The Fund seeks long-term growth of capital. Unlike a typical mutual fund, which
invests directly in portfolio securities, the Fund will invest primarily in
shares of other GT Global mutual funds. The Fund seeks its objective by
investing in the following global theme mutual funds: GT Global Consumer
Products and Services Fund; GT Global Financial Services Fund; GT Global Health
Care Fund; GT Global Infrastructure Fund; GT Global Natural Resources Fund; and
GT Global Telecommunications Fund (collectively, the "Underlying Theme Funds").
There is no assurance that the Fund will achieve its investment objective.
FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR GUARANTEED BY,
ANY BANK, NOR ARE THEY FEDERALLY INSURED OR OTHERWISE PROTECTED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY
OTHER AGENCY.
The Fund is managed by Chancellor LGT Asset Management, Inc. (the "Manager").
The Manager and its worldwide affiliates are part of Liechtenstein Global Trust,
a provider of global asset management and private banking products and services
to individual and institutional investors.
Shares offered by this Prospectus are available for purchase only by certain
investors and are offered at net asset value without the imposition of a
front-end or contingent deferred sales charge or Rule 12b-1 fees.
This Prospectus sets forth concisely the information an investor should know
before investing and should be read carefully and retained for future reference.
A Statement of Additional Information, dated ________ __, 1997, has been filed
with the Securities and Exchange Commission ("SEC") and, as supplemented or
amended from time to time, is incorporated by reference. The Statement of
Additional Information is available without charge by writing to the Fund at 50
California Street, 27th Floor, San Francisco, California 94111, or by calling
(800) 824-1580.
FOR FURTHER INFORMATION, CALL (800) 824-1580 OR CONTACT YOUR FINANCIAL
ADVISOR.
GT GLOBAL
A Member of Liechtenstein Global Trust
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED ON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
T A B L E O F C O N T E N T S
- --------------------------------------------------------------------------------
PAGE
Prospectus Summary............................................................
Investment Objective and Policies.............................................
Description of the Underlying Theme Funds.....................................
Risk Factors and Special Considerations.......................................
How to Invest.................................................................
How to Make Exchanges.........................................................
How to Redeem Shares .........................................................
Shareholder Account Manual....................................................
Calculation of Net Asset Value................................................
Dividends, Other Distributions and Federal Income Taxation ...................
Management....................................................................
Performance...................................................................
Other Information.............................................................
Prospectus Page 2
<PAGE>
GT GLOBAL NEW DIMENSION FUND
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------
The following summary is qualified in its entirety by the more detailed
information appearing in the body of this Prospectus. Cross-references in the
summary are to headings in the body of the Prospectus.
Investment Objective: The Fund seeks long-term growth of capital.
Principal Investments: The Fund seeks its investment objective by
investing its assets in the following global theme
mutual funds: GT Global Consumer Products and
Services Fund ("Consumer Products and Services
Fund"); GT Global Financial Services Fund
("Financial Services Fund"); GT Global Health Care
Fund ("Health Care Fund"); GT Global
Infrastructure Fund ("Infrastructure Fund"); GT
Global Natural Resources Fund ("Natural Resources
Fund"); and GT Global Telecommunications Fund
("Telecommunications Fund"). The allocation of the
Fund's assets among the six Underlying Theme Funds
is governed strictly by a formula described
herein. See "Investment Objective and Policies."
There is no assurance that the Fund will achieve
its investment objective. The Fund's net asset
value will fluctuate, reflecting fluctuations in
the net asset value of the shares of the
Underlying Theme Funds. Investors should review
the investment objectives and policies of the Fund
and the Underlying Theme Funds carefully and
consider their ability to assume these and other
risks involved in purchasing shares of the Fund.
See "Investment Objective and Policies" and
"Description of the Underlying Theme Funds." As a
newly organized entity, the Fund has no operating
history.
Investment Manager: The Manager is part of Liechtenstein Global Trust,
a provider of global asset management and private
banking products and services to individual and
institutional investors, entrusted with
approximately $___ billion in total assets as of
June 30, 1997. The Manager and its worldwide asset
management affiliates maintain fully staffed
investment offices in Frankfurt, Hong Kong,
London, New York, San Francisco, Singapore,
Sydney, Tokyo and Toronto. See "Management."
Prospectus Page 3
<PAGE>
GT GLOBAL NEW DIMENSION FUND
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------
Advisor Class Shares: Advisor Class shares are offered through this
Prospectus to (a) trustees or other fiduciaries
purchasing shares for employee benefit plans which
are sponsored by organizations which have at least
1,000 employees; (b) any account with assets of at
least $10,000 if (i) a financial planner, trust
company, bank trust department or registered
investment adviser has investment discretion over
such account, and (ii) the account holder pays
such person as compensation for its advice and
other services an annual fee of at least .50% on
the assets in the account; (c) any account with
assets of at least $10,000 if (i) such account is
established under a "wrap fee" program, and (ii)
the account holder pays the sponsor of such
program an annual fee of at least .50% on the
assets in the account; (d) accounts advised by one
of the companies composing or affiliated with
Liechtenstein Global Trust; and (e) any of the
companies composing or affiliated with
Liechtenstein Global Trust.
Shares Available Through: Advisor Class shares of the Fund are available
through Financial Advisors (as defined herein)
who have entered into agreements with the
Fund's distributor, GT Global, Inc. ("GT
Global") or certain of its affiliates. See
"How to Invest" and "Shareholder Account
Manual."
Exchange Privileges: Advisor Class shares of the Fund may be
exchanged for Advisor Class shares of other GT
Global Mutual Funds, which are open-end
management investment companies advised and/or
administered by the Manager. See "How to Make
Exchanges" and "Shareholder Account Manual."
Redemptions: Shares may be redeemed through the Fund's
transfer agent, GT Global Investors Services,
Inc. ("Transfer Agent"). See "How to Redeem
Shares" and "Shareholder Account Manual."
Dividends and Other
Distributions: Dividends and capital gain distributions, if
any, are paid annually.
Reinvestment: Dividends and other distributions may be
reinvested automatically in Advisor Class
shares of the Fund or in Advisor Class shares
of other GT Global Mutual Funds.
Prospectus Page 4
<PAGE>
GT GLOBAL NEW DIMENSION FUND
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------
Net Asset Values: Advisor Class shares of the Fund are expected to
be quoted daily in the financial section of most
newspapers.
SUMMARY OF INVESTOR COSTS. The expenses and maximum transaction costs associated
with investing in Advisor Class shares of the Fund are reflected in the
following tables. Expenses shown below are estimated.
ADVISOR CLASS
-------------
SHAREHOLDER TRANSACTIONS COSTS:
Maximum sales charge on purchase of share (as a None
% of offering price)...........................
Sales charges on reinvested distributions to
shareholders................................... None
Maximum deferred sales charges (as a % of net
asset value at time of purchase or sale,
whichever is less)............................. -
Redemption charges............................. -
Exchange fees -
-- On first four exchanges each year......
-- On each additional exchange............ $7.50
ANNUAL FUND OPERATING EXPENSES*:
(AS A % OF AVERAGE NET ASSETS)
Investment management fees..................... None
12b-1 distribution and service fees............ None
Other expenses (after reimbursements).......... 0.00%
Total Fund Operating Expenses.................. =====%
- ---------------------
* The Fund's Annual Fund Operating Expenses are estimated for its initial
fiscal period. "Other expenses" include transfer agency, legal, audit and
other operating expenses. Without reimbursements, "Other expenses" and
"Total Fund Operating Expenses" are estimated to be ____% and ____%,
respectively. See "Management" herein and the Statement of Additional
Information for more information. Investors purchasing Advisor Class
shares through financial planners, trust companies, bank trust departments
or registered investment advisers, or under a "wrap fee" program, will be
subject to additional fees charged by such entities or by the sponsors of
such programs. Where any account advised by one of the companies composing
or affiliated with Liechtenstein Global Trust invests in Advisor Class
shares of the Fund, such account shall not be subject to duplicative
advisory fees.
Prospectus Page 5
<PAGE>
GT GLOBAL NEW DIMENSION FUND
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------
In addition to the Annual Fund Operating Expenses shown above, the Fund, as a
shareholder in the Underlying Theme Funds, will indirectly bear its pro rata
share of the fees and expenses incurred by the Underlying Theme Funds. As a
result, the investment returns of the Fund will reflect the expenses of the
Underlying Theme Funds' that it holds. The following table shows the expense
ratio applicable to Advisor Class shares of the Underlying Theme Funds, for the
fiscal year ended October 31, 1996. The Fund invests only in Advisor Class
shares of the Underlying Theme Funds and, accordingly, pays no sales charge or
Rule 12b-1 service or distribution fees in connection with these investments.
The Fund, however, indirectly bears its pro rata share of the fees and expenses
applicable to Advisor Class shares of the Underlying Theme Funds.
---------------------------------------------------------------------------
UNDERLYING THEME FUND EXPENSE RATIO OF
ADVISOR CLASS SHARES
---------------------------------------------------------------------------
GT Global Consumer Products and Services Fund 1.84%
GT Global Financial Services Fund 1.90%
GT Global Health Care Fund 1.34%
GT Global Infrastructure Fund 1.75%
GT Global Natural Resources Fund 1.80%
GT Global Telecommunications Fund 1.29%
---------------------------------------------------------------------------
The following table shows the estimated aggregate expense ratio of the Fund
based on a weighted average of the expense ratios of the Underlying Theme Funds
in which the Fund would have invested on _________, 1997, plus the expense ratio
of the Fund.
- --------------------------------------------------------------------------------
GT GLOBAL NEW DIMENSION FUND ESTIMATED AGGREGATE EXPENSE
RATIO
- --------------------------------------------------------------------------------
Advisor Class %
- --------------------------------------------------------------------------------
HYPOTHETICAL EXAMPLE OF EFFECT OF EXPENSES:
An investor would have directly or indirectly paid the following expenses of the
Fund and of the Underlying Theme Funds at the end of the periods shown on a
$1,000 investment in the Fund, assuming a 5.0% annual return:
ONE THREE
YEAR YEARS
---- -----
Advisor Class Shares..................................
- -------------------------
THESE TABLES ARE INTENDED TO ASSIST INVESTORS IN UNDERSTANDING THE VARIOUS
COSTS AND EXPENSES ASSOCIATED WITH INVESTING IN THE FUND. THE "HYPOTHETICAL
EXAMPLE" IS NOT A REPRESENTATION OF FUTURE EXPENSES. THE FUND'S ACTUAL
EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN. The example assumes payment
by the Fund of operating expenses at the level set forth under "Annual Fund
Operating Expenses" above and of its pro rata share of the Advisor Class
expenses of the Underlying Theme Funds.
Prospectus Page 6
<PAGE>
GT GLOBAL NEW DIMENSION FUND
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------
The tables and the assumption in the Hypothetical Example of a 5.0% annual
return are required by regulation of the SEC applicable to all mutual
funds. The 5.0% annual return is not a prediction of and does not represent
the Fund's or any Underlying Theme Fund's projected or actual performance.
Prospectus Page 7
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- ------------------------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES
The Fund seeks long-term growth of capital. Unlike a typical mutual fund, which
invests directly in portfolio securities, the Fund will invest primarily in
shares of other GT Global mutual funds. The Fund seeks to achieve its investment
objective by investing substantially all of its assets in the following global
theme mutual funds:
o GT Global Consumer Products and Services Fund
o GT Global Financial Services Fund
o GT Global Health Care Fund
o GT Global Infrastructure Fund
o GT GlobalNatural Resources Fund
o GT Global Telecommunications Fund
The Manager will exercise no discretion in investing the assets of the Fund. The
Manager periodically determines the allocation of assets to the Underlying Theme
Funds according to the industry weightings of the companies comprising the
Morgan Stanley Capital International All Country (AC) World Index ("MSCI"). (The
MSCI is a broad unmanaged index of global stock prices, currently comprising
2500 different issuers, located in 44 countries and grouped in 38 separate
industries.) The Manager assesses which of the Underlying Theme Funds can be
invested, as part of their primary focus, in each of the industries. For
example, Financial Services Fund typically invests primarily in companies
categorized in the MCSI as in the Banking, Financial Services, Insurance and
Real Estate industries. The percentage that those industries comprise in the
MSCI is then used by the Manager as the percentage of new money in the Fund that
will be invested in Financial Services Fund. Where two or more Underlying Theme
Funds can invest in an industry, the weighting of that industry in the MSCI is
split equally among each qualifying Underlying Theme Fund. As a result of the
Manager's analysis of the 38 industries currently comprising the MSCI, the
Underlying Theme Funds are related to all industries. Of course, the Underlying
Theme Funds do not invest necessarily in the same industries or same companies
which comprise the MSCI. Because the industry weighting percentages in the MSCI
change over time and because the percentage that each Underlying Theme Fund will
represent in the Fund will change over time, the Manager will periodically
rebalance the Fund to reflect the current MSCI weighting. This rebalancing will
occur once a year. As of _____________, 1997, the weight assigned to each
Underlying Theme Fund, using the above methodology, was as follows:
Consumer Products and Services Fund ______%
Financial Services Fund ______%
Health Care Fund ______%
Infrastructure Fund ______%
Natural Resources Fund ______%
Telecommunications Fund ______%
The Fund will be a more diversified investment than would be achieved by
investing in any single Underlying Theme Fund. However, because each Underlying
Theme Fund is actively managed without any attempt to reflect the country,
industry or company weightings of the MSCI, those Funds will perform differently
than the corresponding industry components of the MSCI and the Fund will perform
differently than the overall MSCI. While the Fund does not therefore represent
the performance of the MSCI, it does represent a globally diversified portfolio,
with allocations among developed and emerging countries, industries and
companies intended to achieve growth of capital.
Prospectus Page 8
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- ------------------------------------------------------------------------------
The Fund is designed to meet the needs of investors who seek professional money
management services and who appreciate the advantages of diversification. The
Fund by itself should not be considered a complete investment program. As a
newly organized entity, the Fund has no operating history.
OTHER INFORMATION. The investment objective of the Fund may not be changed
without the approval of a majority of the Fund's outstanding voting securities.
As defined in the 1940 Act and as used in this Prospectus, a "majority of the
Fund's outstanding voting securities" means the lesser of (i) 67% of the Fund's
shares represented at a meeting at which more than 50% of the outstanding shares
are represented, or (ii) more than 50% of the outstanding shares. In addition,
the Fund has adopted certain investment limitations as fundamental policies
which also may not be changed without shareholder approval. See "Investment
Limitations" in the Statement of Additional Information. Unless specifically
noted, the Fund's investment policies described in this Prospectus, and in the
Statement of Additional Information, including the policies with respect to
investment in the Underlying Theme Funds, is not a fundamental policy and may be
changed by vote of the Trust's Board of Trustees without shareholder approval.
The Fund's policies regarding concentration and lending, and the percentage of
the Fund's assets that may be committed to borrowing, are fundamental policies
and may not be changed without shareholder approval.
DESCRIPTION OF THE UNDERLYING THEME FUNDS
The following descriptions summarize the investment objectives and policies of
the Underlying Theme Funds. There is no assurance that any of the Underlying
Theme Funds will achieve its investment objective. The Statement of Additional
Information includes more information about the investment policies of the
Underlying Theme Funds. Investors desiring more information on an Underlying
Theme Fund described below should call (800) 824-1580 or contact your financial
advisor for the Underlying Theme Funds' prospectus.
CONSUMER PRODUCTS AND SERVICES FUND. The Consumer Products and Services Fund's
investment objective is long-term capital growth. The Consumer Products and
Services Fund seeks its objective by investing all of its investable assets in
the Consumer Products and Services Portfolio, that, in turn, invests primarily
in equity securities of companies throughout the world that manufacture, market,
retail or distribute consumer products and services. The Consumer Products and
Services Portfolio's investment objective is identical to that of the Consumer
Products and Services Fund. The Consumer Products and Services Portfolio invests
in consumer products and services companies which, in the opinion of the
Manager, have potential for above average, long-term growth in sales and
earnings.
At least 65% of the Consumer Products and Services Portfolio's total assets
normally will be invested in common and preferred stocks and warrants to acquire
such securities issued by consumer products and services companies. A "consumer
products or services" company is an entity in which (i) at least 50% of either
the revenues or earnings was derived from activities relating to consumer
products or services, or (ii) at least 50% of the assets was devoted to such
activities, based on the company's most recent fiscal year. The remainder of the
Consumer Products and Services Portfolio's assets may be invested in debt
securities issued by consumer products or services companies and/or equity and
debt securities of companies outside the consumer products or services
industries, which, in the opinion of the Manager, stand to benefit from
developments in such industries.
Prospectus Page 9
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- ------------------------------------------------------------------------------
The Consumer Products and Services Portfolio expects that a significant portion
of its assets may be invested in the securities of U.S. issuers from time to
time, particularly those that market their products globally. However, consumer
products and services companies of a particular nation or region of the world
are often operated and owned in their local markets, close to their customers.
These companies, the Manager believes, may offer superior opportunities for
capital growth as compared to their larger, multinational counterparts. Certain
global markets may be more attractive than others from time to time; companies
dependent on U.S. markets, for example, may be outperformed by companies not
dependent on U.S. markets. The Manager also believes that the demand for
consumer products and services worldwide will increase along with rising
disposable incomes in both developed and developing nations.
FINANCIAL SERVICES FUND. The Financial Services Fund's investment objective is
long-term capital growth. The Financial Services Fund seeks its objective by
investing all of its investable assets in the Financial Services Portfolio,
that, in turn, invests primarily in equity securities of companies throughout
the world that operate in the financial services industries. The Financial
Services Portfolio's investment objective is identical to that of the Financial
Services Fund. The Financial Services Portfolio invests in financial services
companies which, in the opinion of the Manager, have potential for above
average, long-term growth in sales and earnings. There is no assurance that the
Financial Services Fund or the Financial Services Portfolio will achieve its
investment objective.
At least 65% of the Financial Services Portfolio's total assets normally will be
invested in common and preferred stocks and warrants to acquire such securities
issued by financial services companies. A "financial services" company is an
entity in which (i) at least 50% of either the revenues or earnings was derived
from financial services activities, or (ii) at least 50% of the assets was
devoted to such activities, based on the company's most recent fiscal year. The
remainder of the Financial Services Portfolio's assets may be invested in debt
securities issued by financial services companies and/or equity and debt
securities of companies outside of the financial services industries, which, in
the opinion of the Manager, stand to benefit from developments in the financial
services industries.
The Manager expects that banking and related financial institution consolidation
in the developed countries, increased demand for retail borrowing in developing
countries, a growing need for international trade-based financing, a rising
demand for sophisticated risk management, the proliferating number of liquid
securities markets around the world, and larger concentrations of investable
assets should lead to growth in financial service companies that are positioned
for the future.
HEALTH CARE FUND. The Health Care Fund's investment objective is long-term
capital appreciation. The Health Care Fund seeks its objective by investing
primarily in equity securities of health care companies throughout the world.
The Health Care Fund invests in health care companies, which, in the opinion of
LGT, have potential for above average, long-term growth in sales and earnings.
Prospectus Page 10
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- ------------------------------------------------------------------------------
At least 65% of the Health Care Fund's total assets normally will be invested in
common and preferred stocks, and warrants to acquire such securities, issued by
health care companies. A "health care" company is an entity in which (i) at
least 50% of either the revenues or earnings was derived from health care
activities, or (ii) at least 50% of the assets was devoted to such activities,
based on the company's most recent fiscal year. The remainder of the Health Care
Fund's assets may be invested in debt securities issued by health care companies
and/or equity and debt securities of companies outside of the health care
industry, which, in the opinion of the Manager, stand to benefit from
developments in the health care industries.
The Health Care Fund expects that, from time to time, a significant portion of
its assets may be invested in the securities of U.S. issuers. Health care
industries, however, are global industries with significant, growing markets
outside of the United States. A sizable portion of the companies which comprise
the health care industries are headquartered outside of the United States, and
many important pharmaceutical and biotechnology discoveries and technological
breakthroughs have occurred outside of the United States, primarily in Japan,
the United Kingdom and Western Europe. In addition, the Manager believes that
the rapid and profound change in the United States health care system offers
investment opportunities in those companies acting as consolidators or otherwise
gaining market share at the expense of less efficient competitors.
INFRASTRUCTURE FUND. The Infrastructure Fund's investment objective is long-term
capital growth. The Infrastructure Fund seeks its objective by investing all of
its investable assets in the Infrastructure Portfolio, that, in turn, invests
primarily in equity securities of companies throughout the world that design,
develop or provide products and services significant to a country's
infrastructure. The Infrastructure Portfolio's investment objective is identical
to that of the Infrastructure Fund. The Infrastructure Portfolio invests in
infrastructure companies which, in the opinion of the Manager, have potential
for above average, long-term growth in sales and earnings.
At least 65% of the Infrastructure Portfolio's total assets normally will be
invested in common and preferred stocks and warrants to acquire such securities
issued by infrastructure companies. An "infrastructure" company is an entity in
which (i) at least 50% of either the revenues or earnings was derived from
infrastructure activities, or (ii) at least 50% of the assets was devoted to
such activities, based on the company's most recent fiscal year. The remainder
of the Infrastructure Portfolio's assets may be invested in debt securities
issued by infrastructure companies and/or equity and debt securities of
companies outside of the infrastructure industries, which, in the opinion of the
Manager, stand to benefit from developments in the infrastructure industries.
The Manager believes that strong economic growth in developing countries and
infrastructure replacement, upgrade, and deregulation in more developed
countries provide an environment for favorable investment opportunities in
infrastructure companies worldwide.
Prospectus Page 11
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- ------------------------------------------------------------------------------
NATURAL RESOURCES FUND. The Natural Resources Fund's investment objective is
long-term capital growth. The Natural Resources Fund seeks its objective by
investing all of its investable assets in the Natural Resources Portfolio, that,
in turn, invests primarily in equity securities of companies throughout the
world that own, explore or develop natural resources and other basic
commodities, or supply goods and services to such companies. The Natural
Resources Portfolio's investment objective is identical to that of the Natural
Resources Fund. The Natural Resources Portfolio invests in natural resource
companies which, in the opinion of the Manager, have potential for above
average, long-term growth in sales and earnings. There is no assurance that the
Natural Resources Fund or the Natural Resources Portfolio will achieve its
investment objective.
At least 65% of the Natural Resources Portfolio's total assets will normally be
invested in common stock and preferred stock, and warrants to acquire such
securities, issued by natural resource companies. A "natural resource" company
is an entity in which (i) at least 50% of either the revenues or earnings was
derived from natural resource activities, or (ii) at least 50% of the assets was
devoted to such activities, based upon the company's most recent fiscal year.
The remainder of the Natural Resources Portfolio's assets may be invested in
debt securities issued by natural resource companies and/or equity and debt
securities of companies outside of the natural resource industries, which, in
the opinion of the Manager, stand to benefit from developments in the resource
industries.
The Manager will allocate the Natural Resources Portfolio's investments among
natural resource companies depending on its assessment of their long-term growth
potential. In assessing these companies' long-term growth potential, the Manager
will evaluate, among other factors, their capabilities for expanded exploration
and production, superior exploration programs and production techniques and
facilities, current inventories, expected production and demand levels and the
potential to accumulate new resources. The Manager also believes that
investments in natural resource industries offer an opportunity to protect
wealth against the capital eroding effects of inflation.
TELECOMMUNICATIONS FUND. The Telecommunications Fund's investment objective is
long-term growth of capital. The Telecommunications Fund seeks its objective by
investing primarily in equity securities of companies throughout the world
engaged in the development, manufacture or sale of telecommunications services
or equipment. The Telecommunications Fund invests in telecommunications
companies which, in the opinion of the Manager, have potential for above
average, long-term growth in sales and earnings on a sustained basis.
At least 65% of the Telecommunications Fund's total assets normally will be
invested in common and preferred stocks and warrants to acquire such securities
issued by telecommunications companies. A "telecommunications" company is an
entity in which (i) at least 50% of either its revenues or earnings was derived
from telecommunications activities, or (ii) at least 50% of its assets was
devoted to telecommunications activities, based on the company's most recent
fiscal year. The remainder of the assets of the Telecommunications Fund may be
invested in debt securities issued by telecommunications companies and/or equity
and debt securities of companies outside of the telecommunications industry
which, in the opinion of the Manager, stand to benefit from developments in the
telecommunications industry.
Prospectus Page 12
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- ------------------------------------------------------------------------------
The Manager believes that there are opportunities for continued growth in demand
for components, products, media and systems to collect, store, retrieve,
transmit, process, distribute, record, reproduce and use information. The
pervasive societal impact of communications and information technologies has
been accelerated by the lower costs and higher efficiencies that result from the
blending of computers with telecommunications systems. Accordingly, companies
engaged in the production of methods for using electronic and, potentially,
video technology to communicate information are expected to be important in the
Telecommunications Fund's portfolio. Older technologies, such as photography and
print also may be represented, however.
RISK FACTORS AND SPECIAL CONSIDERATIONS
INVESTING IN THE UNDERLYING THEME FUNDS. The investments of the Fund are
concentrated in the Underlying Theme Funds, so the Fund's investment performance
is directly related to the investment performance of the Underlying Theme Funds.
The ability of the Fund to meet its investment objective is directly related to
the ability of the Underlying Theme Funds to meet their objectives as well as
the allocation among those Underlying Theme Funds. There can be no assurance
that the investment objective of the Fund or any Underlying Theme Fund will be
achieved. The value of the Underlying Theme Funds' domestic and foreign
investments varies in response to many factors. Stock values fluctuate in
response to the activities of individual companies and economic conditions. In
addition, each Underlying Theme Fund may concentrate its investments within
particular industries.
FOREIGN INVESTMENTS. The Underlying Theme Funds' investments in foreign
securities may involve risks in addition to those of U.S. investments, including
increased political and economic risk, as well as exposure to currency
fluctuations.
By investing in foreign securities, the Underlying Theme Funds also have
increased economic and political risks as they are exposed to events and factors
in the various world markets. This is especially true of an Underlying Theme
Fund that invests in emerging markets. Many investments in emerging markets are
considered speculative and therefore may offer higher income and total return
potential, but have significantly greater risk. Also, to the extent that a Theme
Fund's investments are denominated in foreign currencies, changes in the value
of foreign currencies can significantly affect the fund's share price.
INVESTMENT PRACTICES OF THE UNDERLYING THEME FUNDS. In addition to their
principal investments, certain Underlying Theme Funds may enter into forward
currency transactions; lend their portfolio securities; enter into stock index,
interest rate and currency futures contracts, and options on such contracts;
engage in options transactions; purchase restricted and illiquid securities;
purchase securities on a when-issued or delayed delivery basis; enter into
repurchase or reverse repurchase agreements; borrow money; and engage in various
other investment practices.
Prospectus Page 13
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- --------------------------------------------------------------------------------
TEMPORARY DEFENSIVE STRATEGIES. The Fund retains the flexibility to respond
promptly to changes in market and economic conditions. Accordingly, in the
interest of preserving shareholders' capital and consistent with the Fund's
investment objective, the Manager may employ a temporary defensive investment
strategy if it determines such a strategy to be warranted due to market,
economic or political conditions. Under a defensive strategy, the Fund may
invest up to 100% of its total assets in cash and/or high quality debt
securities and money market instruments. To the extent the Fund adopts a
temporary defensive posture, it will not be invested so as to achieve directly
its investment objective.
In addition, pending investment of proceeds from new sales of the shares or to
meet its ordinary daily cash needs, the Fund may hold cash and/or may invest in
high quality debt instruments and money market instruments. Money market
instruments in which the Fund may invest include, but are not limited to, United
States government securities; high-grade commercial paper; bank certificates of
deposit; bankers' acceptances and repurchase agreements related to any of the
foregoing. High-grade commercial paper refers to commercial paper rated A-l by
Standard & Poor's or P-l by Moody's Investors Services, Inc. or, if not rated,
determined by the Manager to be of comparable quality.
LOWER QUALITY. The Fund may invest in an Underlying Theme Fund that invests in
high yield, high risk securities, commonly known as "junk bonds." As a result,
the Fund may be subject to some of the risks resulting from high yield
investing. The Fund also may invest in Underlying Theme Funds that invest in
medium grade bonds. Lower quality debt instruments generally offer a higher
current yield than that available from higher grade issues, but typically
involve greater risk. Lower rated and comparable unrated securities are
especially subject to adverse changes in general economic conditions, to changes
in the financial condition of their issuers, and to price fluctuation in
response to changes in interest rates. During periods of economic downturn or
rising interest rates, issuers of these instruments may experience financial
stress that could adversely affect their ability to make payments of principal
and interest and increase the possibility of default. Further information on
these investment policies and practices can be found in "Description of the
Underlying Theme Funds," in the Appendix to this Prospectus and in the Statement
of Additional Information as well as the prospectus of the Underlying Theme
Funds.
PURCHASES AND REDEMPTIONS. From time to time, the Underlying Theme Funds may
experience relatively large purchases or redemptions due to rebalancing of the
Fund by the Manager. This may have a material effect on the Underlying Theme
Funds, since Underlying Theme Funds that experience redemptions as a result of
reallocations may have to sell portfolio securities and because Underlying Theme
Funds that receive additional cash will have to invest it. While it is
impossible to predict the overall impact of these transactions over time, there
could be adverse effects on portfolio management to the extent that Underlying
Theme Funds may be required to sell securities at times when they would not
otherwise do so, or receive cash that cannot be invested in an expeditious
manner. There may be tax consequences associated with purchases and sales of
securities, and such sales also may increase transaction costs.
PORTFOLIO TURNOVER. The Fund's portfolio turnover rate is expected to be low and
is not anticipated to exceed __% annually. The turnover rates of the Underlying
Theme Funds in which the Fund will invest and their corresponding Portfolios
have ranged from __% to ___% during their most recent fiscal years. There can be
no assurance that the turnover rates of these Funds will remain within this
range during subsequent fiscal years. Higher turnover rates may result in higher
expenses being incurred by the Underlying Theme Funds.
Prospectus Page 14
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- ------------------------------------------------------------------------------
MASTER-FEEDER STRUCTURE OF CERTAIN UNDERLYING THEME FUNDS. The Financial
Services Fund, Infrastructure Fund, Natural Resources Fund and Consumer Products
and Services Fund, unlike mutual funds which directly acquire and manage their
own portfolios of securities, seek to achieve their investment objective by
investing all of their investable assets in the Financial Services Portfolio,
Infrastructure Portfolio, Natural Resources Portfolio and Consumer Products and
Services Portfolio, respectively, each of which is a separate investment
company. Because its corresponding Fund will invest only in its corresponding
Portfolio, that Fund's shareholders will acquire only an indirect interest in
the investments of that Portfolio.
AFFILIATED PERSONS. The officers and trustees of the Trust and the Manager
currently serve as officers, and trustees and the investment adviser,
respectively, of many of the Underlying Theme Funds. Therefore, conflicts may
arise as these persons fulfill their fiduciary responsibilities to the Fund and
the Underlying Theme Funds.
See the Appendix for additional information regarding the investment policies
and risks of the Underlying Theme Funds.
HOW TO INVEST
GENERAL. Advisor Class shares are offered through this Prospectus to (a)
trustees or other fiduciaries purchasing shares for employee benefit plans which
are sponsored by organizations which have at least 1,000 employees; (b) any
account with assets of at least $10,000 if (i) a financial planner, trust
company, bank trust department or registered investment adviser has investment
discretion over such account, and (ii) the account holder pays such person as
compensation for its advice and other services an annual fee of at least .50% on
the assets in the account ("Advisory Account"); (c) any account with assets of
at least $10,000 if (i) such account is established under a "wrap fee" program,
and (ii) the account holder pays the sponsor of such program an annual fee of at
least .50% on the assets in the account ("Wrap Fee Account"); (d) accounts
advised by one of the companies composing or affiliated with Liechtenstein
Global Trust; and (e) any of the companies composing or affiliated with
Liechtenstein Global Trust. Financial planners, trust companies, bank trust
companies and registered investment advisers referenced in subpart (b) and
sponsors of "wrap fee" programs referenced in subpart (c) are collectively
referred to as "Financial Advisors." Fiduciaries and Financial Advisors may be
required to provide information satisfactory to GT Global concerning their
eligibility to purchase Advisor Class shares. Investors in Wrap Fee Accounts and
Advisory Accounts may only purchase Advisor Class shares through Financial
Advisors who have entered into agreements with GT Global or certain of its
affiliates. Investors may be charged a fee by their agents or brokers if they
effect transactions other than through a dealer.
All purchase orders will be executed at the public offering price next
determined after the purchase order is received. Orders received by GT Global
before the close of regular trading on the New York Stock Exchange ("NYSE")
(currently 4:00 p.m. Eastern time, unless weather, equipment failure or other
Prospectus Page 15
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- ------------------------------------------------------------------------------
factors contribute to an earlier closing time) on any Business Day will be
executed at the public offering price for the applicable class of shares
determined that day. A "Business Day" is any day Monday through Friday on which
the NYSE is open for business. THE FUND AND GT GLOBAL RESERVE THE RIGHT TO
REJECT ANY PURCHASE ORDER AND TO SUSPEND THE OFFERING OF SHARES FOR A PERIOD OF
TIME. In particular, the Fund and GT Global may reject purchase orders or
exchanges by investors who appear to follow, in the Manager's judgment, a
market-timing strategy or otherwise engage in excessive trading. See "How to
Make Exchanges - Limitations on Purchase Orders and Exchanges."
Fiduciaries and Financial Advisors may be required to provide information
satisfactory to GT Global concerning their eligibility to purchase Advisor Class
shares. For specific information on opening an account, please contract your
Financial Advisor or GT Global.
PURCHASES BY BANK WIRE. Shares of the Fund may also be purchased through GT
Global by bank wire. Bank wire purchases will be effected at the next determined
public offering price after the bank wire is received. A wire investment is
considered received when the Transfer Agent is notified that the bank wire has
been credited to the Fund. Prior telephonic or facsimile notice must be provided
to the Transfer Agent that a bank wire is being sent. A bank may charge a
service fee for wiring money to the Fund. The Transfer Agent currently does not
charge a service fee for facilitating wire purchases, but reserves the right to
do so in the future. For more information, please refer to the Shareholder
Account Manual in this Prospectus.
CERTIFICATES. Physical certificates representing the Fund's shares will not be
issued unless a written request is submitted to the Transfer Agent. Shares of
the Fund are recorded on a register by the Transfer Agent, and shareholders who
do not elect to receive certificates have the same rights of ownership as if
certificates had been issued to them. Redemptions and exchanges by shareholders
who hold certificates may take longer to effect than similar transactions
involving non-certificated shares because the physical delivery and processing
of properly executed certificates is required. ACCORDINGLY, THE FUND AND GT
GLOBAL RECOMMEND THAT SHAREHOLDERS DO NOT REQUEST ISSUANCE OF CERTIFICATES.
PORTFOLIO REBALANCING PROGRAM. The GT Global Portfolio Rebalancing Program
("Program") permits eligible shareholders to establish and maintain an
allocation across a range of GT Global Mutual Funds. The Program automatically
rebalances holding of GT Global Mutual Funds to the established allocation on a
periodic basis. Under the Program, a shareholder may predesignate, on a
percentage basis, how the total value of his or her holdings in a minimum of
two, and a maximum of ten, GT Global Mutual Funds ("Personal Portfolio") is to
be rebalanced on a monthly quarterly, semiannual, or annual basis.
Rebalancing under the Program will be effected through the exchange of shares of
one or more GT Global Mutual Funds in the shareholder's Personal Portfolio for
shares of the same class of one or more other GT Global Mutual Funds in the
shareholder's Personal Portfolio. See "How to Make Exchanges." If shares of the
Funds in a shareholder's Personal Portfolio have appreciated most during a
rebalancing period, the Program will result in shares of Fund(s) that have
appreciated most during the period being exchanged for shares of Fund(s) that
have appreciated least. SUCH EXCHANGES ARE NOT TAX-FREE AND MAY RESULT IN A
SHAREHOLDER'S REALIZING A GAIN OR LOSS, AS THE CASE MAY BE, FOR TAX PURPOSES.
See "Dividends, Other Distributions and Federal Income Taxation." Participation
in the Program does not assure that a shareholder will profit from purchases
under the Program nor does it prevent or lessen losses in a declining market.
Prospectus Page 16
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- ------------------------------------------------------------------------------
The Program will automatically rebalance the shareholder's Personal Portfolio on
the 28th day of the last month of the period chosen (or the immediately
preceding Business Day if the 28th is not a Business Day), subject to any
limitations below. The Program will not execute an exchange if the variance in a
shareholder's Personal Portfolio for a particular Fund would be 2% or less. In
predesignating percentages, shareholders must use whole percentages and totals
must equal 100%. Shareholders participating in the Program may not request
issuance of physical certificates representing a Fund's shares. Exchanges made
under the Program are not subject to the four free exchanges per year
limitation. The Fund and GT Global reserve the right to modify, suspend, or
terminate the program at any time on 60 days' prior written notice to
shareholders. A request to participate in the Program must be received in good
order at least five business days prior to the next rebalancing date. Once a
shareholder establishes the Program for his or her Personal Portfolio, a
shareholder cannot cancel or change which rebalancing frequency, which Funds or
what allocation percentages are assigned to the Program, unless canceled or
changed in writing and received by the Transfer Agent in good order at least
five business days prior to the rebalancing date. Certain broker/dealers may
charge a fee for establishing accounts relating to the Program. Investors should
contact their broker/dealers or GT Global for more information.
HOW TO MAKE EXCHANGES
Adviser Class shares of the Fund may be exchanged for Advisor Class shares of
any of the other GT Global Mutual Funds based on their respective net asset
values, provided that the registration remains identical. EXCHANGES ARE NOT
TAX-FREE AND MAY RESULT IN A SHAREHOLDER REALIZING A GAIN OR LOSS, AS THE CASE
MAY BE, FOR TAX PURPOSES. See "Dividends, other Distributions and Federal Income
Taxation."
- GT GLOBAL WORLDWIDE GROWTH FUND
- GT GLOBAL INTERNATIONAL GROWTH FUND
- GT GLOBAL EMERGING MARKETS FUND
- GT GLOBAL NEW PACIFIC GROWTH FUND
- GT GLOBAL EUROPE GROWTH FUND
- GT GLOBAL LATIN AMERICA GROWTH FUND
- GT GLOBAL AMERICA SMALL CAP GROWTH FUND
- GT GLOBAL AMERICA MID CAP GROWTH FUND
- GT GLOBAL AMERICA VALUE FUND
- GT GLOBAL JAPAN GROWTH FUND
- GT GLOBAL GROWTH & INCOME FUND
- GT GLOBAL GOVERNMENT INCOME FUND
- GT GLOBAL STRATEGIC INCOME FUND
- GT GLOBAL HIGH INCOME FUND
- GT GLOBAL DOLLAR FUND
- GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
- GT GLOBAL FINANCIAL SERVICES FUND
- GT GLOBAL HEALTH CARE FUND
- GT GLOBAL INFRASTRUCTURE FUND
- GT GLOBAL NATURAL RESOURCES FUND
- GT GLOBAL TELECOMMUNICATIONS FUND
- --------------------
Up to four exchanges each year may be made without charge. A $7.50 service
charge will be imposed on each subsequent exchange. Exchange requests received
in good order by the Transfer Agent before the close of regular trading on the
NYSE on any Business Day will be processed at the net asset value calculated on
that day. The terms of the exchange offer may be modified at any time, on 60
days' prior written notice.
Prospectus Page 17
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- ------------------------------------------------------------------------------
EXCHANGES BY TELEPHONE. A shareholder may give exchange information to his or
her Financial Advisor. Exchange orders will be accepted by telephone provided
that the exchange involves only uncertificated shares on deposit in the
shareholder's account or for which certificates have previously been deposited.
Shareholders automatically have telephone privileges to authorize exchanges. The
Fund, GT Global and the Transfer Agent will not be liable for any loss or damage
for acting in good faith upon instructions received by telephone and reasonably
believed to be genuine. The Fund employs reasonable procedures to confirm that
instructions communicated by telephone are genuine, prior to acting upon
instructions received by telephone including requiring some form of personal
identification, providing written confirmation of such transactions, and/or tape
recording of telephone instructions. The Fund may be liable for any losses due
to unauthorized or fraudulent instructions if it does not follow reasonable
procedures.
Investors in Wrap Fee Accounts and Advisory Accounts interested in making an
exchange should contact their Financial Advisors to request the prospectus of
the other GT Global Mutual Fund(s) being considered. Other investors should
contact GT Global. See the Shareholder Account Manual in this Prospectus for
additional information.
LIMITATIONS ON PURCHASE ORDERS AND EXCHANGES. The GT Global Mutual Funds are not
intended to serve as vehicles for frequent trading in response to short-term
fluctuations in the market. Due to the disruptive effect that market-timing
investment strategies and excessive trading can have on efficient portfolio
management, each GT Global Mutual Fund and GT Global reserve the right to refuse
purchase orders and exchanges by any person or group, if, in the Manager's
judgment, such person or group was following a market-timing strategy or was
otherwise engaging in excessive trading.
In addition, each GT Global Mutual Fund and GT Global reserve the right to
refuse purchase orders and exchanges by any person or group if, in the Manager's
judgment, the Fund would not be able to invest the money effectively in
accordance with that Fund's investment objective and policies or would otherwise
potentially be adversely affected. Although a GT Global Mutual Fund will attempt
to give investors prior notice whenever it is reasonably able to do so, it may
impose the above restrictions at any time.
Finally, as described above, each GT Global Mutual Fund and GT Global reserve
the right to reject any purchase order.
HOW TO REDEEM SHARES
Fund shares may be redeemed at their net asset value and redemption proceeds
will be sent within seven days of the execution of a redemption request. Fund
shares may be redeemed at their net asset value and redemption proceeds will be
sent within seven days of the execution of a redemption request. Redemption
requests may be transmitted to the Transfer Agent by telephone or by mail, in
accordance with the instructions provided in the Shareholder Account Manual.
Redemptions will be effected at the net asset value next determined after the
Transfer Agent has received the request in good order and any required
supporting documentation. Redemption requests will not require a signature
guarantee if the redemption proceeds are to be sent either: (i) to the redeeming
shareholder at the shareholder's address of record as maintained by the Transfer
Prospectus Page 18
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- ------------------------------------------------------------------------------
Agent, provided the shareholder's address of record has not been changed within
the preceding thirty days; or (ii) directly to a pre-designated bank, savings
and loan or credit union account ("Pre-Designated Account"). ALL OTHER
REDEMPTION REQUESTS MUST BE ACCOMPANIED BY A SIGNATURE GUARANTEE OF THE
REDEEMING SHAREHOLDER'S SIGNATURE. A signature guarantee can be obtained from
any bank, U.S. trust company, a member firm of a U.S. stock exchange or a
foreign branch of any of the foregoing or other eligible guarantor institution.
A notary public is not an acceptable guarantor.
Shareholders with Pre-Designated Accounts should request that redemption
proceeds be sent either by bank wire or by check. The minimum redemption amount
for a bank wire is $1,000. Shareholders requesting a bank wire should allow two
Business Days from the time the redemption request is effected for the proceeds
to be deposited in the shareholder's Pre-Designated Account. See "How to Redeem
Shares - Other Important Redemption Information." Shareholders may change their
Pre-Designated Accounts only by a letter of instruction to the Transfer Agent
containing all account signatures, each of which must be guaranteed. The
Transfer Agent currently does not charge a bank wire service fee for each wire
redemption sent, but reserves the right to do so in the future. The
shareholder's bank may charge a bank wire service fee.
Pre-Designated Account. See "How to Redeem Shares--Other Important Redemption
Information." Shareholders may change their Pre-Designated Accounts only by a
letter of instruction to the Transfer Agent containing all account signatures,
each of which must be guaranteed. The Transfer Agent currently does not charge a
bank wire service fee for each wire redemption sent, but reserves the right to
do so in the future. The shareholder's bank may charge a bank wire service fee.
REDEMPTIONS BY TELEPHONE. Redemption requests may be made by telephone by
calling the Transfer Agent at the appropriate toll-free number provided in the
Shareholder Account Manual. Shareholders who hold certificates for shares may
not redeem by telephone. REDEMPTION REQUESTS MAY NOT BE MADE BY TELEPHONE FOR
THIRTY DAYS FOLLOWING ANY CHANGE OF THE SHAREHOLDER'S ADDRESS.
Shareholders automatically have telephone privileges to authorize redemptions.
The Fund, GT Global and the Transfer Agent will not be liable for any loss or
damage for acting in good faith upon instructions received by telephone and
reasonably believed to be genuine. The Fund employs reasonable procedures to
confirm that instructions communicated by telephone are genuine, prior to acting
upon instructions received by telephone, including requiring some form of
personal identification providing written confirmation of such transactions,
and/or tape recording of telephone instructions.
REDEMPTIONS BY MAIL. Redemption requests should be mailed directly to the
Transfer Agent at the appropriate address provided in the Shareholder Account
Manual. As discussed above, requests for payment of redemption proceeds to a
party other than the shareholder of record and/or requests that redemption
proceeds be mailed to an address other than the shareholder's address of record
require a signature guarantee. In addition, if the shareholder's address of
record has been changed within the preceding thirty days, a signature guarantee
is required. Redemptions of shares for which certificates have been issued must
be accompanied by properly endorsed share certificates.
Prospectus Page 19
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- --------------------------------------------------------------------------------
OTHER IMPORTANT REDEMPTION INFORMATION. A request for redemption will not be
processed until all of the necessary documentation has been received in good
order. A shareholder in doubt as to what documents are required should contact
his or her Financial Advisor.
Except in extraordinary circumstances and as permitted under the 1940 Act,
payment for shares redeemed by telephone or by mail will be made promptly after
receipt of a redemption request, if in good order, but not later than seven days
after the date the request is executed. Requests for redemption which are
subject to any special conditions or which specify a future or past effective
date cannot be accepted.
If the Transfer Agent is requested to redeem shares for which the Fund has not
yet received good payment, the Fund may delay payment of redemption proceeds
until the Transfer Agent has assured itself that good payment has been collected
for the purchase of the shares. In the case of purchases by check it can take up
to 10 Business Days to confirm that the check has cleared and good payment has
been received. Redemption proceeds will not be delayed when shares have been
paid for by wire or when the investor's account holds a sufficient number of
shares for which funds already have been collected.
GT reserves the right to redeem the shares of any Advisory Account or Wrap Fee
Account if the amount invested in GT Global Mutual Funds through such account is
reduced to less than $500 through redemptions or other action by the
shareholder. Written notice will be given to the shareholder at least 60 days
prior to the date fixed for such redemption, during which time the shareholder
may increase the amount invested in GT Global Mutual Funds through such account
to an aggregate amount of $500 or more.
For additional information on how to redeem shares, see the Shareholder Account
Manual in this Prospectus, or contact your Financial Advisor.
SHAREHOLDER ACCOUNT MANUAL
Purchase, exchange and redemption orders should be placed in accordance with
this Manual. It is recommended that investors in Wrap Fee Accounts and Advisory
Accounts make such orders through their Financial Advisor. PLEASE BE CAREFUL TO
REFERENCE "ADVISOR CLASS" IN ALL INSTRUCTIONS PROVIDED. See "How to Invest,"
"How to Make Exchanges," "How to Redeem Shares," and "Dividends, Other
Distributions and Federal Income Taxation -- Taxes;" for more information.
The Fund's Transfer Agent is GT GLOBAL INVESTOR SERVICES, INC.
INVESTMENTS BY MAIL
Send the completed Account Application (if initial purchase) or letter stating
Fund name, class of shares, shareholder's registered name and account number (if
subsequent purchase) with a check to:
GT Global
P.O. Box 7340
San Francisco, California 94120-7345
Prospectus Page 20
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- ------------------------------------------------------------------------------
INVESTMENTS BY BANK WIRE
A new account may be opened by calling 1-800-223-2138 to obtain an account
number. WITHIN SEVEN DAYS OF PURCHASE A COMPLETED ACCOUNT APPLICATION CONTAINING
THE APPROPRIATE CERTIFIED TAXPAYER IDENTIFICATION NUMBER TO GT GLOBAL AT THE
ADDRESS PROVIDED ABOVE UNDER "INVESTMENTS BY MAIL." Wire instructions must state
Fund name, class of shares, shareholder's registered name and account number.
Bank wires should be sent through the Federal Reserve Bank Wire System to:
WELLS FARGO BANK N.A.
ABA 121000248
Attn: GT GLOBAL
ACCOUNT NO. 4023-000701
EXCHANGES BY TELEPHONE
Call GT Global at 1-800-223-2138.
EXCHANGES BY MAIL
Send complete instructions, including name of GT Global Mutual Fund exchanging
from, class of shares, amount of exchange, name of the GT Global Mutual Fund
exchanging into, shareholder's registered name and account number, to:
GT Global
P.O. Box 7893
San Francisco, CA 94120-7893
REDEMPTIONS BY TELEPHONE
Call GT Global at 1-800-223-2138.
REDEMPTIONS BY MAIL
Send complete instructions, including name of the Fund, class of shares, amount
of redemption, shareholder's registered name and account number, to:
GT GLOBAL
P.O. Box 7893
San Francisco, CA 94120-7893
OVERNIGHT MAIL
Overnight mail services do not deliver to post office boxes. To send purchase,
exchange or redemption orders by overnight mail, follow the above instructions
but send the instructions to the following address:
GT Global Investor Services
California Plaza
2121 N. California Boulevard
Suite 450
Walnut Creek, CA 94596
ADDITIONAL QUESTIONS
Shareholders with additional questions regarding purchase, exchange and
redemption procedures should call GT Global at 1-800-223-2138.
Prospectus Page 21
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- ------------------------------------------------------------------------------
CALCULATION OF NET ASSET VALUE
The Fund calculates its net asset value as of the close of regular trading on
the NYSE (currently 4:00 p.m. Eastern Time, unless weather, equipment failure or
other factors contribute to an earlier closing time), each Business Day. The
Fund's net asset value per share is computed by dividing the value of the Fund's
net assets by the total number of shares outstanding. Net asset value is
determined separately for each class of shares of the Fund. The assets of the
Fund consist primarily of the Underlying Theme Funds, which are valued at their
respective net asset values at the time of computation. Other Fund assets are
valued at current market price or, if unavailable, at fair value determined in
good faith by or under the direction of the Trust's Board of Trustees.
DIVIDENDS, OTHER DISTRIBUTIONS
AND FEDERAL INCOME TAXATION
DIVIDENDS AND OTHER DISTRIBUTIONS. The Fund annually declares as a dividend all
of its net investment income, if any, which includes dividends, accrued interest
and earned discount (including both original issue and market discounts) less
applicable expenses. The Fund also annually distributes substantially all of its
realized net short-term capital gain (the excess of short-term capital gains
over short-term capital losses), net capital gain (the excess of net long-term
capital gain over net short-term capital loss) and net gains from foreign
currency transactions, if any. The Fund may make an additional dividend or other
distribution if necessary to avoid a 4% excise tax on certain undistributed
income and gain. Dividends and other distributions paid by the Fund with respect
to all classes of its shares are calculated in the same manner and at the same
time. The per share income dividends on Advisor Class shares of the Fund will be
higher than the per share income dividends on shares of other classes of the
Fund as a result of the service and distribution fees applicable to those other
shares. SHAREHOLDERS MAY ELECT:
o to have all dividends and other distributions automatically reinvested in
additional Advisor Class shares of the Fund (or other GT Global Mutual
Funds); or
o to receive dividends in cash and have other distributions automatically
reinvested in additional Advisor Class shares of the Fund (or other GT Global
Mutual Funds); or
o to receive other distributions in cash and have dividends automatically
reinvested in additional Advisor Class shares of the Fund (or other GT Global
Mutual Funds); or
o to receive dividends and other distributions in cash.
Automatic reinvestments in additional Advisor Class shares are made at net asset
value without imposition of a sales charge. IF NO ELECTION IS MADE BY A
SHAREHOLDER, ALL DIVIDENDS AND OTHER DISTRIBUTIONS WILL BE AUTOMATICALLY
REINVESTED IN ADDITIONAL ADVISOR CLASS SHARES OF THE FUND. Reinvestments in
another GT Global Mutual Fund may only be directed to an account with the
identical shareholder registration and account number. These elections may be
changed by a shareholder at any time; to be effective with respect to a
distribution, the shareholder or the shareholder's broker must contact the
Transfer Agent by mail or telephone at least 15 Business Days prior to the
payment date. THE FEDERAL INCOME TAX CONSEQUENCES OF DIVIDENDS AND OTHER
DISTRIBUTIONS ARE THE SAME WHETHER THEY ARE RECEIVED IN CASH OR REINVESTED IN
ADDITIONAL SHARES.
Prospectus Page 22
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- ------------------------------------------------------------------------------
Any dividend or other distribution paid by the Fund has the effect of reducing
the net asset value per share on the ex-dividend date by the amount thereof.
Therefore, a dividend or other distribution paid shortly after a purchase of
shares would represent, in substance, a return of capital to the shareholder (to
the extent it is paid on the shares so purchased) even though subject to income
tax, as discussed below.
TAXES. The Fund intends to qualify for treatment as a regulated investment for
treatment as a regulated investment company under the Code. In each taxable year
that the Fund so qualifies, the Fund (but not its shareholders) will be relieved
of federal income tax on that part of its investment company taxable income
(consisting generally of net investment income and net short-term capital gain)
and net capital gain that is distributed to its shareholders.
Dividends from the Fund's investment company taxable income (whether paid in
cash or reinvested in additional shares) are taxable to its shareholders as
ordinary income to the extent of the Fund's earnings and profits. Distributions
of the Fund's net capital gain, when designated as such, are taxable to its
shareholders as long-term capital gains, regardless of how long they have held
their Fund shares and whether paid in cash or reinvested in additional shares.
The Fund provides federal tax information to its shareholders annually,
including information about dividends and other distributions paid during the
preceding year [and, under certain circumstances, [indirectly] the shareholders'
respective shares of any foreign taxes treated as paid by the Underlying Theme
Funds, in which event each shareholder of the Fund would be required to include
in his or her gross income his or her pro rata share of those taxes but might be
entitled to claim a credit or deduction for them.]
The Fund must withhold 31% from dividends, capital gain distributions and
redemption proceeds payable to any individuals and certain other noncorporate
shareholders who have not furnished to the Fund a correct taxpayer
identification number or a properly completed claim for exemption on Form W-8 or
W-9. Withholding at that rate also is required from dividends and capital gain
distributions payable to such shareholders who otherwise are subject to backup
withholding. Fund accounts opened via a bank wire purchase (see "How to Invest -
Purchases Through the Distributor") are considered to have uncertified taxpayer
identification numbers unless a completed Form W-8 or W-9 or Account Application
is received by the Transfer Agent within seven days after the purchase. A
shareholder should contact the Transfer Agent if the shareholder is uncertain
whether a proper taxpayer identification number is on file with the Fund.
A redemption of Fund shares may result in taxable gain or loss to the redeeming
shareholder, depending upon whether the redemption proceeds are more or less
than the shareholder's adjusted basis for the redeemed shares. An exchange of
Fund shares for shares of another GT Global Mutual Fund generally will have
similar tax consequences. However, special tax rules apply when a shareholder
(1) disposes of Class A shares of the Fund through a redemption or exchange
within 90 days after purchase and (2) subsequently acquires Class A shares of
such Fund or any other GT Global Mutual Fund on which an initial sales charge
normally is imposed without paying that sales charge due to the reinstatement
Prospectus Page 23
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- ------------------------------------------------------------------------------
privilege or exchange privilege. In these cases, any gain on the disposition of
the original Class A shares will be increased, or loss decreased, by the amount
of the sales charge paid when those shares were acquired, and that amount will
increase the adjusted basis of the shares subsequently acquired. In addition, if
shares of the Fund are purchased within 30 days before or after redeeming other
shares of the Fund (regardless of class) at a loss, all or a part of the loss
will not be deductible and instead will increase the basis of the newly
purchased shares.
The foregoing is only a summary of some of the important federal tax
considerations generally affecting the Fund and its shareholders. See "Taxes" in
the Statement of Additional Information for a further discussion. There may be
other federal, state, local or foreign tax considerations applicable to a
particular investor. Prospective investors therefore are urged to consult their
tax advisers.
MANAGEMENT
The Trust's Board of Trustees has overall responsibility for the operation of
the Fund and has approved contracts with various financial organizations to
provide certain services required by the Fund. See "Trustees and Executive
Officers" in the Statement of Additional Information for a complete description
of the Trustees of the Trust.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Subject to the supervision and
direction of the Trust's Board of Trustees, the Manager will ensure that the
Fund's assets are invested in the Underlying Theme Funds according to the
formula and pre-determined percentages described in the "Investment Objective
and Policies" section of this Prospectus. The Manager will determine how the
Fund's assets will be invested in short-term investments and place all purchase
and sale orders for such instruments and for the Underlying Theme Funds. The
Manager provides the following administration services to the Fund: furnishing
corporate officers and clerical staff; providing office space, services and
equipment; and supervising all matters relating to the Fund's operation. The
Manager also serves as the Fund's pricing and accounting agent. Finally the
Manager will assume all other costs of the Fund's operation, such as trustee
fees, legal and audit fees, except that the Fund will pay certain distribution
fees, as described below. The Fund, as a shareholder in the Underlying Theme
Funds, indirectly will bear its proportionate share of any investment management
fees and other expenses paid by the Underlying Theme Funds.
The Manager provides investment management and/or administration services to the
GT Global Mutual Funds. The Manager and its worldwide asset management
affiliates have provided investment management and/or administration services to
institutional, corporate and individual clients around the world since 1969.
The Manager and its worldwide affiliates, including the Manager Bank in
Liechtenstein, formerly Bank in Liechtenstein, compose Liechtenstein Global
Trust, formerly BIL GT Group Limited. Liechtenstein Global Trust is a provider
of global asset management and private banking products and services to
individual and institutional investors. Liechtenstein Global Trust is controlled
by the Prince of Liechtenstein Foundation, which serves as the parent
organization for the various business enterprises of the Princely Family of
Liechtenstein. The principal business address of the Prince of Liechtenstein
Foundation is Herrengasse 12, FL-9490, Vaduz, Liechtenstein.
Prospectus Page 24
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- ------------------------------------------------------------------------------
As of June 30, 1996, the Manager and its worldwide affiliates managed
approximately $__ billion. In the United States, as of June 30, 1996, the
Manager managed or administered approximately ___ billion of GT Global Mutual
Funds. As of June 30, 1996, assets entrusted to Liechtenstein Global Trust
totaled approximately ___ billion.
At least once a year the Fund will rebalance the percentages of its assets in
each Underlying Theme Fund according to the total industry weighting of the
securities held by the Underlying Theme Funds as represented in the Morgan
Stanley Capital International AC World Index.
While the Fund will not be actively managed or have a portfolio manager, the
Underlying Theme Funds are actively managed by teams of investment
professionals.
DISTRIBUTION OF FUND SHARES. GT Global is the distributor of the Fund's Advisor
Class shares. Like the Manager, GT Global is a subsidiary of Liechtenstein
Global Trust with offices at 50 California Street, 27th Floor, San Francisco, CA
94111.
GT Global, at its own expense, may provide additional promotional incentives to
broker/dealers that sell shares of the Fund and/or shares of the other GT Global
Mutual Funds. In some instances additional compensation or promotional
incentives may be offered to broker/dealers that have sold or may sell
significant amounts of shares during specified periods of time. Such
compensation and incentives may include, but are not limited to, cash,
merchandise, trips and financial assistance to brokers in connection with
preapproved conferences or seminars, sales or training programs for invited
sales personnel, payment for travel expenses (including meals and lodging)
incurred by sales personnel and members of their families or other invited
guests to various locations for such seminars or training programs, seminars for
the public, advertising and sales campaigns regarding one or more of the GT
Global Mutual Funds, and/or other events sponsored by the broker/dealers.
The Glass-Steagall Act and other applicable laws, among other things, generally
prohibit federally chartered or supervised banks from engaging in the business
of underwriting or distributing securities. Accordingly, GT Global intends to
engage banks (if at all) only to perform administrative and shareholder
servicing functions. If a bank were prohibited from so acting, its shareholder
clients would be permitted to remain shareholders, and alternative means for
continuing the servicing of such shareholders would be sought. It is not
expected that shareholders would suffer any adverse financial consequences as a
result of any of these occurrences.
PERFORMANCE
PERFORMANCE OF THE UNDERLYING THEME FUNDS. The Fund has no operating history as
of the date of this Prospectus and therefore no performance record. The
following table shows the average annual total returns of Class A shares1/ of
each Underlying Theme Fund for the most recent one-, five- and ten-year periods
(or since inception if shorter). The performance information reflects the
maximum applicable sales charges and other distribution-related expenses and
service fees. Returns would be higher if these charges and fees were not
reflected. The Fund invests in Advisor Class shares of the Underlying Theme
Funds, which are not subject to these sales charges and distribution-related
expenses and service fees.
Prospectus Page 25
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- --------------------------------------------------------------------------------
Assets as of Average Annual Total
Underlying Theme Fund 12/31/96 Inception Returns through
($000's) Date 12/31/96
One Five Ten
Year Years Years
- --------------------------------------------------------------------------------
GT Global Consumer
Products and Services
Fund
GT Global Financial
Services Fund
GT Global Health
Care Fund
GT Global
Infrastructure Fund
GT Global Natural
Resources Fund
GT Global
Telecommunications Fund
(1) The class outstanding for the longest period. If more than one class is
outstanding for the longest period, the table shows performance for the class
that represents the largest portion of the Underlying Theme Fund's net assets.
The past performance of the Underlying Theme Funds is not a guarantee of future
results for either the Underlying Theme Funds or the Fund. Further information
about each Underlying Theme Fund's performance is contained in its Annual
Report, which may be obtained without charge by calling (800) 824-1580 or
contacting your financial adviser.
OTHER INFORMATION
CONFIRMATIONS AND REPORTS TO SHAREHOLDERS. Each time a transaction is made that
affects a shareholder's account in the Fund, the shareholder will receive from
the Transfer Agent a confirmation statement reflecting the transaction.
Confirmations for transactions effected pursuant to the Fund's Automatic
Investment Plan, Systematic Withdrawal Plan and automatic dividend reinvestment
program may be provided quarterly. Shortly after the end of the Fund's fiscal
year on October 31 and fiscal half-year on April 30 of each year, shareholders
receive an annual and semiannual report, respectively. In addition, the federal
income status of distributions made by the Fund to shareholders will be reported
after the end of the fiscal year on Form 1099-DIV. Under certain circumstances,
duplicate mailings of such reports to the same household may be consolidated.
Prospectus Page 26
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- ------------------------------------------------------------------------------
ORGANIZATION OF THE TRUST. The Trust was organized as a Massachusetts business
trust on August 26, 1996 and is registered with the SEC as a diversified
open-end management investment company. The Trust currently consists of one
series. From time to time, the Trust may establish other series, each
corresponding to a distinct investment portfolio and a distinct series of the
Trust's common stock. Shares of each series are entitled to one vote per share
(with proportional voting for fractional shares) and are freely transferable.
Shareholders have no preemptive or conversion rights.
On any matter submitted to a vote of shareholders, shares of the Fund will be
voted by the Fund's shareholders individually when the matter affects the
specific interest of the Fund only, such as approval of its investment
management arrangements. In addition, each class of shares of the Fund has
exclusive voting rights with respect to its distribution plan. The shares of all
the Trust's fund will be voted in the aggregate on other matters, such as the
election of Trustees and ratification of the selection by the Board of Trustees
of the Trust's independent accountants.
Normally there will be no annual meeting of shareholders in any year, except as
required under the 1940 Act. The Fund would be required to hold a shareholders'
meeting in the event that at any time less than a majority of the Trustees
holding office had been elected by shareholders. Trustees shall continue to hold
office until their successors are elected and have qualified. Shares of the Fund
do not have cumulative voting rights, which means that the holders of a majority
of the shares voting for the election of Trustees can elect all the Trustees. A
Trustee may be removed upon a majority vote of the shareholders qualified to
vote in the election. Shareholders holding 10% of the Trust's outstanding voting
shares may call a meeting of shareholders for the purpose of voting upon the
question of removal of any Trustee or for any other purpose. The 1940 Act
requires the Trust to assist shareholders in calling such a meeting.
The Fund offers Advisor Class shares through this Prospectus to certain
investors. The Fund also offers Class A and Class B shares to investors through
a separate prospectus. Each class of shares will experience different net asset
values and dividends as a result of different expenses borne by each class of
shares. The per share net asset value and dividends of the Advisor Class shares
of the Fund generally will be higher than that of the Class A and Class B shares
of the Fund because of the higher expenses borne by the Class A and Class B
shares. Consequently, during comparable periods, the Fund expects that the total
return on an investment in shares of the Advisor Class will be higher than the
total return on Class A or Class B shares.
Pursuant to the Trust's Declaration of Trust, the Trust may issue an unlimited
number of shares of the Fund, including an unlimited number of Class A, Class B
and Advisor Class shares of the Fund. Each share of the Fund has no par value,
represents an equal proportionate interests in the Fund with other shares of the
Fund and is entitled to such dividends and other distributions out of the income
earned and gain realized on the assets belonging to the Fund as may be declared
at the discretion of the Board of Trustees. Each Class A, Class B and Advisor
Class share of the Fund is equal in earnings, assets and voting privileges to
each other share in the Fund, except as noted above, and each class bears the
expenses, if any, related to the distribution of its Shares. Shares of the Fund
when issued are fully paid and nonassessable.
Prospectus Page 27
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- ------------------------------------------------------------------------------
SHAREHOLDER INQUIRIES. Shareholder inquiries may be made by calling the Fund
toll-free at (800) 223-2138 or by writing to the Fund at 50 California
Street, 27th Floor, San Francisco, California 94111.
PERFORMANCE INFORMATION. The Fund, from time to time, may include information on
its investment results and/or comparisons of its investment results to various
unmanaged indices or results of other mutual funds or groups of mutual funds in
advertisements, sales literature or reports furnished to present or prospective
shareholders.
In such materials, the Fund may quote its average annual total return
("Standardized Return"). Standardized Return is calculated separately for each
class of shares of the Fund. Standardized Return shows percentage rates
reflecting the average annual change in the value of an assumed investment in
the Fund at the end of a one-year period and at the end of five- and ten-year
periods, reduced by the maximum applicable sales charge imposed on sales of Fund
shares. If a one-, five- and/or ten-year period has not yet elapsed, data will
be provided as of the end of a shorter period corresponding to the life of the
Fund. Standardized Return assumes the reinvestment of all dividends and other
distributions.
In addition, in order to more completely represent the Fund's performance or
more accurately compare such performance to other measures of investment return,
the Fund also may include in advertisements, sales literature and shareholder
reports other total return performance data ("Non-Standardized Return").
Non-Standardized Return reflects percentage rates of return encompassing all
elements of return (i.e., income and capital appreciation or depreciation) and
assumes reinvestment of all dividends and other distributions. Non-Standardized
Return may be quoted for the same or different periods as those for which
Standardized Return is quoted; it may consist of an aggregate or average annual
percentage rate of return, actual year-by-year rates or any combination thereof.
Non-Standardized Return may or may not take sales charges into account;
performance data calculated without taking the effect of sales charges into
account will be higher than data including the effect of such charges.
The Fund's performance data will reflect past performance and will not
necessarily be indicative of future results. The Fund's investment results will
vary from time to time depending upon market conditions, the composition of
their portfolios and their operating expenses. These factors and possible
differences in calculation methods should be considered when comparing the
Fund's investment results with those published for other investment companies,
other investment vehicles and unmanaged indices. The Fund's results also should
be considered relative to the risks associated with its investment objective and
policies. See "Investment Results" in the Statement of Additional Information.
TRANSFER AGENT. Shareholder servicing, reporting and general transfer agent
functions for the Fund are performed by GT Global Investor Services, Inc. The
Transfer Agent is an affiliate of the Manager and GT Global, a subsidiary of
Liechtenstein Global Trust and maintains offices at California Plaza, 2121 N.
California Boulevard, Suite 450, Walnut Creek, CA 94596.
CUSTODIAN. State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, is custodian of the assets of the Fund.
Prospectus Page 28
<PAGE>
GT GLOBAL NEW DIMENSION FUND
- ------------------------------------------------------------------------------
COUNSEL. The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue,
N.W., Washington, D.C. 20036-1800, acts as counsel to the Trust and to the Fund.
Kirkpatrick & Lockhart LLP also acts as counsel to the Manager, GT Global and
the Transfer Agent in connection with other matters.
INDEPENDENT ACCOUNTANTS. The Fund's independent accountants are Coopers &
Lybrand L.L.P., One Post Office Square, Boston, Massachusetts 02109. Coopers &
Lybrand L.L.P. conducts an annual audit of the Fund, assists in the preparation
of the Fund's federal and state income tax returns, and consults with the Trust
and the Fund as to matters of accounting, regulatory filings, and federal and
state income taxation.
MULTIPLE TRANSLATIONS OF THE PROSPECTUS. This Prospectus may be translated into
other languages. In the event of any inconsistency or ambiguity as to the
meaning of any word or phrase contained in a translation, the English text shall
prevail.
Prospectus Page 29
<PAGE>
GT Global New Dimension Fund
50 California Street, 27th Floor
San Francisco, California 94111
(415) 392-6181
Toll Free: (800) 824-1580
Statement of Additional Information
- --------------------------------------------------------------------------------
________, 1997
This Statement of Additional Information ("SAI") relates to Class A and Class B
shares of GT Global New Dimension Fund (the "Fund"), a diversified series of GT
Global Asset Allocation Trust (the "Trust"), an open-end management investment
company organized as a Massachusetts business trust. The Fund seeks to achieve
its investment objective by investing in the following global theme mutual
funds: GT Global Consumer Products and Services Fund; GT Global Financial
Services Fund; GT Global Health Care Fund; GT Global Infrastructure Fund; GT
Global Natural Resources Fund; and GT Global Telecommunications Fund
(collectively, the "Underlying Theme Funds").
Chancellor LGT Asset Management, Inc. (the "Manager") serves as the
investment manager of the Fund. The distributor of the Fund's shares is GT
Global, Inc. ("GT Global"). The Fund's transfer agent is GT Global Investor
Services, Inc. ("GT Services" or the "Transfer Agent").
This SAI, which is not a prospectus, supplements and should be read in
conjunction with the Fund's current Prospectus dated _______, 1997, a copy of
which is available without charge by writing to the above address or calling the
Fund at the toll-free telephone number printed above.
Information contained herein is subject to completion or amendment. A
Registration Statement to these securities has been filed with the Securities
and Exchange Commission. These securities may not be sold nor may offers to buy
be accepted prior to the time the Registration Statement becomes effective. This
SAI shall not constitute an offer to sell or the solicitation of an offer to
buy.
Table of Contents
PAGE NO.
--------
Investment Objective and Policies..............................................
Options, Futures and Currency Strategies.......................................
Risk Factors of the Underlying Theme Funds.....................................
Investment Limitations.........................................................
Execution of Portfolio Transactions............................................
Trustees and Executive Officers................................................
Management.....................................................................
Valuation of Fund Shares.......................................................
Information Relating to Sales and Redemptions..................................
Taxes..........................................................................
Additional Information.........................................................
Investment Results.............................................................
Description of Debt Ratings....................................................
<PAGE>
INVESTMENT OBJECTIVE
AND POLICIES
INVESTMENT OBJECTIVE AND POLICIES OF THE FUND
The following supplements the information contained in the Prospectus concerning
the investment policies of the Fund.
DIRECT INVESTMENTS IN SECURITIES. As stated in the Prospectus, in addition to
investing in the Underlying Theme Funds, the Fund may invest directly in cash
and/or money market instruments.
REPURCHASE AGREEMENTS. The Fund may invest in repurchase agreements. Repurchase
agreements are transactions in which the Fund purchases securities from a bank
or recognized securities dealer and simultaneously commits to resell the
securities to the bank or dealer at an agreed-upon date or upon demand and at a
price reflecting a market rate of interest unrelated to the coupon rate or
maturity of the purchased securities. The Fund maintains custody of the
underlying securities prior to their repurchase; thus, the obligation of the
bank or dealer to pay the repurchase price on the date agreed to is, in effect,
secured by such securities. If the value of these securities is less than the
repurchase price, plus any agreed-upon additional amount, the other party to the
agreement must provide additional collateral so that at all times the collateral
is at least equal to the repurchase price, plus any agreed-upon additional
amount. The difference between the total amount to be received upon repurchase
of the securities and the price that was paid by the Fund upon acquisition is
accrued as interest and included in its net investment income. Repurchase
agreements carry certain risks not associated with direct investments in
securities, including possible declines in the market value of the underlying
securities and delays and costs to the Fund if the other party to a repurchase
agreement becomes insolvent.
MONEY MARKET INSTRUMENTS. The Fund may invest in money market instruments which
may include securities issued or guaranteed by the U.S. government, its agencies
or instrumentalities, commercial paper rated in the highest category by a
nationally recognized statistical rating organization, bank certificates of
deposit, bankers' acceptances and repurchase agreements secured by any of the
foregoing.
U.S. GOVERNMENT SECURITIES. The Fund may invest in various direct
obligations of the U.S. Treasury and obligations issued or guaranteed by the
U.S. government or one of its agencies or instrumentalities (collectively,
"U.S. government securities"). Among the U.S. government securities that may
be held by the Fund are securities that are supported by the full faith and
credit of the United States; securities that are supported by the right of
the issuer to borrow from the U.S. Treasury; and securities that are
supported solely by the credit of the instrumentality. U.S. government
securities are described in detail in "Investment Objectives and Policies of
the Underlying Theme Funds."
INVESTMENT OBJECTIVE AND POLICIES OF THE UNDERLYING THEME FUNDS
The following supplements the information contained in the Prospectus concerning
the investment policies and limitations of the Underlying Theme Funds. More
information about the investment policies and restrictions and the investment
limitations of each Underlying Theme Fund is set forth in the Underlying Theme
Funds' prospectus and SAI.
2
<PAGE>
The Underlying Theme Funds are diversified series of GT Investment Funds, Inc.
(the "Company"), a registered open-end management investment company. The GT
Global Consumer Products and Services Fund ("Consumer Products and Services
Fund"), GT Global Financial Services Fund ("Financial Services Fund"), GT Global
Infrastructure Fund ("Infrastructure Fund"), and GT Global Natural Resources
Fund ("Natural Resources Fund") (each, a "Feeder Fund," and, collectively, the
"Feeder Funds") invest all of their investable assets in the Global Financial
Services Portfolio, Global Infrastructure Portfolio, Global Natural Resources
Portfolio and Global Consumer Products and Services Portfolio (each, a
"Portfolio," and, collectively, the "Portfolios"), respectively.
Each of the Portfolios is a subtrust (a "series") of Global Investment Portfolio
(an open-end management investment company) with an investment objective that is
identical to that of its corresponding Underlying Theme Fund. Whenever the
phrase "all of the Underlying Theme Fund's investable assets" is used herein, it
means that the only investment securities held by a Feeder Fund will be its
interest in its corresponding Portfolio. A Feeder Fund may withdraw its
investment in its corresponding Portfolio at any time, if the Board of Directors
of the Company determines that it is in the best interests of the Feeder Fund
and its shareholders to do so. Upon any such withdrawal, a Feeder Fund's assets
would be invested in accordance with the investment policies of its
corresponding Portfolio described below and in the Underlying Theme Funds'
Prospectus.
The investment objective of each Feeder Fund is long-term capital growth. The
investment objectives of the GT Global Health Care Fund and GT Global
Telecommunications Fund are long-term capital appreciation and long-term growth
of capital, respectively. The Portfolios and GT Global Health Care Fund and GT
Global Telecommunications Fund, together , are referred to herein as the
"Underlying Theme Portfolios."
SELECTION OF EQUITY INVESTMENTS. With respect to the Natural Resources
Portfolio, the Manager has identified four areas that it expects will create
investment opportunities: (i) improving supply/demand fundamentals, which may
result in higher commodity prices; (ii) privatization of state-owned natural
resource businesses; (iii) management which can improve production efficiencies
without correspondingly increasing commodity prices; and (iv) service companies
with emerging technologies that can enhance productivity or reduce production
costs. Of course, there is no certainty that these factors will produce the
anticipated results.
With respect to the Telecommunications Fund, the Manager has identified four
areas that it expects will create investment opportunities: (i) deregulation of
companies in the industry, which will allow competition to promote greater
efficiencies; (ii) privatization of state-owned telecommunications businesses;
(iii) development of infrastructure in underdeveloped countries and upgrading of
services in other countries; and (iv) emerging technologies that will enhance
productivity and reduce costs in the telecommunications industry. Of course,
there is no certainty that these factors will produce the anticipated results.
There may be times when, in the opinion of the Manager, prevailing market,
economic or political conditions warrant reducing the proportion of the
Underlying Theme Portfolios' assets invested in equity securities and increasing
the proportion held in cash (U.S. dollars, foreign currencies or multinational
currency units) or invested in debt securities or high quality money market
3
<PAGE>
instruments issued by corporations, or the U.S., or a foreign government. A
portion of each Underlying Theme Portfolio's assets normally will be held in
cash (U.S. dollars, foreign currencies or multinational currency units) or
invested in foreign or domestic high quality money market instruments pending
investment of proceeds from new sales of Underlying Theme Fund shares to provide
for ongoing expenses and to satisfy redemptions.
For each Underlying Theme Portfolio's investment purposes, an issuer is
typically considered as located in a particular country if it (a) is organized
under the laws of or has its principal office in a particular country, or (b)
normally derives 50% or more of its total revenues from business in that
country, provided that, in the Manager's view, the value of such issuer's
securities will tend to reflect such country's development to a greater extent
than developments elsewhere. However, these are not absolute requirements, and
certain companies incorporated in a particular country and considered by the
Manager to be located in that country may have substantial foreign operations or
subsidiaries and/or export sales exceeding in size the assets or sales in that
country.
In certain countries, governmental restrictions and other limitations on
investment may affect a Underlying Theme Portfolio's ability to invest in such
countries. In addition, in some instances only special classes of securities may
be purchased by foreigners and the market prices, liquidity and rights with
respect to those securities may vary from shares owned by nationals. The Manager
is not aware at this time of the existence of any investment or exchange control
regulations which might substantially impair the operations of the Underlying
Theme Portfolios as described in the Underlying Theme Funds' Prospectus and
Statement of Additional Information. Restrictions may in the future, however,
make it undesirable to invest in certain countries. None of the Underlying Theme
Portfolios has a present intention of making any significant investment in any
country or stock market in which the Manager considers the political or economic
situation to threaten a Underlying Theme Portfolio with substantial or total
loss of its investment in such country or market.
INVESTMENTS IN OTHER INVESTMENT COMPANIES. Each Underlying Theme Portfolio may
invest in the securities of investment companies within the limits of the
Investment Company Act of 1940, as amended (the "1940 Act"). These limitations
currently provide that, in general, a Underlying Theme Portfolio may purchase
shares of an investment company unless (a) such a purchase would cause a
Underlying Theme Portfolio to own in the aggregate more than 3% of the total
outstanding voting stock of the investment company or (b) such a purchase would
cause the Underlying Theme Portfolio to have more than 5% of its assets invested
in the investment company or more than 10% of its assets invested in an
aggregate of all such investment companies. The foregoing restrictions do not
apply to the investment of the Financial Services Fund, Infrastructure Fund,
Natural Resources Fund and Consumer Products and Services Fund in their
corresponding Underlying Theme Portfolios. Investment in closed-end investment
companies may involve the payment of substantial premiums above the value of
such companies' Underlying Theme Portfolio securities. Each Underlying Theme
Portfolio does not intend to invest in such investment companies unless, in the
judgment of the Manager, the potential benefits of such investments justify the
payment of any applicable premiums. The return on such securities will be
reduced by operating expenses of such companies, including payments to the
investment managers of those investment companies.
DEPOSITORY RECEIPTS. An Underlying Theme Portfolio may hold securities of
foreign issuers in the form of American Depository Receipts ("ADRs"), American
Depository Shares ("ADSs") and European Depository Receipts ("EDRs") or other
4
<PAGE>
securities convertible into securities of eligible foreign issuers. These
securities may not necessarily be denominated in the same currency as the
securities for which they may be exchanged. ADRs and ADSs are typically issued
by an American bank or trust company and evidence ownership of underlying
securities issued by a foreign corporation. EDRs, which are sometimes referred
to as Continental Depository Receipts ("CDRs"), are issued in Europe typically
by foreign banks and trust companies and evidence ownership of either foreign or
domestic securities. Generally, ADRs and ADSs in registered form are designed
for use in U.S. securities markets and EDRs in bearer form are designed for use
in European securities markets. For purposes of each Underlying Theme
Portfolio's investment policies, an Underlying Theme Portfolio's investments in
ADRs, ADSs and EDRs will be deemed to be investments in the equity securities
representing securities of foreign issuers into which they may be converted.
ADR facilities may be established as either "unsponsored" or "sponsored." While
ADRs issued under these two types of facilities are in some respects similar,
there are distinctions between them relating to the rights and obligations of
ADR holders and the practices of market participants. A depository may establish
an unsponsored facility without participation by (or even necessarily the
acquiescence of) the issuer of the deposited securities, although typically the
depository requests a letter of non-objection from such issuer prior to the
establishment of the facility. Holders of unsponsored ADRs generally bear all
the costs of such facilities. The depository usually charges fees upon the
deposit and withdrawal of the deposited securities, the conversion of dividends
into U.S. dollars, the disposition of non-cash distributions, and the
performance of other services. The depository of an unsponsored facility
frequently is under no obligation to distribute shareholder communications
received from the issuer of the deposited securities or to pass-through voting
rights to ADR holders in respect of the deposited securities. Sponsored ADR
facilities are created in generally the same manner as unsponsored facilities,
except that the issuer of the deposited securities enters into a deposit
agreement with the depository. The deposit agreement sets out the rights and
responsibilities of the issuer, the depository and the ADR holders. With
sponsored facilities, the issuer of the deposited securities generally will bear
some of the costs relating to the facility (such as dividend payment fees of the
depository), although ADR holders continue to bear certain other costs (such as
deposit and withdrawal fees). Under the terms of most sponsored arrangements,
depositories agree to distribute notices of shareholder meetings and voting
instructions, and to provide shareholder communications and other information to
the ADR holders at the request of the issuer of the deposited securities. The
Underlying Theme Portfolios may invest in both sponsored and unsponsored ADRs.
WARRANTS OR RIGHTS. Warrants or rights may be acquired by an Underlying Theme
Portfolio in connection with other securities or separately and provide the
Underlying Theme Portfolio with the right to purchase at a later date other
securities of the issuer.
LENDING OF UNDERLYING THEME PORTFOLIO SECURITIES. For the purpose of realizing
additional income, each Underlying Theme Portfolio may make secured loans of its
securities holdings amounting to not more than 30% of its total assets.
Securities loans are made to broker/dealers or institutional investors pursuant
to agreements requiring that the loans be continuously secured by collateral at
least equal at all times to the value of the securities lent plus any accrued
interest, "marked to market" on a daily basis. The Underlying Theme Portfolios
may pay reasonable administrative and custodial fees in connection with the
loans of their securities. While the securities loan is outstanding, an
5
<PAGE>
Underlying Theme Portfolio will continue to receive the equivalent of the
interest or dividends paid by the issuer on the securities, as well as interest
on the investment of the collateral or a fee from the borrower. An Underlying
Theme Portfolio will have a right to call each loan and obtain the securities on
five business days' notice. An Underlying Theme Portfolio will not have the
right to vote equity securities while they are being lent, but it may call in a
loan in anticipation of any important vote. Loans will only be made to firms
deemed by the Manager to be of good standing and will not be made unless, in the
judgment of the Manager, the consideration to be earned from such loans would
justify the risk. The risks in lending Underlying Theme Portfolio securities, as
with other extensions of secured credit, consist of possible delays in receiving
additional collateral or in recovery of the securities and possible loss of
rights in the collateral should the borrower fail financially.
COMMERCIAL BANK OBLIGATIONS. For the purposes of each Underlying Theme
Portfolio's investment policies with respect to bank obligations, obligations of
foreign branches of U.S. banks and of foreign banks are obligations of the
issuing bank and may be general obligations of the parent bank. Such obligations
may, however, be limited by the terms of a specific obligation and by government
regulation. As with investments in non-U.S. securities in general, investments
in the obligations of foreign branches of U.S. banks and of foreign banks may
subject each Underlying Theme Portfolio to investment risks that are different
in some respects from those of investments in obligations of U.S. issuers.
Although each Underlying Theme Portfolio will typically acquire obligations
issued and supported by the credit of U.S. or foreign banks having total assets
at the time of purchase of $1 billion or more, this $1 billion figure is not an
investment policy or restriction of each Underlying Theme Portfolio. For the
purposes of calculation with respect to the $1 billion figure, the assets of a
bank will be deemed to include the assets of its U.S. and non-U.S. branches.
REPURCHASE AGREEMENTS. A repurchase agreement is a transaction in which an
Underlying Theme Portfolio purchases a security from a bank or recognized
securities dealer and simultaneously commits to resell that security to the bank
or dealer at an agreed upon price, date, and market rate of interest unrelated
to the coupon rate or maturity of the purchased security. Although repurchase
agreements carry certain risks not associated with direct investments in
securities, including possible decline in the market value of the underlying
securities and delays and costs to the Underlying Theme Portfolio if the other
party to the repurchase agreement becomes bankrupt, the Underlying Theme
Portfolios intend to enter into repurchase agreements only with banks and
dealers believed by the Manager to present minimal credit risks in accordance
with guidelines established by the Company's Board of Directors, or the
Underlying Theme Portfolios' Board of Trustees, as applicable. The Manager will
review and monitor the creditworthiness of such institutions under the
applicable Board's general supervision.
Each Underlying Theme Portfolio will invest only in repurchase agreements
collateralized at all times in an amount at least equal to the repurchase price
plus accrued interest. To the extent that the proceeds from any sale of such
collateral upon a default in the obligation to repurchase were less than the
repurchase price, an Underlying Theme Portfolio would suffer a loss. If the
6
<PAGE>
financial institution which is party to the repurchase agreement petitions for
bankruptcy or otherwise becomes subject to bankruptcy or other liquidation
proceedings, there may be restrictions on an Underlying Theme Portfolio's
ability to sell the collateral and an Underlying Theme Portfolio could suffer a
loss. However, with respect to financial institutions whose bankruptcy or
liquidation proceedings are subject to the U.S. Bankruptcy Code, each Underlying
Theme Portfolio intends to comply with provisions under such Code that would
allow the immediate resale of such collateral. Each Underlying Theme Portfolio
will not enter into a repurchase agreement with a maturity of more than seven
days if, as a result, more than 15% of the value of its net assets (except for
Health Care Fund, more than 10% of the value of its total assets) would be
invested in such repurchase agreements and other illiquid investments.
BORROWING, REVERSE REPURCHASE AGREEMENTS AND "ROLL" TRANSACTIONS. Each
Underlying Theme Portfolio's borrowings will not exceed 33-1/3% of its total
assets, i.e., the Underlying Theme Portfolio's total assets at all times will
equal at least 300% of the amount of outstanding borrowings. If market
fluctuations in the value of an Underlying Theme Portfolio's securities holdings
or other factors cause the ratio of an Underlying Theme Portfolio's total assets
to outstanding borrowings to fall below 300%, within three days (excluding
Sundays and holidays) of such event that Underlying Theme Portfolio may be
required to sell Underlying Theme Portfolio securities to restore the 300% asset
coverage, even though from an investment standpoint such sales might be
disadvantageous. Each Underlying Theme Portfolio may also borrow up to 5% of its
total assets for temporary or emergency purposes other than to meet redemptions.
Any borrowing by an Underlying Theme Portfolio may cause greater fluctuation in
the value of its shares than would be the case if that Underlying Theme
Portfolio did not borrow.
Each Underlying Theme Portfolio's fundamental investment limitations permit the
Underlying Theme Portfolio to borrow money for leveraging purposes. However,
each Underlying Theme Portfolio (except the Health Care Fund) is currently
prohibited, pursuant to a non-fundamental investment policy, from borrowing
money in order to purchase securities. Nevertheless, this policy may be changed
in the future by the Company's Board of Directors or the Underlying Theme
Portfolios' Board of Trustees, as applicable. In the event that an Underlying
Theme Portfolio employs leverage in the future, it would be subject to certain
additional risks. Use of leverage creates an opportunity for greater growth of
capital but would exaggerate any increases or decreases in the net asset value
of the Financial Services Fund, Infrastructure Fund, Natural Resources Fund,
Consumer Products and Services Fund or an Underlying Theme Portfolio. When the
income and gains on securities purchased with the proceeds of borrowings exceed
the costs of such borrowings, an Underlying Theme Portfolio's earnings or the
Underlying Theme Fund's net asset value will increase faster than otherwise
would be the case; conversely, if such income and gains fail to exceed such
costs, an Underlying Theme Portfolio's earnings or the Underlying Theme Fund's
net asset value would decline faster than would otherwise be the case.
Each Underlying Theme Portfolio may enter into reverse repurchase agreements. A
reverse repurchase agreement is a borrowing transaction in which the Underlying
Theme Portfolio transfers possession of a security to another party, such as a
bank or broker/dealer, in return for cash, and agrees to repurchase the security
in the future at an agreed upon price, which includes an interest component.
Each Underlying Theme Portfolio may also engage in "roll" borrowing
transactions, which involve the sale of Government National Mortgage Association
certificates or other securities together with a commitment (for which the
Underlying Theme Portfolio may receive a fee) to purchase similar, but not
identical, securities at a future date. Each Underlying Theme Portfolio will
maintain, in a segregated account with a custodian, cash or liquid securities in
an amount sufficient to cover its obligations under "roll" transactions and
reverse repurchase agreements with broker/dealers. No segregation is required
for reverse repurchase agreements with banks.
7
<PAGE>
SHORT SALES. Each Underlying Theme Portfolio (except the Health Care Fund) is
authorized to make short sales of securities. A short sale is a transaction in
which an Underlying Theme Portfolio sells a security in anticipation that the
market price of that security will decline. An Underlying Theme Portfolio may
make short sales (i) as a form of hedging to offset potential declines in long
positions in securities it owns, or anticipates acquiring, or in similar
securities, and (ii) in order to maintain flexibility in its securities
holdings.
When an Underlying Theme Portfolio makes a short sale of a security it does not
own, it must borrow the security sold short and deliver it to the broker/dealer
or other intermediary through which it made the short sale. The Underlying Theme
Portfolio may have to pay a fee to borrow particular securities and will often
be obligated to pay over any payments received on such borrowed securities.
An Underlying Theme Portfolio's obligation to replace the borrowed security when
the borrowing is called or expires will be secured by collateral deposited with
the intermediary. The Underlying Theme Portfolio will also be required to
deposit collateral with its custodian to the extent, if any, necessary so that
the value of both collateral deposits in the aggregate is at all times equal to
at least 100% of the current market value of the security sold short. Depending
on arrangements made with the intermediary from which it borrowed the security
regarding payment of any amounts received by that Underlying Theme Portfolio on
such security, an Underlying Theme Portfolio may not receive any payments
(including interest) on its collateral deposited with such intermediary.
If the price of the security sold short increases between the time of the short
sale and the time an Underlying Theme Portfolio replaces the borrowed security,
that Underlying Theme Portfolio will incur a loss; conversely, if the price
declines, the Underlying Theme Portfolio will realize a gain. Any gain will be
decreased, and any loss increased, by the transaction costs associated with the
transaction. Although an Underlying Theme Portfolio's gain is limited by the
price at which it sold the security short, its potential loss theoretically is
unlimited.
No Underlying Theme Portfolio will make a short sale if, after giving effect to
such sale, the market value of the securities sold short exceeds 25% of the
value of its total assets or the Underlying Theme Portfolio's aggregate short
sales of the securities of any one issuer exceed the lesser of 2% of the
Underlying Theme Portfolio's net assets or 2% of the securities of any class of
the issuer. Moreover, an Underlying Theme Portfolio may engage in short sales
only with respect to securities listed on a national securities exchange. An
Underlying Theme Portfolio may make short sales "against the box" without
respect to such limitations. In this type of short sale, at the time of the sale
the Underlying Theme Portfolio owns the security it has sold short or has the
immediate and unconditional right to acquire at no additional cost the identical
security.
RISKS ASSOCIATED WITH DEBT SECURITIES. The value of the debt securities held by
each Underlying Theme Portfolio generally will vary conversely with market
interest rates. If interest rates in a market fall, the value of the debt
securities held by each Underlying Theme Portfolio ordinarily will rise. If
market interest rates increase, however, the debt securities owned by each
Underlying Theme Portfolio in that market will be likely to decrease in value.
8
<PAGE>
The Infrastructure Portfolio, Natural Resources Portfolio and Consumer Products
and Services Portfolio may each invest up to 20% of its total assets in debt
securities rated below investment grade. Such investments involve a high degree
of risk. However, the Infrastructure Portfolio, Natural Resources Portfolio and
Consumer Products and Services Portfolio will not invest in debt securities that
are in default as to payment of principal and interest.
Debt rated Baa by Moody's Investor Services, Inc. ("Moody's") is considered to
have speculative characteristics. Debt rated BB, B, CCC, CC or C by Standard &
Poors Ratings Group ("S&P") and debt rated Ba, B, Caa, Ca or C by Moody's is
regarded, on balance, as predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal in accordance with the terms of the
obligation. For S&P, BB indicates the lowest degree of speculation for such
lower quality debt and C the highest degree of speculation. For Moody's, Baa
indicates the lowest degree of speculation for such lower quality debt and C the
highest degree of speculation. While such lower quality debt will likely have
some quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions. Debt rated C by
Moody's or S&P is the lowest rated debt that is not in default as to principal
or interest, and such issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing. Lower quality debt
securities also are generally considered to be subject to greater risk than
securities with higher ratings with regard to a deterioration of general
economic conditions. These lower quality debt securities are the equivalent of
high yield, high risk bonds, commonly known as "junk bonds."
Ratings of debt securities represent the rating agency's opinion regarding their
quality and are not a guarantee of quality. Rating agencies attempt to evaluate
the safety of principal and interest payments and do not evaluate the risks of
fluctuations in market value. Also, rating agencies may fail to make timely
changes in credit ratings in response to subsequent events, so that an issuer's
current financial condition may be better or worse than a rating indicates.
The market values of lower quality debt securities tend to reflect individual
developments of the issuer to a greater extent than do higher quality
securities, which react primarily to fluctuations in the general level of
interest rates. In addition, lower quality debt securities tend to be more
sensitive to economic conditions and generally have more volatile prices than
higher quality securities. Issuers of lower quality securities are often highly
leveraged and may not have available to them more traditional methods of
financing. For example, during an economic downturn or a sustained period of
rising interest rates, highly leveraged issuers of lower quality securities may
experience financial stress. During such periods, 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 developments affecting the issuer, such as the issuer's inability to
meet specific projected business forecasts or the unavailability of additional
financing. The risk of loss due to default by the issuer is significantly
greater for the holders of lower quality securities because such securities are
generally unsecured and may be subordinated to the claims of other creditors of
the issuer.
Lower quality debt securities of corporate issuers frequently have call or
buy-back features which would permit an issuer to call or repurchase the
security from the Underlying Theme Portfolios. If an issuer exercises these
provisions in a declining interest rate market, the Underlying Theme Portfolios
may have to replace the security with a lower yielding security, resulting in a
decreased return for investors. In addition, the Underlying Theme Portfolios may
have difficulty disposing of lower quality securities because they may have a
thin trading market. There may be no established retail secondary market for
9
<PAGE>
many of these securities, and each of the Underlying Theme Portfolios
anticipates that such securities could be sold only to a limited number of
dealers or institutional investors. The lack of a liquid secondary market also
may have an adverse impact on market prices of such instruments and may make it
more difficult for the Underlying Theme Portfolios to obtain accurate market
quotations for purposes of valuing the Underlying Theme Portfolios portfolio
investments. The Underlying Theme Portfolios may also acquire lower quality debt
securities during an initial underwriting or which are sold without registration
under applicable securities laws. Such securities involve special considerations
and risks.
In addition to the foregoing, factors that could have an adverse effect on the
market value of lower quality debt securities in which the Underlying Theme
Portfolios may invest include: (i) potential adverse publicity; (ii) heightened
sensitivity to general economic or political conditions; and (iii) the likely
adverse impact of a major economic recession. An Underlying Theme Portfolio may
also incur additional expenses to the extent it is required to seek recovery
upon a default in the payment of principal or interest on portfolio holdings,
and the Underlying Theme Portfolio may have limited legal recourse in the event
of a default.
The Manager attempts to minimize the speculative risks associated with
investments in lower quality securities through credit analysis and by carefully
monitoring current trends in interest rates, political developments and other
factors.
OPTIONS, FUTURES AND CURRENCY STRATEGIES
SPECIAL RISKS OF OPTIONS, FUTURES AND CURRENCY STRATEGIES
The use of options, futures contracts and forward currency contracts ("Forward
Contracts") involves special considerations and risks, as described below. Risks
pertaining to particular instruments are described in the sections that follow.
(1) Successful use of most of these instruments depends upon the
Manager's ability to predict movements of the overall securities and
currency markets, which requires different skills than predicting changes
in the prices of individual securities. While the Manager is experienced
in the use of these instruments, there can be no assurance that any
particular strategy adopted will succeed.
(2) There might be imperfect correlation, or even no correlation,
between price movements of an instrument and price movements of the
investments being hedged. For example, if the value of an instrument used
in a short hedge increased by less than the decline in value of the hedged
investment, the hedge would not be fully successful. Such a lack of
correlation might occur due to factors unrelated to the value of the
investments being hedged, such as speculative or other pressures on the
markets in which the hedging instrument is traded. The effectiveness of
hedges using hedging instruments on indices will depend on the degree of
correlation between price movements in the index and price movements in
the investments being hedged.
(3) Hedging strategies, if successful, can reduce risk of loss by
wholly or partially offsetting the negative effect of unfavorable price
movements in the investments being hedged. However, hedging strategies can
also reduce opportunity for gain by offsetting the positive effect of
favorable price movements in the hedged investments. For example, if an
10
<PAGE>
Underlying Theme Portfolio entered into a short hedge because the Manager
projected a decline in the price of a security in the Underlying Theme
Portfolio's Underlying Theme Portfolio, and the price of that security
increased instead, the gain from that increase might be wholly or
partially offset by a decline in the price of the hedging instrument.
Moreover, if the price of the hedging instrument declined by more than the
increase in the price of the security, the Underlying Theme Portfolio
could suffer a loss. In either such case, the Underlying Theme Portfolio
would have been in a better position had it not hedged at all.
(4) As described below, the Underlying Theme Portfolio might be
required to maintain assets as "cover," maintain segregated accounts or
make margin payments when it takes positions in instruments involving
obligations to third parties (I.E., instruments other than purchased
options). If the Underlying Theme Portfolio were unable to close out its
positions in such instruments, it might be required to continue to
maintain such assets or accounts or make such payments until the position
expired or matured. The requirements might impair the Underlying Theme
Portfolio's ability to sell an Underlying Theme Portfolio security or make
an investment at a time when it would otherwise be favorable to do so, or
require that the Underlying Theme Portfolio sell an Underlying Theme
Portfolio security at a disadvantageous time. The Underlying Theme
Portfolio's ability to close out a position in an instrument prior to
expiration or maturity depends on the existence of a liquid secondary
market or, in the absence of such a market, the ability and willingness of
the other party to the transaction ("contra party") to enter into a
transaction closing out the position. Therefore, there is no assurance
that any position can be closed out at a time and price that is favorable
to the Underlying Theme Portfolio.
WRITING CALL OPTIONS
Each Underlying Theme Portfolio may write (sell) call options on securities,
indices and currencies. Call options generally will be written on securities and
currencies that, in the opinion of the Manager are not expected to make any
major price moves in the near future but that, over the long term, are deemed to
be attractive investments for the Underlying Theme Portfolios.
A call option gives the holder (buyer) the right to purchase a security or
currency at a specified price (the exercise price) at any time until (American
style) or on (European style) a certain date (the expiration date). So long as
the obligation of the writer of a call option continues, he or she may be
assigned an exercise notice, requiring him or her to deliver the underlying
security or currency against payment of the exercise price. This obligation
terminates upon the expiration of the call option, or such earlier time at which
the writer effects a closing purchase transaction by purchasing an option
identical to that previously sold.
Underlying Theme Portfolio securities or currencies on which call options may be
written will be purchased solely on the basis of investment considerations
consistent with each Underlying Theme Portfolio's investment objective. When
writing a call option, an Underlying Theme Portfolio, in return for the premium,
gives up the opportunity for profit from a price increase in the underlying
security or currency above the exercise price, and retains the risk of loss
should the price of the security or currency decline. Unlike one who owns
11
<PAGE>
securities or currencies not subject to an option, an Underlying Theme Portfolio
has no control over when it may be required to sell the underlying securities or
currencies, since most options may be exercised at any time prior to the
option's expiration. If a call option that an Underlying Theme Portfolio has
written expires, the Underlying Theme Portfolio will realize a gain in the
amount of the premium; however, such gain may be offset by a decline in the
market value of the underlying security or currency during the option period. If
the call option is exercised, the Underlying Theme Portfolio will realize a gain
or loss from the sale of the underlying security or currency, which will be
increased or offset by the premium received. Each Underlying Theme Portfolio
does not consider a security or currency covered by a call option to be
"pledged" as that term is used in that Underlying Theme Portfolio's policy that
limits the pledging or mortgaging of its assets.
Writing call options can serve as a limited short hedge because declines in the
value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security or currency
appreciates to a price higher than the exercise price of the call option, it can
be expected that the option will be exercised and an Underlying Theme Portfolio
will be obligated to sell the security or currency at less than its market
value.
The premium that an Underlying Theme Portfolio receives for writing a call
option is deemed to constitute the market value of an option. The premium the
Underlying Theme Portfolio will receive from writing a call option will reflect,
among other things, the current market price of the underlying investment, the
relationship of the exercise price to such market price, the historical price
volatility of the underlying investment, and the length of the option period. In
determining whether a particular call option should be written, the Manager will
consider the reasonableness of the anticipated premium and the likelihood that a
liquid secondary market will exist for those options.
Closing transactions will be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security or currency from
being called, or to permit the sale of the underlying security or currency.
Furthermore, effecting a closing transaction will permit an Underlying Theme
Portfolio to write another call option on the underlying security or currency
with either a different exercise price or expiration date, or both.
Each Underlying Theme Portfolio will pay transaction costs in connection with
the writing of options and in entering into closing purchase contracts.
Transaction costs relating to options activity are normally higher than those
applicable to purchases and sales of Underlying Theme Portfolio securities.
The exercise price of the options may be below, equal to or above the current
market values of the underlying securities, indices or currencies at the time
the options are written. From time to time, an Underlying Theme Portfolio may
purchase an underlying security or currency for delivery in accordance with the
exercise of an option, rather than delivering such security or currency from its
Underlying Theme Portfolio. In such cases, additional costs will be incurred.
An Underlying Theme Portfolio will realize a profit or loss from a closing
purchase transaction if the cost of the transaction is less or more,
respectively, than the premium received from writing the option. Because
increases in the market price of a call option generally will reflect increases
in the market price of the underlying security or currency, any loss resulting
from the repurchase of a call option is likely to be offset in whole or in part
by appreciation of the underlying security or currency owned by an Underlying
Theme Portfolio.
12
<PAGE>
WRITING PUT OPTIONS
Each Underlying Theme Portfolio may write put options on securities, indices and
currencies. A put option gives the purchaser of the option the right to sell,
and the writer (seller) the obligation to buy, the underlying security or
currency at the exercise price at any time until (American style) or on
(European style) the expiration date. The operation of put options in other
respects, including their related risks and rewards, is substantially identical
to that of call options.
An Underlying Theme Portfolio generally would write put options in circumstances
where the Manager wishes to purchase the underlying security or currency for an
Underlying Theme Portfolio's holdings at a price lower than the current market
price of the security or currency. In such event, an Underlying Theme Portfolio
would write a put option at an exercise price that, reduced by the premium
received on the option, reflects the lower price it is willing to pay. Since the
Underlying Theme Portfolio would also receive interest on debt securities or
currencies maintained to cover the exercise price of the option, this technique
could be used to enhance current return during periods of market uncertainty.
The risk in such a transaction would be that the market price of the underlying
security or currency would decline below the exercise price less the premium
received.
Writing put options can serve as a limited long hedge because increases in the
value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security or currency
depreciates to a price lower than the exercise price of the put option, it can
be expected that the put option will be exercised and an Underlying Theme
Portfolio will be obligated to purchase the security or currency at greater than
its market value.
PURCHASING PUT OPTIONS
Each Underlying Theme Portfolio may purchase put options on securities, indices
and currencies. As the holder of a put option, an Underlying Theme Portfolio
would have the right to sell the underlying security or currency at the exercise
price at any time until (American style) or on (European style) the expiration
date. An Underlying Theme Portfolio may enter into closing sale transactions
with respect to such options, exercise such option or permit such option to
expire.
Each Underlying Theme Portfolio may purchase a put option on an underlying
security or currency ("protective put") owned by the Underlying Theme Portfolio
in order to protect against an anticipated decline in the value of the security
or currency. Such hedge protection is provided only during the life of the put
option when the Underlying Theme Portfolio, as the holder of the put option, is
able to sell the underlying security or currency at the put exercise price
regardless of any decline in the underlying security's market price or
currency's exchange value. For example, a put option may be purchased in order
to protect unrealized appreciation of a security or currency when the Manager
deems it desirable to continue to hold the security or currency because of tax
considerations. The premium paid for the put option and any transaction costs
would reduce any profit otherwise available for distribution when the security
or currency is eventually sold.
An Underlying Theme Portfolio may also purchase put options at a time when it
does not own the underlying security or currency. By purchasing put options on a
security or currency it does not own, that Underlying Theme Portfolio seeks to
benefit from a decline in the market price of the underlying security or
13
<PAGE>
currency. If the put option is not sold when it has remaining value, and if the
market price of the underlying security or currency remains equal to or greater
than the exercise price during the life of the put option, the Underlying Theme
Portfolio will lose its entire investment in the put option. In order for the
purchase of a put option to be profitable, the market price of the underlying
security or currency must decline sufficiently below the exercise price to cover
the premium and transaction costs, unless the put option is sold in a closing
sale transaction.
PURCHASING CALL OPTIONS
Each Underlying Theme Portfolio may purchase call options on securities, indices
and currencies. As the holder of a call option, the Underlying Theme Portfolio
would have the right to purchase the underlying security or currency at the
exercise price at any time until (American style) or on (European style) the
expiration date. An Underlying Theme Portfolio may enter into closing sale
transactions with respect to such options, exercise such options or permit such
options to expire.
Call options may be purchased by an Underlying Theme Portfolio for the purpose
of acquiring the underlying security or currency for its Underlying Theme
Portfolio. Utilized in this fashion, the purchase of call options would enable
an Underlying Theme Portfolio to acquire the security or currency at the
exercise price of the call option plus the premium paid. At times, the net cost
of acquiring the security or currency in this manner may be less than the cost
of acquiring the security or currency directly. This technique may also be
useful to an Underlying Theme Portfolio in purchasing a large block of
securities that would be more difficult to acquire by direct market purchases.
So long as it holds such a call option, rather than the underlying security or
currency itself, the Underlying Theme Portfolio is partially protected from any
unexpected decline in the market price of the underlying security or currency
and, in such event, could allow the call option to expire, incurring a loss only
to the extent of the premium paid for the option.
An Underlying Theme Portfolio may also purchase call options on underlying
securities or currencies it owns in order to protect unrealized gains on call
options previously written by it. A call option could be purchased for this
purpose where tax considerations make it inadvisable to realize such gains
through a closing purchase transaction. Call options may also be purchased at
times to avoid realizing losses that would result in a reduction of the
Underlying Theme Portfolio's current return. For example, where an Underlying
Theme Portfolio has written a call option on an underlying security or currency
having a current market value below the price at which such security or currency
was purchased by that Underlying Theme Portfolio, an increase in the market
price could result in the exercise of the call option written by the Underlying
Theme Portfolio and the realization of a loss on the underlying security or
currency. Accordingly, the Underlying Theme Portfolio could purchase a call
option on the same underlying security or currency, which could be exercised to
fulfill the Underlying Theme Portfolio's delivery obligations under its written
call (if it is exercised). This strategy could allow the Underlying Theme
Portfolio to avoid selling the Underlying Theme Portfolio security or currency
at a time when it has an unrealized loss; however, the Underlying Theme
Portfolio would have to pay a premium to purchase the call option plus
transaction costs.
14
<PAGE>
Aggregate premiums paid for put and call options will not exceed 5% of each
Underlying Theme Portfolio's total assets at the time of each purchase.
An Underlying Theme Portfolio may attempt to accomplish objectives similar to
those involved in using Forward Contracts, by purchasing put or call options on
currencies. A put option gives the Underlying Theme Portfolio as purchaser the
right (but not the obligation) to sell a specified amount of currency at the
exercise price at any time until (American style) or on (European style) the
expiration date of the option. A call option gives the Underlying Theme
Portfolio as purchaser the right (but not the obligation) to purchase a
specified amount of currency at the exercise price at any time until (American
style) or on (European style) the expiration date of the option. An Underlying
Theme Portfolio might purchase a currency put option, for example, to protect
itself against a decline in the dollar value of a currency in which it holds or
anticipates holding securities. If the currency's value should decline against
the dollar, the loss in currency value should be offset, in whole or in part, by
an increase in the value of the put. If the value of the currency instead should
rise against the dollar, any gain to an Underlying Theme Portfolio would be
reduced by the premium it had paid for the put option. A currency call option
might be purchased, for example, in anticipation of, or to protect against, a
rise in the value against the dollar of a currency in which an Underlying Theme
Portfolio anticipates purchasing securities.
Options may be either listed on an exchange or traded in over-the-counter
("OTC") markets. Listed options are third-party contracts (I.E., performance of
the obligations of the purchaser and seller is guaranteed by the exchange or
clearing corporation) and have standardized strike prices and expiration dates.
OTC options are two-party contracts with negotiated strike prices and expiration
dates. An Underlying Theme Portfolio will not purchase an OTC option unless it
believes that daily valuations for such options are readily obtainable. OTC
options differ from exchange-traded options in that OTC options are transacted
with dealers directly and not through a clearing corporation (which guarantees
performance). Consequently, there is a risk of non-performance by the dealer.
Since no exchange is involved, OTC options are valued on the basis of an average
of the last bid prices obtained from dealers, unless a quotation from only one
dealer is available, in which case only that dealer's price will be used. In the
case of OTC options, there can be no assurance that a liquid secondary market
will exist for any particular option at any specific time.
The staff of the Securities and Exchange Commission ("SEC") considers purchased
OTC options to be illiquid securities. An Underlying Theme Portfolio may also
sell OTC options and, in connection therewith, segregate assets or cover its
obligations with respect to OTC options written by the Underlying Theme
Portfolio. The assets used as cover for OTC options written by an Underlying
Theme Portfolio will be considered illiquid unless the OTC options are sold to
qualified dealers who agree that the Underlying Theme Portfolio may repurchase
any OTC option it writes at a maximum price to be calculated by a formula set
forth in the option agreement. The cover for an OTC option written subject to
this procedure would be considered illiquid only to the extent that the maximum
repurchase price under the formula exceeds the intrinsic value of the option.
An Underlying Theme Portfolio's ability to establish and close out positions in
exchange-listed options depends on the existence of a liquid market. An
Underlying Theme Portfolio intends to purchase or write only those
exchange-traded options for which there appears to be a liquid secondary market.
However, there can be no assurance that such a market will exist at any
particular time. Closing transactions can be made for OTC options only by
negotiating directly with the contra party or by a transaction in the secondary
15
<PAGE>
market if any such market exists. Although an Underlying Theme Portfolio will
enter into OTC options only with contra parties that are expected to be capable
of entering into closing transactions with the Underlying Theme Portfolio, there
is no assurance that the Underlying Theme Portfolio will in fact be able to
close out an OTC option position at a favorable price prior to expiration. In
the event of insolvency of the contra party, the Underlying Theme Portfolio
might be unable to close out an OTC option position at any time prior to its
expiration.
INDEX OPTIONS
Puts and calls on indices are similar to puts and calls on securities or futures
contracts except that all settlements are in cash and gain or loss depends on
changes in the index in question (and thus on price movements in the securities
market or a particular market sector generally) rather than on price movements
in individual securities or futures contracts. When an Underlying Theme
Portfolio writes a call on an index, it receives a premium and agrees that,
prior to the expiration date, the purchaser of the call, upon exercise of the
call, will receive from the Underlying Theme Portfolio an amount of cash if the
closing level of the index upon which the call is based is greater than the
exercise price of the call. The amount of cash is equal to the difference
between the closing price of the index and the exercise price of the call times
a specified multiple (the "multiplier"), which determines the total dollar value
for each point of such difference. When an Underlying Theme Portfolio buys a
call on an index, it pays a premium and has the same rights as to such call as
are indicated above. When an Underlying Theme Portfolio buys a put on an index,
it pays a premium and has the right, prior to the expiration date, to require
the seller of the put, upon the Underlying Theme Portfolio's exercise of the
put, to deliver to the Underlying Theme Portfolio an amount of cash if the
closing level of the index upon which the put is based is less than the exercise
price of the put, which amount of cash is determined by the multiplier, as
described above for calls. When the Underlying Theme Portfolio writes a put on
an index, it receives a premium and the purchaser has the right, prior to the
expiration date, to require the Underlying Theme Portfolio to deliver to it an
amount of cash equal to the difference between the closing level of the index
and the exercise price times the multiplier, if the closing level is less than
the exercise price.
The risks of investment in index options may be greater than options on
securities. Because index options are settled in cash, when an Underlying Theme
Portfolio writes a call on an index it cannot provide in advance for its
potential settlement obligations by acquiring and holding the underlying
securities. An Underlying Theme Portfolio can offset some of the risk of writing
a call index option position by holding a diversified Underlying Theme Portfolio
of securities similar to those on which the underlying index is based. However,
an Underlying Theme Portfolio cannot, as a practical matter, acquire and hold an
Underlying Theme Portfolio containing exactly the same securities as underlie
the index and, as a result, bears a risk that the value of the securities held
will vary from the value of the index.
Even if an Underlying Theme Portfolio could assemble a securities portfolio that
exactly reproduced the composition of the underlying index, it still would not
be fully covered from a risk standpoint because of the "timing risk" inherent in
writing index options. When an 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 options, the Underlying Theme Portfolio, as
the call writer, will not know that it has been assigned until the next business
day at the earliest. The time lag between exercise and notice of assignment
16
<PAGE>
poses no risk for the writer of a covered call on a specific underlying
security, such as common stock, because there the writer's obligation is to
deliver the underlying security, not to pay its value as of a fixed time in the
past. So long as the writer already owns the underlying security, it can satisfy
its settlement obligations by simply delivering it, and the risk that its value
may have declined since the exercise date is borne by the exercising holder. In
contrast, even if the writer of an index call holds securities that exactly
match the composition of the underlying index, it will not be able to satisfy
its assignment obligations by delivering those securities against payment of the
exercise price. Instead, it will be required to pay cash in an amount based on
the closing index value on the exercise date; and by the time it learns that it
has been assigned, the index may have declined, with a corresponding decline in
the value of its securities Underlying Theme Portfolio. This "timing risk" is an
inherent limitation on the ability of index call writers to cover their risk
exposure by holding securities positions.
If an Underlying Theme Portfolio has purchased an index option and exercises it
before the closing index value for that day is available, it runs the risk that
the level of the underlying index may subsequently change. If such a change
causes the exercised option to fall out-of-the-money, the Underlying Theme
Portfolio 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.
INTEREST RATE, CURRENCY AND STOCK INDEX FUTURES CONTRACTS
Each Underlying Theme Portfolio may enter into interest rate or currency futures
contracts, and may enter into stock index futures contracts (collectively,
"Futures" or "Futures Contracts"), as a hedge against changes in prevailing
levels of interest rates, currency exchange rates or stock price levels in order
to establish more definitely the effective return on securities or currencies
held or intended to be acquired by the Underlying Theme Portfolio. An Underlying
Theme Portfolio's hedging may include sales of Futures as an offset against the
effect of expected increases in interest rates, and decreases in currency
exchange rates and stock prices, and purchases of Futures as an offset against
the effect of expected declines in interest rates, and increases in currency
exchange rates or stock prices.
Each Underlying Theme Portfolio only will enter into Futures Contracts that are
traded on futures exchanges and are standardized as to maturity date and
underlying financial instrument. Futures exchanges and trading thereon in the
United States are regulated under the Commodity Exchange Act by the Commodity
Futures Trading Commission ("CFTC"). Futures are exchanged in London at the
London International Financial Futures Exchange.
Although techniques other than sales and purchases of Futures Contracts could be
used to reduce an Underlying Theme Portfolio's exposure to interest rate,
currency exchange rate and stock market fluctuations, that Underlying Theme
Portfolio may be able to hedge its exposure more effectively and at a lower cost
through using Futures Contracts.
A Futures Contract provides for the future sale by one party and purchase by
another party of a specified amount of a specific financial instrument (security
or currency) for a specified price at a designated date, time and place. A stock
index Futures Contract provides for the delivery, at a designated date, time and
place, of an amount of cash equal to a specified dollar amount times the
difference between the stock index value at the close of trading on the contract
and the price at which the Futures Contract is originally struck; no physical
delivery of stocks comprising the index is made. Brokerage fees are incurred
when a Futures Contract is bought or sold, and margin deposits must be
maintained at all times the Futures Contract is outstanding.
17
<PAGE>
Although Futures Contracts typically require future delivery of and payment for
financial instruments or currencies, Futures Contracts usually are closed out
before the delivery date. Closing out an open Futures Contract sale or purchase
is effected by entering into an offsetting Futures Contract purchase or sale,
respectively, for the same aggregate amount of the identical financial
instrument or currency and the same delivery date. If the offsetting purchase
price is less than the original sale price, the Underlying Theme Portfolio
realizes a gain; if it is more, the Underlying Theme Portfolio realizes a loss.
Conversely, if the offsetting sale price is more than the original purchase
price, the Underlying Theme Portfolio realizes a gain; if it is less, the
Underlying Theme Portfolio realizes a loss. The transaction costs must also be
included in these calculations. There can be no assurance, however, that an
Underlying Theme Portfolio will be able to enter into an offsetting transaction
with respect to a particular Futures Contract at a particular time. If an
Underlying Theme Portfolio is not able to enter into an offsetting transaction,
that Underlying Theme Portfolio will continue to be required to maintain the
margin deposits on the Futures Contract.
As an example of an offsetting transaction, the contractual obligations arising
from the sale of one Futures Contract of September Deutschemarks on an exchange
may be fulfilled at any time before delivery under the Futures Contract is
required (I.E., on a specified date in September, the "delivery month") by the
purchase of another Futures Contract of September Deutschemarks on the same
exchange. In such instance, the difference between the price at which the
Futures Contract was sold and the price paid for the offsetting purchase, after
allowance for transaction costs, represents the profit or loss to the Underlying
Theme Portfolio.
Each Underlying Theme Portfolio's Futures transactions will be entered into for
hedging purposes; that is, Futures Contracts will be sold to protect against a
decline in the price of securities or currencies that an Underlying Theme
Portfolio owns, or Futures Contracts will be purchased to protect the Underlying
Theme Portfolio against an increase in the price of securities or currencies it
has committed to purchase or expects to purchase.
"Margin" with respect to Futures Contracts is the amount of funds that must be
deposited by an Underlying Theme Portfolio in order to initiate Futures trading
and maintain the Underlying Theme Portfolio's open positions in Futures
Contracts. A margin deposit made when the Futures Contract is entered into
("initial margin") is intended to ensure the Underlying Theme Portfolio's
performance under the Futures Contract. The margin required for a particular
Futures Contract is set by the exchange on which the Futures Contract is traded
and may be significantly modified from time to time by the exchange during the
term of the Futures Contract.
Subsequent payments, called "variation margin," to and from the futures
commission merchant through which the Underlying Theme Portfolio entered into
the Futures Contract will be made on a daily basis as the price of the
underlying security, currency or index fluctuates making the Futures Contract
more or less valuable, a process known as marking-to-market.
RISKS OF USING FUTURES CONTRACTS. The prices of Futures Contracts are volatile
and are influenced by, among other things, actual and anticipated changes in
interest rates and currency exchange rates, and in stock market movements, which
in turn are affected by fiscal and monetary policies and national and
international political and economic events.
18
<PAGE>
There is a risk of imperfect correlation between changes in prices of Futures
Contracts and prices of the securities or currencies in an Underlying Theme
Portfolio's Underlying Theme Portfolio being hedged. The degree of imperfection
of correlation depends upon circumstances such as variations in speculative
market demand for Futures and for securities or currencies, including technical
influences in Futures trading; and differences between the financial instruments
being hedged and the instruments underlying the standard Futures Contracts
available for trading. A decision of whether, when and how to hedge involves
skill and judgment, and even a well-conceived hedge may be unsuccessful to some
degree because of unexpected market behavior or interest or currency rate
trends.
Because of the low margin deposits required, Futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a Futures Contract may result in immediate and substantial loss, as
well as gain, to the investor. For example, if at the time of purchase, 10% of
the value of the Futures Contract is deposited as margin, a subsequent 10%
decrease in the value of the Futures Contract would result in a total loss of
the margin deposit, before any deduction for the transaction costs, if the
account were then closed out. A 15% decrease would result in a loss equal to
150% of the original margin deposit, if the Futures Contract were closed out.
Thus, a purchase or sale of a Futures Contract may result in losses in excess of
the amount invested in the Futures Contract.
Most U.S. Futures exchanges limit the amount of fluctuation permitted in Futures
Contract and options on Futures Contracts prices during a single trading day.
The daily limit establishes the maximum amount that the price of a Futures
Contract or option may vary either up or down from the previous day's settlement
price at the end of a trading session. Once the daily limit has been reached in
a particular type of Futures Contract or option, no trades may be made on that
day at a price beyond that limit. The daily limit governs only price movement
during a particular trading day and therefore does not limit potential losses,
because the limit may prevent the liquidation of unfavorable positions. Futures
Contract and option prices have occasionally moved to the daily limit for
several consecutive trading days with little or no trading, thereby preventing
prompt liquidation of positions and subjecting some traders to substantial
losses.
If an Underlying Theme Portfolio were unable to liquidate a Futures or option on
Futures position due to the absence of a liquid secondary market or the
imposition of price limits, it could incur substantial losses. The Underlying
Theme Portfolio would continue to be subject to market risk with respect to the
position. In addition, except in the case of purchased options, the Underlying
Theme Portfolio would continue to be required to make daily variation margin
payments and might be required to maintain the position being hedged by the
Future or option or to maintain cash or securities in a segregated account.
Certain characteristics of the Futures market might increase the risk that
movements in the prices of Futures Contracts or options on Futures might not
correlate perfectly with movements in the prices of the investments being
hedged. For example, all participants in the Futures and options on Futures
markets are subject to daily variation margin calls and might be compelled to
liquidate Futures or options on Futures positions whose prices are moving
unfavorably to avoid being subject to further calls. These liquidations could
increase price volatility of the instruments and distort the normal price
19
<PAGE>
relationship between the Futures or options and the investments being hedged.
Also, because initial margin deposit requirements in the Futures market are less
onerous than margin requirements in the securities markets, there might be
increased participation by speculators in the Futures markets. This
participation also might cause temporary price distortions. In addition,
activities of large traders in both the Futures and securities markets involving
arbitrage, "program trading" and other investment strategies might result in
temporary price distortions.
OPTIONS ON FUTURES CONTRACTS
Options on Futures Contracts are similar to options on securities or currencies
except that options on Futures Contracts give the purchaser the right, in return
for the premium paid, to assume a position in a Futures Contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the period of the option. Upon
exercise of the option, the delivery of the Futures position by the writer of
the option to the holder of the option will be accompanied by delivery of the
accumulated balance in the writer's Futures margin account, which represents the
amount by which the market price of the Futures Contract, at exercise, exceeds
(in the case of a call) or is less than (in the case of a put) the exercise
price of the option on the Futures Contract. If an option is exercised on the
last trading day prior to the expiration date of the option, the settlement will
be made entirely in cash equal to the difference between the exercise price of
the option and the closing level of the securities, currencies or index upon
which the Futures Contract is based on the expiration date. Purchasers of
options who fail to exercise their options prior to the exercise date suffer a
loss of the premium paid.
The purchase of call options on Futures can serve as a long hedge, and the
purchase of put options on Futures can serve as a short hedge. Writing call
options on Futures can serve as a limited short hedge, and writing put options
on Futures can serve as a limited long hedge, using a strategy similar to that
used for writing options on securities, foreign currencies or indices.
If an Underlying Theme Portfolio writes an option on a Futures Contract, it will
be required to deposit initial and variation margin pursuant to requirements
similar to those applicable to Futures Contracts. Premiums received from the
writing of an option on a Futures Contract are included in the initial margin
deposit.
An Underlying Theme Portfolio may seek to close out an option position by
selling an option covering the same Futures Contract and having the same
exercise price and expiration date. The ability to establish and close out
positions on such options is subject to the maintenance of a liquid secondary
market.
LIMITATIONS ON USE OF FUTURES, OPTIONS ON FUTURES AND CERTAIN OPTIONS ON
CURRENCIES To the extent that an Underlying Theme Portfolio enters into Futures
Contracts, options on Futures Contracts, and options on foreign currencies
traded on a CFTC-regulated exchange, in each case other than for BONA FIDE
hedging purposes (as defined by the CFTC), the aggregate initial margin and
premiums required to establish those positions (excluding the amount by which
options are "in-the-money") will not exceed 5% of the liquidation value of the
20
<PAGE>
Underlying Theme Portfolio, after taking into account unrealized profits and
unrealized losses on any contracts the Underlying Theme Portfolio has entered
into. In general, a call option on a Futures Contract is "in-the-money" if the
value of the underlying Futures Contract exceeds the strike, I.E., exercise,
price of the call; a put option on a Futures Contract is "in-the-money" if the
value of the underlying Futures Contract is exceeded by the strike price of the
put. This guideline may be modified by the Company's Board of Directors and the
Underlying Theme Portfolio's Board of Trustees, as applicable, without a
shareholder vote. This limitation does not limit the percentage of an Underlying
Theme Portfolio's assets at risk to 5%.
FORWARD CURRENCY CONTRACTS
A Forward Contract is an obligation, usually arranged with a commercial bank or
other currency dealer, to purchase or sell a currency against another currency
at a future date and price as agreed upon by the parties. An Underlying Theme
Portfolio either may accept or make delivery of the currency at the maturity of
the Forward Contract. An Underlying Theme Portfolio may also, if its contra
party agrees prior to maturity, enter into a closing transaction involving the
purchase or sale of an offsetting contract.
An Underlying Theme Portfolio engages in forward currency transactions in
anticipation of, or to protect itself against, fluctuations in exchange rates.
An Underlying Theme Portfolio might sell a particular foreign currency forward,
for example, when it holds bonds denominated in a foreign currency but
anticipates, and seeks to be protected against, a decline in the currency
against the U.S. dollar. Similarly, an Underlying Theme Portfolio might sell the
U.S. dollar forward when it holds bonds denominated in U.S. dollars but
anticipates, and seeks to be protected against, a decline in the U.S. dollar
relative to other currencies. Further, an Underlying Theme Portfolio might
purchase a currency forward to "lock in" the price of securities denominated in
that currency that it anticipates purchasing.
Forward Contracts are traded in the interbank market conducted directly between
currency traders (usually large commercial banks) and their customers. A Forward
Contract generally has no deposit requirement, and no commissions are charged at
any stage for trades. Each Underlying Theme Portfolio will enter into such
Forward Contracts with major U.S. or foreign banks and securities or currency
dealers in accordance with guidelines approved by the Underlying Theme
Portfolios' Board of Trustees or the Company's Board of Directors, as
applicable.
An Underlying Theme Portfolio may enter into Forward Contracts either with
respect to specific transactions or with respect to overall investments of that
Underlying Theme Portfolio. The precise matching of the Forward Contract amounts
and the value of specific securities generally will not be possible because the
future value of such securities in foreign currencies will change as a
consequence of market movements in the value of those securities between the
date the Forward Contract is entered into and the date it matures. Accordingly,
it may be necessary for that Underlying Theme Portfolio to purchase additional
foreign currency on the spot (I.E., cash) market (and bear the expense of such
purchase) if the market value of the security is less than the amount of foreign
currency the Underlying Theme Portfolio is obligated to deliver and if a
decision is made to sell the security and make delivery of the foreign currency.
Conversely, it may be necessary to sell on the spot market some of the foreign
currency the Underlying Theme Portfolio is obligated to deliver. The projection
of short-term currency market movements is extremely difficult, and the
successful execution of a short-term hedging strategy is highly uncertain.
Forward Contracts involve the risk that anticipated currency movements will not
be predicted accurately, causing an Underlying Theme Portfolio to sustain losses
on these contracts and transaction costs.
21
<PAGE>
At or before the maturity of a Forward Contract requiring an Underlying Theme
Portfolio to sell a currency, that Underlying Theme Portfolio either may sell a
security and use the sale proceeds to make delivery of the currency or retain
the security and offset its contractual obligation to deliver the currency by
purchasing a second contract pursuant to which the Underlying Theme Portfolio
will obtain, on the same maturity date, the same amount of the currency that it
is obligated to deliver. Similarly, an Underlying Theme Portfolio may close out
a Forward Contract requiring it to purchase a specified currency by, if its
contra party agrees, entering into a second contract entitling it to sell the
same amount of the same currency on the maturity date of the first contract. An
Underlying Theme Portfolio would realize a gain or loss as a result of entering
into such an offsetting Forward Contract under either circumstance to the extent
the exchange rate or rates between the currencies involved moved between the
execution dates of the first contract and the offsetting contract.
The cost to an Underlying Theme Portfolio of engaging in Forward Contracts
varies with factors such as the currencies involved, the length of the contract
period and the market conditions then prevailing. Because Forward Contracts are
usually entered into on a principal basis, no fees or commissions are involved.
The use of Forward Contracts does not eliminate fluctuations in the prices of
the underlying securities an Underlying Theme Portfolio owns or intends to
acquire, but it does establish a rate of exchange in advance. In addition, while
Forward Contract sales limit the risk of loss due to a decline in the value of
the hedged currencies, they also limit any potential gain that might result
should the value of the currencies increase.
FOREIGN CURRENCY STRATEGIES -- SPECIAL CONSIDERATIONS
An Underlying Theme Portfolio may use options on foreign currencies, Futures on
foreign currencies, options on Futures on foreign currencies and Forward
Contracts to hedge against movements in the values of the foreign currencies in
which the Underlying Theme Portfolio's securities are denominated. Such currency
hedges can protect against price movements in a security that the Underlying
Theme Portfolio owns or intends to acquire that are attributable to changes in
the value of the currency in which it is denominated. Such hedges do not,
however, protect against price movements in the securities that are attributable
to other causes.
An Underlying Theme Portfolio might seek to hedge against changes in the value
of a particular currency when no Futures Contract, Forward Contract or option
involving that currency is available or one of such contracts is more expensive
than certain other contracts. In such cases, the Underlying Theme Portfolio may
hedge against price movements in that currency by entering into a contract on
another currency or basket of currencies, the values of which the Manager
believes will have a positive correlation to the value of the currency being
hedged. The risk that movements in the price of the contract will not correlate
perfectly with movements in the price of the currency being hedged is magnified
when this strategy is used.
The value of Futures Contracts, options on Futures Contracts, Forward Contracts
and options on foreign currencies depends on the value of the underlying
currency relative to the U.S. dollar. Because foreign currency transactions
occurring in the interbank market might involve substantially larger amounts
than those involved in the use of Futures Contracts, Forward Contracts or
options, the Underlying Theme Portfolio could be disadvantaged by dealing in the
odd lot market (generally consisting of transactions of less than $1 million)
for the underlying foreign currencies at prices that are less favorable than for
round lots.
22
<PAGE>
There is no systematic reporting of last sale information for foreign currencies
or any regulatory requirements that quotations available through dealers or
other market sources be firm or revised on a timely basis. Quotation information
generally is representative of very large transactions in the interbank market
and thus might not reflect odd-lot transactions where rates might be less
favorable. The interbank market in foreign currencies is a global,
round-the-clock market. To the extent the U.S. options or Futures markets are
closed while the markets for the underlying currencies remain open, significant
price and rate movements might take place in the underlying markets that cannot
be reflected in the markets for the Futures contracts or options until they
reopen.
Settlement of Futures Contracts, Forward Contracts and options involving foreign
currencies might be required to take place within the country issuing the
underlying currency. Thus, the Underlying Theme Portfolio might be required to
accept or make delivery of the underlying foreign currency in accordance with
any U.S. or foreign regulations regarding the maintenance of foreign banking
arrangements by U.S. residents and might be required to pay any fees, taxes and
charges associated with such delivery assessed in the issuing country.
COVER
Transactions using Forward Contracts, Futures Contracts and options (other than
options that an Underlying Theme Portfolio has purchased) expose the Underlying
Theme Portfolio to an obligation to another party. An Underlying Theme Portfolio
will not enter into any such transactions unless it owns either (1) an
offsetting ("covered") position in securities, currencies, or other options,
Forward Contracts or Futures Contracts, or (2) cash, receivables and short-term
debt securities with a value sufficient at all times to cover its potential
obligations not covered as provided in (1) above. Each Underlying Theme
Portfolio will comply with SEC guidelines regarding cover for these instruments
and, if the guidelines so require, set aside cash or liquid securities.
Assets used as cover or held in a segregated account cannot be sold while the
position in the corresponding Forward Contract, Futures Contract or option is
open, unless they are replaced with other appropriate assets. If a large portion
of an Underlying Theme Portfolio's assets is used for cover or otherwise set
aside, it could affect Underlying Theme Portfolio management or the Underlying
Theme Portfolio's ability to meet redemption requests or other current
obligations.
RISK FACTORS OF THE UNDERLYING THEME PORTFOLIOS
ILLIQUID SECURITIES
Each Underlying Theme Portfolio may invest up to 15% of its net assets (except
for the Health Care Fund, which may invest up to 10% of its total assets) in
illiquid securities. Securities may be considered illiquid if an Underlying
Theme Portfolio cannot reasonably expect within seven days to sell the
securities for approximately the amount at which that Underlying Theme Portfolio
values such securities. See "Investment Limitations of the Underlying Theme
Funds and Portfolios." The sale of illiquid securities, if they can be sold at
all, generally will require more time and result in higher brokerage charges or
dealer discounts and other selling expenses than will the sale of liquid
securities such as securities eligible for trading on U.S. securities exchanges
or in OTC markets. Moreover, restricted securities, which may be illiquid for
purposes of this limitation, often sell, if at all, at a price lower than
similar securities that are not subject to restrictions on resale.
23
<PAGE>
Illiquid securities include those that are subject to restrictions contained in
the securities laws of other countries. However, securities that are freely
marketable in the country where they are principally traded, but would not be
freely marketable in the United States, will not be considered illiquid. Where
registration is required, an Underlying Theme Portfolio may be obligated to pay
all or part of the registration expenses and a considerable period may elapse
between the time of the decision to sell and the time the Underlying Theme
Portfolio may be permitted to sell a security under an effective registration
statement. If, during such a period, adverse market conditions were to develop,
the Underlying Theme Portfolio might obtain a less favorable price than
prevailed when it decided to sell.
Not all restricted securities are illiquid. In recent years a large
institutional market has developed for certain securities that are not
registered under the Securities Act of 1933, as amended ("1933 Act"), including
private placements, repurchase agreements, commercial paper, foreign securities
and corporate bonds and notes. These instruments are often restricted securities
because the securities are sold in transactions not requiring registration.
Institutional investors generally will not seek to sell these instruments to the
general public, but instead will often depend either on an efficient
institutional market in which such unregistered securities can be readily resold
or on an issuer's ability to honor a demand for repayment. Therefore, the fact
that there are contractual or legal restrictions on resale to the general public
or certain institutions is not dispositive of the liquidity of such investments.
Rule 144A under the 1933 Act establishes a "safe harbor" from the registration
requirements of the 1933 Act for resales of certain securities to qualified
institutional buyers. Institutional markets for restricted securities have
developed as a result of Rule 144A, providing both readily ascertainable values
for restricted securities and the ability to liquidate an investment to satisfy
share redemption orders. Such markets include automated systems for the trading,
clearance and settlement of unregistered securities of domestic and foreign
issuers, such as the PORTAL System sponsored by the National Association of
Securities Dealers, Inc. An insufficient number of qualified institutional
buyers interested in purchasing Rule 144A-eligible restricted securities held by
an Underlying Theme Portfolio, however, could affect adversely the marketability
of such Underlying Theme Portfolio securities and the Underlying Theme Portfolio
might be unable to dispose of such securities promptly or at favorable prices.
With respect to liquidity determinations generally, the Portfolios' Board of
Trustees or the Company's Board of Directors, as applicable, has the ultimate
responsibility for determining whether specific securities, including restricted
securities pursuant to Rule 144A under the 1933 Act, are liquid or illiquid.
Each Board has delegated the function of making day-to-day determinations of
liquidity to the Manager, in accordance with procedures approved by that Board.
The Manager takes into account a number of factors in reaching liquidity
decisions, including, but not limited to, (i) the frequency of trading in the
security; (ii) the number of dealers that make quotes for the security; (iii)
the number of dealers that have undertaken to make a market in the security;
(iv) the number of other potential purchasers; and (v) the nature of the
security and how trading is effected (e.g., the time needed to sell the
security, how offers are solicited and the mechanics of transfer). The Manager
monitors the liquidity of securities held by each Underlying Theme Portfolio and
periodically reports such determinations to the Underlying Theme Portfolios'
Board of Trustees or the Company's Board of Directors, as applicable. The
Manager believes that carefully selected investments in joint ventures,
cooperatives, partnerships and state enterprises which are illiquid
(collectively, "Special Situations") could enable the Underlying Theme Portfolio
to achieve capital appreciation substantially exceeding the appreciation the
Underlying Theme Portfolio would realize if it did not make such investments.
However, in order to attempt to limit investment risk, each of the Underlying
Theme Portfolios will invest no more than 5% of its total assets in Special
Situations.
24
<PAGE>
FOREIGN SECURITIES
POLITICAL, SOCIAL AND ECONOMIC RISKS. Investing in securities of non-U.S.
companies may entail additional risks due to the potential political, social and
economic instability of certain countries and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on foreign
investment convertibility of currencies into U.S. dollars and on repatriation of
capital invested. In the event of such expropriation, nationalization or other
confiscation by any country, an Underlying Theme Portfolio could lose its entire
investment in any such country.
RELIGIOUS, POLITICAL AND ETHNIC INSTABILITY. Certain countries in which an
Underlying Theme Portfolio may invest may have groups that advocate radical
religious or revolutionary philosophies or support ethnic independence. Any
disturbance on the part of such individuals could carry the potential for
widespread destruction or confiscation of property owned by individuals and
entities foreign to such country and could cause the loss of an Underlying Theme
Portfolio's investment in those countries. Instability may also result from,
among other things: (i) authoritarian governments or military involvement in
political and economic decision-making, including changes in government through
extra-constitutional means; (ii) popular unrest associated with demands for
improved political, economic and social conditions; and (iii) hostile relations
with neighboring or other countries. Such political, social and economic
instability could disrupt the principal financial markets in which an Underlying
Theme Portfolio invests and adversely affect the value of an Underlying Theme
Portfolio's assets.
FOREIGN INVESTMENT RESTRICTIONS. Certain countries prohibit or impose
substantial restrictions on investments in their capital markets, particularly
their equity markets, by foreign entities such as an Underlying Theme Portfolio.
These restrictions or controls may at times limit or preclude investments in
certain securities and may increase the cost and expenses of an Underlying Theme
Portfolio. For example, certain countries require prior governmental approval
before investments by foreign persons may be made, or may limit the amount of
investment by foreign persons in a particular company or limit the investment by
foreign persons to only a specific class of securities of a company that may
have less advantageous terms than securities of the company available for
purchase by nationals. Moreover, the national policies of certain countries may
restrict investment opportunities in issuers or industries deemed sensitive to
national interests. In addition, some countries require governmental approval
for the repatriation of investment income, capital or the proceeds of securities
sales by foreign investors. In addition, if there is a deterioration in a
country's balance of payments or for other reasons, a country may impose
restrictions on foreign capital remittances abroad. An Underlying Theme
Portfolio could be adversely affected by delays in, or a refusal to grant, any
required governmental approval for repatriation, as well as by the application
to it of other restrictions on investments.
NON-UNIFORM CORPORATE DISCLOSURE STANDARDS AND GOVERNMENTAL REGULATION. Foreign
companies are subject to accounting, auditing and financial standards and
requirements that differ, in some cases significantly, from those applicable to
U.S. companies. In particular, the assets, liabilities and profits appearing on
the financial statements of such a company may not reflect its financial
position or results of operations in the way they would be reflected had such
financial statements been prepared in accordance with U.S. generally accepted
accounting principles. Most of the securities held by an Underlying Theme
25
<PAGE>
Portfolio will not be registered with the SEC or regulators of any foreign
country, nor will the issuers thereof be subject to the SEC's reporting
requirements. Thus, there will be less available information concerning most
foreign issuers of securities held by an Underlying Theme Portfolio than is
available concerning U.S. issuers. In instances where the financial statements
of an issuer are not deemed to reflect accurately the financial situation of the
issuer, the Manager will take appropriate steps to evaluate the proposed
investment, which may include on-site inspection of the issuer, interviews with
its management and consultations with accountants, bankers and other
specialists. There is substantially less publicly available information about
foreign companies than there are reports and ratings published about U.S.
companies and the U.S. government. In addition, where public information is
available, it may be less reliable than such information regarding U.S. issuers.
Issuers of securities in foreign jurisdictions are generally not subject to the
same degree of regulation as are U.S. issuers with respect to such matters as
restrictions on market manipulation, insider trading rules, shareholder proxy
requirements and timely disclosure of information.
CURRENCY FLUCTUATIONS. Because each Underlying Theme Portfolio, under normal
circumstances, will invest a substantial portion of its total assets in the
securities of foreign issuers which are denominated in foreign currencies, the
strength or weakness of the U.S. dollar against such foreign currencies will
account for part of an Underlying Theme Portfolio's investment performance. A
decline in the value of any particular currency against the U.S. dollar will
cause a decline in the U.S. dollar value of that Underlying Theme Portfolio's
holdings of securities and cash denominated in such currency and, therefore,
will cause an overall decline in the appropriate Underlying Theme Fund's net
asset value and any net investment income and capital gains derived from such
securities to be distributed in U.S. dollars to shareholders of the Underlying
Theme Fund. Moreover, if the value of the foreign currencies in which an
Underlying Theme Portfolio receives its income falls relative to the U.S. dollar
between receipt of the income and the making of Underlying Theme Portfolio
distributions, the Underlying Theme Portfolio may be required to liquidate
securities in order to make distributions if the Underlying Theme Portfolio has
insufficient cash in U.S. dollars to meet distribution requirements.
The rate of exchange between the U.S. dollar and other currencies is determined
by several factors, including the supply and demand for particular currencies,
central bank efforts to support particular currencies, the relative movement of
interest rates, and pace of business activity in the other countries and the
United States, and other economic and financial conditions affecting the world
economy.
Although each Underlying Theme Portfolio values its assets daily in terms of
U.S. dollars, the Underlying Theme Portfolios do not intend to convert their
holdings of foreign currencies into U.S. dollars on a daily basis. Each
Underlying Theme Portfolio will do so, from time to time, and investors should
be aware of the costs of currency conversion. Although foreign exchange dealers
do not charge a fee for conversion, they do realize a profit based on the
difference ("spread") between the prices at which they buy and sell various
currencies. Thus, a dealer may offer to sell a foreign currency to an Underlying
Theme Portfolio at one rate, while offering a lesser rate of exchange should an
Underlying Theme Portfolio desire to sell that currency to the dealer.
26
<PAGE>
ADVERSE MARKET CHARACTERISTICS. Securities of many foreign issuers may be less
liquid and their prices more volatile than securities of comparable U.S.
issuers. In addition, foreign securities markets and brokers generally are
subject to less governmental supervision and regulation than in the United
States, and foreign securities transactions usually are subject to fixed
commissions, which generally are higher than negotiated commissions on U.S.
transactions. In addition, foreign securities transactions may be subject to
difficulties associated with the settlement of such transactions. Delays in
settlement could result in temporary periods when assets of an Underlying Theme
Portfolio are uninvested and no return is earned thereon. The inability of an
Underlying Theme Portfolio to make intended security purchases due to settlement
problems could cause that Underlying Theme Portfolio to miss attractive
investment opportunities. Inability to dispose of an Underlying Theme Portfolio
security due to settlement problems either could result in losses to that
Underlying Theme Portfolio due to subsequent declines in value of the Underlying
Theme Portfolio security or, if that Underlying Theme Portfolio has entered into
a contract to sell the security, could result in possible liability to the
purchaser. The Manager will consider such difficulties when determining the
allocation of an Underlying Theme Portfolio's assets, although the Manager does
not believe that such difficulties will have a material adverse effect on an
Underlying Theme Portfolio's Underlying Theme Portfolio trading activities.
Each Underlying Theme Portfolio may use foreign custodians, which may involve
risks in addition to those related to its use of U.S. custodians. Such risks
include uncertainties relating to determining and monitoring the foreign
custodian's financial strength, reputation and standing; maintaining appropriate
safeguards concerning that Underlying Theme Portfolio's investments; and
possible difficulties in obtaining and enforcing judgments against such
custodians.
WITHHOLDING TAXES. Each Underlying Theme Portfolio's net investment income from
foreign issuers may be subject to withholding taxes by the foreign issuer's
country, thereby reducing that Underlying Theme Portfolio's net investment
income or delaying the receipt of income when those taxes may be recaptured. See
"Taxes."
CONCENTRATION. To the extent an Underlying Theme Portfolio invests a significant
portion of its assets in securities of issuers located in a particular country
or region of the world, such Underlying Theme Portfolio may be subject to
greater risks and may experience greater volatility than a fund that is more
broadly diversified geographically.
SPECIAL CONSIDERATIONS AFFECTING WESTERN EUROPEAN COUNTRIES. The countries that
are members of the European Economic Community ("Common Market") (Belgium,
Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands,
Portugal, Spain, and the United Kingdom) eliminated certain import tariffs and
quotas and other trade barriers with respect to one another over the past
several years. The Manager believes that this deregulation should improve the
prospects for economic growth in many Western European countries. Among other
things, the deregulation could enable companies domiciled in one country to
avail themselves of lower labor costs existing in other countries. In addition,
this deregulation could benefit companies domiciled in one country by opening
additional markets for their goods and services in other countries. Since,
however, it is not clear what the exact form or effect of these Common Market
reforms will be on business in Western Europe, it is impossible to predict the
long-term impact of the implementation of these programs on the securities owned
by an Underlying Theme Portfolio.
27
<PAGE>
SPECIAL CONSIDERATIONS AFFECTING RUSSIA AND EASTERN EUROPEAN COUNTRIES.
Investing in Russia and Eastern European countries involves a high degree of
risk and special considerations not typically associated with investing in the
United States securities markets, and should be considered highly speculative.
Such risks include: (1) delays in settling Underlying Theme Portfolio
transactions and risk of loss arising out of the system of share registration
and custody; (2) the risk that it may be impossible or more difficult than in
other countries to obtain and/or enforce a judgement; (3) pervasiveness of
corruption and crime in the economic system; (4) currency exchange rate
volatility and the lack of available currency hedging instruments; (5) higher
rates of inflation (including the risk of social unrest associated with periods
of hyper-inflation) and high unemployment; (6) controls on foreign investment
and local practices disfavoring foreign investors and limitations on
repatriation of invested capital, profits and dividends, and on a fund's ability
to exchange local currencies for U.S. dollars; (7) political instability and
social unrest and violence; (8) the risk that the governments of Russia and
Eastern European countries may decide not to continue to support the economic
reform programs implemented recently and could follow radically different
political and/or economic policies to the detriment of investors, including
non-market-oriented policies such as the support of certain industries at the
expense of other sectors or investors, or a return to the centrally planned
economy that existed when such countries had a communist form of government; (9)
the financial condition of companies in these countries, including large amounts
of inter-company debt which may create a payments crisis on a national scale;
(10) dependency on exports and the corresponding importance of international
trade; (11) the risk that the tax system in these countries will not be reformed
to prevent inconsistent, retroactive and/or exorbitant taxation; and (12) the
underdeveloped nature of the securities markets.
SPECIAL CONSIDERATIONS AFFECTING JAPAN. Japan's economic growth has declined
significantly since 1990. The general government position has deteriorated as a
result of weakening economic growth and stimulative measures taken to support
economic activity and to restore financial stability. Although the decline in
interest rates and fiscal stimulation packages have helped to contain
recessionary forces, uncertainties remain. Japan is also heavily dependent upon
international trade, so its economy is especially sensitive to trade barriers
and disputes. Japan has had difficult relations with its trading partners,
particularly the United States, where the trade imbalance is the greatest. It is
possible that trade sanctions and other protectionist measures could impact
Japan adversely in both the short and the long term.
The common stocks of many Japanese companies trade at high price-earnings
ratios. Differences in accounting methods make it difficult to compare the
earnings of Japanese companies with those of companies in other countries,
especially in the U.S. In general, however, reported net income in Japan is
understated relative to U.S. accounting standards and this is one reason why
price-earnings ratios of the stocks of Japanese companies have tended
historically to be higher than those for U.S. stocks. In addition, Japanese
companies have tended to have higher growth rates than U.S. companies and
Japanese interest rates have generally been lower than in the U.S., both of
which factors tend to result in lower discount rates and higher price-earnings
ratios in Japan than in the U.S.
The Japanese securities markets are less regulated than those in the United
States. Evidence has emerged from time to time of distortion of market prices to
serve political or other purposes. Shareholders' rights are not always equally
enforced. In addition, Japan's banking industry is undergoing problems related
to bad loans and declining values in real estate.
28
<PAGE>
SPECIAL CONSIDERATIONS AFFECTING PACIFIC REGION COUNTRIES. Certain of the risks
associated with international investments are heightened for investments in
Pacific region countries. For example, some of the currencies of Pacific region
countries have experienced steady devaluations relative to the U.S. dollar, and
major adjustments have been made periodically in certain of such currencies.
Certain countries, such as India, face serious exchange constraints.
Jurisdictional disputes also exist between South Korea and North Korea. In
addition, the Underlying Theme Portfolios' intend to invest in Hong Kong, which
reverted to Chinese Administration on July 1, 1997. Investments in Hong Kong may
be subject to expropriation, national, nationalization or confiscation, in which
case an Underlying Theme Portfolio could lose its entire investment in Hong
Kong. In addition, the reversion of Hong Kong also presents a risk that the Hong
Kong dollar will be devalued and a risk of possible loss of investor confidence
in Hong Kong's currency, stock market and assets.
SPECIAL CONSIDERATIONS AFFECTING LATIN AMERICAN COUNTRIES. Most Latin American
countries have experienced substantial, and in some periods extremely high,
rates of inflation for many years. Inflation and rapid fluctuations in inflation
rates have had and may continue to have very negative effects on the economies
and securities markets of certain Latin American countries. Certain Latin
American countries are also among the largest debtors to commercial banks and
foreign governments. At times certain Latin American countries have declared
moratoria on the payment of principal and/or interest on external debt. In
addition, certain Latin American securities markets have experienced high
volatility in recent years.
Latin American countries may also close certain sectors of their economies to
equity investments by foreigners. Further due to the absence of securities
markets and publicly owned corporations and due to restrictions on direct
investment by foreign entities, investments may only be made in certain Latin
American countries solely or primarily through governmentally approved
investment vehicles or companies.
Certain Latin American countries may have managed currencies that are maintained
at artificial levels to the U.S. dollar rather than at levels determined by the
market. This type of system can lead to sudden and large adjustments in the
currency which, in turn, can have a disruptive and negative effect on foreign
investors. For example, in late 1994, the value of the Mexican peso lost more
than one-third of its value relative to the U.S. dollar.
SPECIAL CONSIDERATIONS AFFECTING EMERGING MARKETS. Investing in the securities
of companies in emerging markets may entail special risks relating to potential
political and economic instability and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on foreign
investment, convertibility of currencies into U.S. dollars and on repatriation
of capital invested. In the event of such expropriation, nationalization or
other confiscation by any country, an Underlying Theme Portfolio could lose its
entire investment in any such country.
Emerging securities markets are substantially smaller, less developed, less
liquid and more volatile than the major securities markets. The limited size of
emerging securities markets and limited trading value in issuers compared to the
29
<PAGE>
volume of trading in U.S. securities could cause prices to be erratic for
reasons apart from factors that affect the quality of the securities. For
example, limited market size may cause prices to be unduly influenced by traders
who control large positions. Adverse publicity and investors' perceptions,
whether or not based on fundamental analysis, may decrease the value and
liquidity of Underlying Theme Portfolio securities, especially in these markets.
In addition, securities traded in certain emerging markets may be subject to
risks due to the inexperience of financial intermediaries, a lack of modern
technology, the lack of a sufficient capital base to expand business operations,
and the possibility of permanent or temporary termination of trading.
Settlement mechanisms in emerging securities markets may be less efficient and
reliable than in more developed markets. In such emerging securities there may
be share registration and delivery delays or failures.
Many emerging market countries have experienced substantial, and in some periods
extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates and corresponding currency devaluations have had
and may continue to have negative effects on the economies and securities
markets of certain emerging market countries.
PRIVATIZATIONS. The governments of some foreign countries have been engaged in
programs of selling part or all of their stakes in government owned or
controlled enterprises ("privatizations"). The Manager believes that
privatizations may offer opportunities for significant capital appreciation and
intends to invest assets of the Underlying Theme Funds in privatizations in
appropriate circumstances. In certain foreign countries, the ability of foreign
entities such as the Underlying Theme Funds to participate in privatizations may
be limited by local law, or the terms on which the Underlying Theme Funds may be
permitted to participate may be less advantageous than those for local
investors. There can be no assurance that foreign governments will continue to
sell companies currently owned or controlled by them or that privatization
programs will be successful.
TEMPORARY DEFENSIVE STRATEGIES.
Each Underlying Theme Portfolio retains the flexibility to respond promptly to
changes in market and economic conditions. Accordingly, in the interest of
preserving shareholders' capital and consistent with each Underlying Theme
Portfolio's investment objective, the Manager may employ a temporary defensive
investment strategy if it determines such a strategy to be warranted due to
market, economic or political conditions. Under a defensive strategy, each
Underlying Theme Portfolio may invest up to 100% of its total assets in cash
(U.S. dollars, foreign currencies or multinational currency units) and/or high
quality debt securities or money market instruments issued by corporations, the
U.S. or a foreign government. In addition, for temporary defensive purposes,
such as during times of international political or economic uncertainty, most or
all of each Underlying Theme Portfolio's investments may be made in the United
States and denominated in U.S. dollars. To the extent any Underlying Theme
Portfolio adopts a temporary defensive posture, it will not be invested so as to
achieve directly its investment objective.
In addition, pending investment of proceeds from new sales of the shares or to
meet its ordinary daily cash needs, each Underlying Theme Portfolio may hold
cash (U.S. dollars, foreign currencies or multinational currency units) and may
invest in foreign or domestic high quality money market instruments. Money
market instruments in which each Underlying Theme Portfolio may invest include,
but are not limited to, U.S. or foreign government securities; high-grade
commercial paper; bank certificates of deposit; bankers' acceptances; and
repurchase agreements related to any of the foregoing. High-grade commercial
paper refers to commercial paper rated A-l by S&P or P-l by Moody's or, if not
rated, determined by the Manager to be of comparable quality.
30
<PAGE>
RISKS ASSOCIATED WITH DEBT SECURITIES.
The value of the debt securities held by each Underlying Theme Portfolio
generally will vary conversely with market interest rates. If interest rates in
a market fall, the value of the debt securities held by each Underlying Theme
Portfolio ordinarily will rise. If market interest rates increase, however, the
debt securities owned by each Underlying Theme Portfolio in that market will be
likely to decrease in value.
The Infrastructure Portfolio, Natural Resources Portfolio and Consumer Products
and Services Portfolio may each invest up to 20% of its total assets in debt
securities rated below investment grade. Such investments involve a high degree
of risk. However, the Infrastructure Portfolio, Natural Resources Portfolio and
Consumer Products and Services Portfolio will not invest in debt securities that
are in default as to payment of principal and interest.
Debt rated Baa by Moody's is considered by Moody's to have speculative
characteristics. Debt rated BB, B, CCC, CC or C by S&P and debt rated Ba, B,
Caa, Ca or C by Moody's is regarded, on balance, as predominantly speculative
with respect to the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligation. For S&P, BB indicates the lowest
degree of speculation for such lower quality debt and C the highest degree of
speculation. For Moody's, Baa indicates the lowest degree of speculation for
such lower quality debt and C the highest degree of speculation. While such
lower quality debt will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposures to adverse
conditions. Debt rated C by Moody's or S&P is the lowest rated debt that is not
in default as to principal or interest, and such issues so rated can be regarded
as having extremely poor prospects of ever attaining any real investment
standing. Lower quality debt securities also are generally considered to be
subject to greater risk than securities with higher ratings with regard to a
deterioration of general economic conditions. These lower quality debt
securities are the equivalent of high yield, high risk bonds, commonly known as
"junk bonds."
Ratings of debt securities represent the rating agency's opinion regarding their
quality and are not a guarantee of quality. Rating agencies attempt to evaluate
the safety of principal and interest payments and do not evaluate the risks of
fluctuations in market value. Also, rating agencies may fail to make timely
changes in credit ratings in response to subsequent events, so that an issuer's
current financial condition may be better or worse than a rating indicates.
The market values of lower quality debt securities tend to reflect individual
developments of the issuer to a greater extent than do higher quality
securities, which react primarily to fluctuations in the general level of
interest rates. In addition, lower quality debt securities tend to be more
sensitive to economic conditions and generally have more volatile prices than
higher quality securities. Issuers of lower quality securities are often highly
leveraged and may not have available to them more traditional methods of
financing. For example, during an economic downturn or a sustained period of
rising interest rates, highly leveraged issuers of lower quality securities may
experience financial stress. During such periods, 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 developments affecting the issuer, such as the issuer's inability to
meet specific projected business forecasts or the unavailability of additional
financing. The risk of loss due to default by the issuer is significantly
greater for the holders of lower quality securities because such securities are
generally unsecured and may be subordinated to the claims of other creditors of
the issuer.
31
<PAGE>
Lower quality debt securities of corporate issuers frequently have call or
buy-back features which would permit an issuer to call or repurchase the
security from the Underlying Theme Portfolios. If an issuer exercises these
provisions in a declining interest rate market, the Underlying Theme Portfolios
may have to replace the security with a lower yielding security, resulting in a
decreased return for investors. In addition, the Underlying Theme Portfolios may
have difficulty disposing of lower quality securities because they may have a
thin trading market. There may be no established retail secondary market for
many of these securities, and each of the Underlying Theme Portfolios
anticipates that such securities could be sold only to a limited number of
dealers or institutional investors. The lack of a liquid secondary market also
may have an adverse impact on market prices of such instruments and may make it
more difficult for the Underlying Theme Portfolios to obtain accurate market
quotations for purposes of valuing the Underlying Theme Portfolios portfolio
investments. The Underlying Theme Portfolios may also acquire lower quality debt
securities during an initial underwriting or which are sold without registration
under applicable securities laws. Such securities involve special considerations
and risks.
In addition to the foregoing, factors that could have an adverse effect on the
market value of lower quality debt securities in which the Underlying Theme
Portfolios may invest include: (i) potential adverse publicity; (ii) heightened
sensitivity to general economic or political conditions; and (iii) the likely
adverse impact of a major economic recession. An Underlying Theme Portfolio may
also incur additional expenses to the extent it is required to seek recovery
upon a default in the payment of principal or interest on portfolio holdings,
and the Underlying Theme Portfolio may have limited legal recourse in the event
of a default.
The Manager attempts to minimize the speculative risks associated with
investments in lower quality securities through credit analysis and by carefully
monitoring current trends in interest rates, political developments and other
factors.
The Prospectus and the Statement of Additional Information of the Underlying
Theme Funds contains more detailed information about this organizational
structure of the Financial Services Fund, Infrastructure Fund, Natural Resources
Fund and Consumer Products and Services Fund and their corresponding Portfolios,
including information related to: (i) the investment objective, policies and
restrictions of the Underlying Theme Funds and their Portfolios; (ii) the Board
of Directors and officers of the Underlying Theme Funds, the Trustees and
officers of the Portfolios, the administrator of the Underlying Theme Funds and
the investment manager and administrator of the Portfolios; (iii) portfolio
transactions and brokerage commissions; (iv) the Underlying Theme Funds' and
Portfolios' shares, including the rights and liabilities of their shareholders;
(v) additional performance information, including the method used to calculate
yield and total return; and (vi) the determination of the value of the shares of
such Funds.
INVESTMENT LIMITATIONS
INVESTMENT LIMITATIONS OF THE FUND
FUNDAMENTAL LIMITATIONS. The following fundamental limitations of the Fund
cannot be changed without the affirmative vote of the lesser of (i) 67% of the
Fund's shares represented at a meeting at which more than 50% of the outstanding
shares are represented, or (ii) more than 50% of the outstanding shares. If a
32
<PAGE>
percentage restriction is adhered to at the time of an investment or
transaction, a later increase or decrease in percentage resulting from a change
in values or Underlying Theme Portfolio securities or amount of total assets
will not be considered a violation of any of the following limitations.
The Fund will not:
(1) issue senior securities or borrow money, except as permitted under the 1940
Act and then not in excess of 33 1/3% of the Fund's total assets (including
the amount of the senior securities issued but reduced by any liabilities
not constituting senior securities) at the time of the issuance or
borrowing, except that the Fund may borrow up to an additional 5% of its
total assets (not including the amount borrowed) for temporary or emergency
purposes.
(2) make loans, except through loans of Underlying Theme Portfolio securities or
through repurchase agreements, provided that for purposes of this
restriction, the acquisition of bonds, debentures, other debt securities or
instruments, or participations or other interests therein and investments in
government obligations, commercial paper, certificates of deposit, bankers'
acceptances or similar instruments will not be considered the making of a
loan.
(3) engage in the business of underwriting securities of other issuers, except
to the extent that the Fund might be considered an underwriter under the
federal securities laws in connection with its disposition of Underlying
Theme Portfolio securities.
(4) purchase or sell real estate, except that investments in securities of
issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except that
the Fund may exercise rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be
liquidated in an orderly manner.
(5) purchase or sell physical commodities unless acquired as a result of owning
securities or other instruments, but the Fund may purchase, sell or enter
into financial options and futures, forward and spot currency contracts,
swap transactions and other financial contracts or derivative instruments.
Because of its investment objective and policies, the Fund will concentrate more
than 25% of its assets in the mutual fund industry. In accordance with the
Fund's investment program set forth in the Prospectus, the Fund may invest more
than 25% of its assets in the Underlying Theme Funds. However, each of the
Underlying Theme Portfolios will not concentrate more than 25% of its total
assets in any one industry.
NON-FUNDAMENTAL LIMITATIONS. The following investment restrictions applying
to the Fund are non-fundamental and may be changed by the vote of the Fund's
board without shareholder approval.
33
<PAGE>
The Fund will not:
(1) invest more than 15% of its net assets in illiquid securities, a term which
means securities that cannot be disposed of within seven days in the
ordinary course of business at approximately the amount at which the Fund
has valued the securities and includes, among other things, repurchase
agreements maturing in more than seven days.
(2) purchase Underlying Theme Portfolio securities while borrowings in excess of
5% of its total assets are outstanding.
(3) purchase securities on margin, except for short-term credit necessary for
clearance of Underlying Theme Portfolio transactions and except that the
Fund may make margin deposits in connection with its use of financial
options and futures, forward and spot currency contracts, swap transactions
and other financial contract or derivative instruments.
(4) engage in short sales of securities or maintain a short position, except
that the Fund may (a) sell short "against the box" and (b) maintain short
positions in connection with its use of financial options an futures,
forward and spot currency contracts, swap transactions and other financial
contracts or derivative instruments.
(5) purchase securities of other investment companies, except to the extent
permitted by the 1940 Act or under the terms of any exemptive order granted
by the Securities and Exchange Commission ("SEC") and except that this
limitation does not apply to securities received or acquired as dividends,
through offers of exchange, or as a result of reorganization, consolidation,
or merger.
Notwithstanding the forgoing investment limitations, the Fund may invest in
Underlying Theme Funds that have adopted investment limitations that may be more
or less restrictive than those listed above. As a result, the Fund may engage
indirectly in investment strategies that are prohibited under the investment
limitations listed above. The investment limitations and other investment
policies and restrictions of each Underlying Theme Fund are described in its
prospectus and statement of additional information.
Under Section 12(d)(1)(G) of the 1940 Act, the Fund may invest substantially all
of its assets in the Underlying Theme Funds.
INVESTMENT LIMITATIONS OF THE UNDERLYING THEME FUNDS AND UNDERLYING THEME
PORTFOLIOS
FEEDER FUNDS
The Financial Services Fund, Infrastructure Fund, Natural Resources Fund and
Consumer Products and Services Fund each has the following fundamental
investment policy to enable it to invest in the Financial Services Underlying
Theme Portfolio, Infrastructure Underlying Theme Portfolio, Natural Resources
Underlying Theme Portfolio and Consumer Products and Services Underlying
Theme Portfolio, respectively:
Notwithstanding any other investment policy of the Underlying Theme Fund, the
Underlying Theme Fund may invest all of its investable assets (cash, securities
and receivables related to securities) in an open-end management investment
company having substantially the same investment objective, policies and
limitations as the Underlying Theme Fund.
34
<PAGE>
All other fundamental investment policies, and the non-fundamental policies, of
each Feeder Fund and its corresponding Underlying Theme Portfolio are identical.
Therefore, although the following discusses the investment policies of each
Underlying Theme Portfolio and its Board of Trustees, it applies equally to each
Feeder Fund and its Board of Directors.
Each Underlying Theme Portfolio has adopted the following investment limitations
as fundamental policies which (unless otherwise noted) may not be changed
without approval by the affirmative vote of the lesser of (i) 67% of that
Underlying Theme Portfolio's shares represented at a meeting at which more than
50% of the outstanding shares are represented, or (ii) more than 50% of the
outstanding shares. Whenever a Feeder Fund is requested to vote on a change in
the investment limitations of its corresponding Underlying Theme Portfolio, such
Feeder Fund will hold a meeting of its shareholders and will cast its votes as
instructed by its shareholders.
Each Underlying Theme Portfolio may not:
(1) Buy or sell real estate (including real estate limited
partnerships); however, each Underlying Theme Portfolio may invest in debt
securities secured by real estate or interests therein or issued by
companies which invest in real estate or interests therein, including real
estate investment trusts;
(2) Buy or sell commodities or commodity contracts, except that each
Underlying Theme Portfolio may purchase and sell financial and currency
futures contracts and options thereon, and may purchase and sell currency
forward contracts, options on foreign currencies and may otherwise engage
in other transactions in foreign currencies;
(3) Underwrite securities of other issuers, except to the extent
that the disposition of an investment position may technically cause it to
be considered an underwriter as that term is defined under the 1933 Act;
(4) Make loans, except that each Underlying Theme Portfolio may
purchase debt securities and enter into repurchase agreements and may make
loans of Underlying Theme Portfolio securities;
(5) Purchase securities on margin, provided that each Underlying
Theme Portfolio may obtain such short-term credits as may be necessary for
the clearance of purchases and sales of securities; except that it may
make margin deposits in connection with futures contracts;
(6) Borrow money except from banks not in excess of 331/3% of the
value of each Underlying Theme Portfolio's total assets, (including the
amount borrowed), less all liabilities and indebtedness (other than the
borrowing). This restriction shall not prevent any Underlying Theme
Portfolio from entering into reverse repurchase agreements, provided that
reverse repurchase agreements, and any other transactions constituting
borrowing by an Underlying Theme Portfolio may not exceed one-third of
35
<PAGE>
that Underlying Theme Portfolio's total assets. Transactions involving
options, futures contracts, options on futures contracts and forward
currency contracts, as described in the Prospectus and this Statement of
Additional Information, and collateral arrangements relating thereto will
not be deemed to be borrowings;
(7) Mortgage, pledge, or hypothecate any of its assets, provided
that this restriction shall not apply to the transfer of securities in
connection with any permissible borrowing or to collateral arrangements in
connection with permissible activities; or
(8) Invest in direct interests or leases in oil, gas, or other
mineral exploration or development programs; however, each Underlying
Theme Portfolio may invest in the securities of companies that engage in
these activities.
In addition, each Underlying Theme Portfolio has adopted as a fundamental
investment policy a classification as a "diversified" Underlying Theme Portfolio
under the 1940 Act. This means that, with respect to 75% of the Underlying Theme
Portfolio's total assets, no more than 5% will be invested in the securities of
any one issuer, and the Underlying Theme Portfolio will purchase no more than
10% of the outstanding voting securities of any one issuer. This policy cannot
be changed without approval by the holders of a majority of the Underlying Theme
Portfolio's outstanding voting securities as defined above and in the Underlying
Theme Funds' Prospectus.
The following investment policies of each Underlying Theme Portfolio are not
fundamental policies and may be changed by vote of the Underlying Theme
Portfolios' Board of Trustees without shareholder approval. No Underlying
Theme Portfolio may:
(1) Invest in securities of an issuer if the investment would cause
the Underlying Theme Portfolio to own more than 10% of any class of
securities of any one issuer;
(2) Invest in companies for the purpose of exercising control
or management;
(3) Invest more than 15% of its net assets in illiquid securities,
including securities that are illiquid by virtue of the absence of a
readily available market;
(4) Invest more than 5% of its total assets in securities of
companies having, together with their predecessors, a record of less than
three years of continuous operation;
(5) Purchase or retain the securities of any issuer, if those
individual officers and Trustees of the Underlying Theme Portfolio, the
Underlying Theme Portfolio's investment adviser, or distributor, each
owning beneficially more than 1/2 of 1% of the securities of such issuer,
together own more than 5% of the securities of such issuer;
(6) Enter into a futures contract, an option on a futures contract,
or an option on foreign currency traded on a CFTC-regulated exchange, in
each case other than for BONA FIDE hedging purposes (as defined by the
CFTC), if the aggregate initial margin and premiums required to establish
all of those positions (excluding the amount by which options are
"in-the-money") exceeds 5% of the liquidation value of the Underlying
Theme Portfolio's Underlying Theme Portfolio, after taking into account
unrealized profits and unrealized losses on any contracts the Underlying
Theme Portfolio has entered into;
36
<PAGE>
(7) Borrow money except for temporary or emergency purposes (not for
leveraging) in excess of 331/3% of the value of the Underlying Theme
Portfolio's total assets (while borrowings exceed 5% of the Infrastructure
Underlying Theme Portfolio's and Natural Resources Underlying Theme
Portfolio's total assets, such Underlying Theme Portfolio will not make
any additional investments); and
(8) Invest more than 10% of its total assets in shares of other
investment companies and may not invest more than 5% of its total assets
in any one investment company or acquire more than 3% of the outstanding
voting securities of any one investment company.
Investors should refer to the Underlying Theme Funds' Prospectus for further
information with respect to the investment objective of each Feeder Fund, which
may not be changed without the approval of shareholders, and its corresponding
Underlying Theme Portfolio's investment objective, which may be changed without
the approval of its shareholders, and other investment policies, techniques and
limitations, which may or may not be changed without shareholder approval.
HEALTH CARE FUND
The Health Care Fund has adopted the following investment limitations as
fundamental policies, which (unless otherwise noted) may not be changed without
approval by the affirmative vote of the lesser of (i) 67% of its shares
represented at a meeting at which more than 50% of the outstanding shares are
represented, or (ii) more than 50% of the outstanding shares.
The Health Care Fund may not:
(1) Invest more than 10% of its total assets in securities which
cannot be readily resold to the public because of legal or contractual
restrictions or for which no readily available market exists, which for
this purpose includes repurchase agreements maturing in more than seven
days;
(2) Invest in companies for the purpose of exercising control
or management;
(3) Purchase or sell real estate; provided that the Health Care Fund
may invest in securities secured by real estate or interests therein or
issued by companies that invest in real estate or interests therein;
(4) Purchase securities on margin or make short sales, except for
short-term credits necessary for clearance of Underlying Theme Portfolio
transactions, and except that the Health Care Fund may make short sales
and maintain short positions and may make margin deposits in connection
with its use of options, futures contracts and options on futures
contracts;
(5) Underwrite securities of other issuers, except to the extent
that, in connection with the disposition of Underlying Theme Portfolio
securities, the Health Care Fund may be deemed to be an underwriter under
federal securities laws;
37
<PAGE>
(6) Make loans, except through loans of Underlying Theme Portfolio
securities as authorized by the Prospectus and except through repurchase
agreements, provided that for purposes of this limitation the acquisition
of Underlying Theme Portfolio securities consistent with the Health Care
Fund's investment objective and policies shall not be deemed to be the
making of a loan;
(7) Purchase or sell commodities or commodity contracts, except that
consistent with the Health Care Fund's investment objective and policies
it may use financial and currency futures instruments and options thereon
for hedging purposes;
(8) Issue senior securities, except that for purposes of this
limitation the Health Care Fund may borrow money in such amounts and in
such fashion as is permitted under the 1940 Act and the rules thereunder;
(9) Mortgage, pledge or hypothecate or in any manner transfer, as
security for indebtedness, any securities owned or held by the Health Care
Fund, except as may be necessary in connection with permitted borrowings;
provided, however, that this does not prohibit escrow, collateral or
margin arrangements in connection with its use of options, futures
contracts and options on futures contracts;
(10) Invest in oil, gas or mineral-related programs or leases;
or
(11) Purchase any security if as a result more than 5% of the Health
Care Fund's total assets would be invested in securities of companies
which together with any predecessors have been in operation for less than
three years.
In addition, the Health Care Fund has adopted as a fundamental investment policy
the classification as a "diversified" fund under the 1940 Act, which means that,
with respect to 75% of its total assets, no more than 5% will be invested in the
securities of any one issuer, and it will purchase no more than 10% of the
outstanding voting securities of any one issuer. This policy cannot be changed
without approval by the holders of a majority of the Health Care Fund's
outstanding voting securities as defined above and in the Underlying Theme
Funds' Prospectus.
Investors should refer to the Underlying Theme Funds' Prospectus for further
information with respect to the Health Care Fund's investment objective, which
may not be changed without the approval of its shareholders, and other
investment policies, techniques and limitations, which may be changed without
shareholder approval.
TELECOMMUNICATIONS FUND
The Telecommunications Fund has adopted the following investment limitations as
fundamental policies, which (unless otherwise noted) may not be changed without
approval by the affirmative vote of the lesser of (i) 67% of its shares
represented at a meeting at which more than 50% of the outstanding shares are
represented, or (ii) more than 50% of the outstanding shares.
38
<PAGE>
The Telecommunications Fund may not:
(1) Buy or sell real estate (including real estate limited
partnerships); however, the Telecommunications Fund may invest in debt
securities secured by real estate or interests therein or issued by
companies which invest in real estate or interests therein, including real
estate investment trusts;
(2) Purchase or sell commodities or commodity contracts, except that
the Telecommunications Fund may purchase and sell financial and currency
futures contracts and options thereon, and may purchase and sell currency
forward contracts, options on foreign currencies and may otherwise engage
in other transactions in foreign currencies;
(3) Engage in the business of underwriting securities of other
issuers, except to the extent that the disposition of an investment
position may technically cause it to be considered an underwriter as that
term is defined under the 1933 Act;
(4) Make loans, except that the Telecommunications Fund may purchase
debt securities and enter into repurchase agreements and may make loans of
Underlying Theme Portfolio securities;
(5) Purchase securities on margin, provided that the
Telecommunications Fund may obtain such short-term credits as may be
necessary for the clearance of purchases and sales of securities; except
that it may make margin deposits in connection with futures contracts;
(6) Borrow money except from banks not in excess of 33-1/3% of the
value of the Telecommunications Fund's total assets, including the amount
borrowed, less all liabilities and indebtedness (other than the
borrowing). This restriction shall not prevent the Telecommunications Fund
from entering into reverse repurchase agreements, provided that reverse
repurchase agreements, and any other transactions constituting borrowing
by it may not exceed one-third of its total assets. Transactions involving
options, futures contracts, options on futures contracts and forward
currency contracts, as described in the Prospectus and this Statement of
Additional Information, and collateral arrangements relating thereto will
not be deemed to be borrowings;
(7) Mortgage, pledge, or hypothecate any of its assets, provided
that this restriction shall not apply to the transfer of securities in
connection with any permissible borrowing or to collateral arrangements in
connection with permissible activities; or
(8) Invest in direct interests or leases in oil, gas, or other
mineral exploration or development programs; however, the
Telecommunications Fund may invest in the securities of companies that
engage in these activities.
In addition, the Telecommunications Fund has adopted as a fundamental investment
policy the classification as a "diversified" fund under the 1940 Act, which
means that, with respect to 75% of its total assets, no more than 5% will be
invested in the securities of any one issuer, and it will purchase no more than
10% of the outstanding voting securities of any one issuer. This policy cannot
be changed without approval by the holders of a majority of the
Telecommunications Fund's outstanding voting securities as defined above and in
the Underlying Theme Funds' Prospectus.
39
<PAGE>
The following operating policies of the Telecommunications Fund are not
fundamental policies and may be changed by vote of the Company's Board of
Directors without shareholder approval. The Telecommunications Fund may not:
(1) Invest in securities of an issuer if the investment would cause
the Telecommunications Fund to own more than 10% of any class of
securities of any one issuer;
(2) Invest in companies for the purpose of exercising control
or management;
(3) Invest more than 15% of its net assets in illiquid securities,
including securities that are illiquid by virtue of the absence of a
readily available market;
(4) Invest more than 5% of its total assets in securities of
companies having, together with their predecessors, a record of less than
three years of continuous operation;
(5) Purchase or retain the securities of any issuer, if those
individual officers and Directors of the Company, the Telecommunications
Fund's investment adviser, or distributor, each owning beneficially more
than 1/2 of 1% of the securities of such issuer, together own more than 5%
of the securities of such issuer;
(6) Enter into a futures contract, an option on a futures contract,
or an option on foreign currency traded on a CFTC-regulated exchange, in
each case other than for BONA FIDE hedging purposes (as defined by the
CFTC), if the aggregate initial margin and premiums required to establish
all of those positions (excluding the amount by which options are
"in-the-money") exceeds 5% of the liquidation value of the
Telecommunications Fund's Underlying Theme Portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the
Telecommunications Fund has entered into; or
(7) Borrow money except for temporary or emergency purposes (not for
leveraging) not in excess of 331/3% of the value of the Telecommunications
Fund's total assets. While borrowings exceed 5% of the Telecommunications
Fund's total assets, the Telecommunications Fund will not make any
additional investments.
The Telecommunications Fund has the authority to invest up to 10% of its total
assets in shares of other investment companies, and in real estate investment
trusts. The Telecommunications Fund may not invest more than 5% of its total
assets in any one investment company or acquire more than 3% of the outstanding
voting securities of any one investment company.
Investors should refer to the Underlying Theme Funds' Prospectus for further
information with respect to the Telecommunications Fund's investment objective,
which may not be changed without the approval of shareholders, and other
investment policies, techniques and limitations, which may be changed without
shareholder approval.
40
<PAGE>
If a percentage restriction on investment or utilization of assets in an
investment policy or restriction is adhered to at the time an investment is
made, a later change in percentage ownership of a security or kind of securities
resulting from changing market values or a similar type of event will not be
considered a violation of the Underlying Theme Fund's or Underlying Theme
Portfolio's investment policies or restrictions. The Underlying Theme Fund or
Underlying Theme Portfolio may exchange securities, exercise conversion or
subscription rights, warrants or other rights to purchase common stock or other
equity securities and may hold, except to the extent limited by the 1940 Act,
any such securities so acquired without regard to the Underlying Theme Fund's or
Underlying Theme Portfolio's investment policies and restrictions. The original
cost of the securities so acquired will be included in any subsequent
determination of the Underlying Theme Fund's or Underlying Theme Portfolio's
compliance with the investment percentage limitations referred to above and in
the Prospectus.
EXECUTION OF PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities for the Fund
(normally shares of the Underlying Theme Funds) are placed on behalf of the Fund
by the Manager. As stated in the Prospectus, the Manager will exercise no
discretion in investing the assets of the Fund other than to make investments in
government securities and money market instruments and to rebalance the
percentage of the Fund's assets in each Underlying Theme Fund.
Subject to policies established by the Underlying Theme Funds' Board of
Directors and the Underlying Theme Portfolios' Board of Trustees, the Manager is
responsible for the execution of each Underlying Theme Fund's and Underlying
Theme Portfolio's securities transactions and the selection of broker/dealers
who execute such transactions on behalf of each Underlying Theme Portfolio. In
executing Underlying Theme Portfolio transactions, the Manager seeks the best
net results for each Underlying Theme Portfolio, taking into account such
factors as the price (including the applicable brokerage commission or dealer
spread), size of the order, difficulty of execution and operational facilities
of the firm involved. Although the Manager generally seeks reasonably
competitive commission rates and spreads, payment of the lowest commission or
spread is not necessarily consistent with the best net results. While each
Underlying Theme Portfolio may engage in soft dollar arrangements for research
services, as described below, each Underlying Theme Portfolio has no obligation
to deal with any broker/dealer or group of broker/dealers in the execution of
Underlying Theme Portfolio transactions.
Consistent with the interests of each Underlying Theme Portfolio, the Manager
may select broker/dealers to execute that Underlying Theme Portfolio's
Underlying Theme Portfolio transaction on the basis of the research and
brokerage services they provide to the Manager for its use in managing that
Underlying Theme Portfolio and its other advisory accounts. Such services may
include furnishing analyses, reports and information concerning issuers,
industries, securities, geographic regions, economic factors and trends,
Underlying Theme Portfolio strategy, and performance of accounts; and effecting
securities transactions and performing functions incidental thereto (such as
clearance and settlement). Research and brokerage services received from such
broker is in addition to, and not in lieu of, the services required to be
performed by the Manager under the applicable Investment Management and
Administration Contract (defined below). A commission paid to such broker may be
higher than that which another qualified broker would have charged for effecting
the same transaction, provided that the Manager determines in good faith that
such commission is reasonable in terms either of that particular transaction or
41
<PAGE>
the overall responsibility of the Manager to that Underlying Theme Portfolio and
its other clients and that the total commissions paid by the Underlying Theme
Portfolio will be reasonable in relation to the benefits received by that
Underlying Theme Portfolio over the long term. Research services may also be
received from dealers who execute Underlying Theme Portfolio transactions in OTC
markets.
The Manager may allocate brokerage transactions to broker/dealers who have
entered into arrangements under which the broker/dealer allocates a portion of
the commissions paid by an Underlying Theme Portfolio toward payment of that
Underlying Theme Portfolio's expenses, such as custodian fees.
Investment decisions for an Underlying Theme Portfolio and for other investment
accounts managed by the Manager are made independently of each other in light of
differing conditions. However, the same investment decision occasionally may be
made for two or more of such accounts, including an Underlying Theme Portfolio.
In such cases, simultaneous transactions may occur. Purchases or sales are then
allocated as to price or amount in a manner deemed fair and equitable to all
accounts involved. While in some cases this practice could have a detrimental
effect upon the price or value of the security as far as an Underlying Theme
Portfolio is concerned, in other cases the Manager believes that coordination
and the ability to participate in volume transactions will be beneficial to that
Underlying Theme Portfolio.
Under a policy adopted by the Company's Board of Directors and the Underlying
Theme Portfolios' Board of Trustees, and subject to the policy of obtaining the
best net results, the Manager may consider a broker/dealer's sale of the shares
of the Underlying Theme Funds and the other portfolios for which the Manager
serves as investment manager or administrator in selecting broker/dealers for
the execution of Underlying Theme Portfolio transactions. This policy does not
imply a commitment to execute Underlying Theme Portfolio transactions through
all broker/dealers that sell shares of the Underlying Theme Funds and such other
portfolios.
Each Underlying Theme Portfolio contemplates purchasing most foreign equity
securities in OTC markets or stock exchanges located in the countries in which
the respective principal offices of the issuers of the various securities are
located, if that is the best available market. The fixed commissions paid in
connection with most such foreign stock transactions generally are higher than
negotiated commissions on U.S. transactions. There generally is less government
supervision and regulation of foreign stock exchanges and brokers than in the
United States. Foreign security settlements may in some instances be subject to
delays and related administrative uncertainties.
Foreign equity securities may be held by an Underlying Theme Portfolio in the
form of ADRs, ADSs, EDRs, CDRs or securities convertible into foreign equity
securities. ADRs, ADSs, EDRs and CDRs may be listed on stock exchanges, or
traded in the OTC markets in the United States or Europe, as the case may be.
ADRs, like other securities traded in the United States, will be subject to
negotiated commission rates. The foreign and domestic debt securities and money
market instruments in which an Underlying Theme Portfolio may invest are
generally traded in the OTC markets.
42
<PAGE>
An Underlying Theme Portfolio does not have any obligation to deal with any
broker/dealer or group of broker/dealers in the execution of securities
transactions. Each Underlying Theme Portfolio contemplates that, consistent with
the policy of obtaining the best net results, brokerage transactions may be
conducted through certain companies that are members of Liechtenstein Global
Trust. The Company's Board of Directors or the Underlying Theme Portfolios'
Board of Trustees, as applicable, has adopted procedures in conformity with Rule
17e-1 under the 1940 Act to ensure that all brokerage commissions paid to such
affiliates are reasonable and fair in the context of the market in which they
are operating. Any such transactions will be effected and related compensation
paid only in accordance with applicable SEC regulations.
UNDERLYING THEME PORTFOLIO TRADING AND TURNOVER
The Fund's Underlying Theme Portfolio turnover rate is expected to be low, since
the Fund will only periodically rebalance its Underlying Theme Portfolio. The
Fund's annual Underlying Theme Portfolio turnover rate is not expected to exceed
___% annually.
The portfolio turnover rates of the Underlying Theme Portfolios have ranged from
__% to __% during their most recent fiscal years. There can be no assurance that
the portfolio turnover rates of the Underlying Theme Portfolios will remain
within this range during subsequent fiscal years. Higher portfolio turnover
rates may result in higher expenses being incurred by the Underlying Theme
Portfolios.
TRUSTEES AND EXECUTIVE OFFICERS
The Trust's Trustees and Executive Officers are listed below.
Name, Position(s) with the Principal Occupations and Business
Company And Address Experience For The Past 5 Years
- -------------------------- -----------------------------------
Daniel R. Waltcher, 33 Managing Director and Senior Counsel of the
Trustee and President Manager since July 1995; Associate Simpson
50 California Street Thacher & Bartlett from September 1989
San Francisco, CA 94111 through June 1995.
James R. Tufts, 38 Chief Information Officer for the Manager
Vice President and since October 1996; President, GT Services
Chief Financial Officer since 1995; Senior Vice President -- Finance
50 California Street and Administration, GT Global, GT Services
San Francisco, CA 94111 and G.T. Insurance from 1994 to 1995; Senior
Vice President -- Finance and Administration,
LGT Asset Management from 1994 to October
1996; Vice President -- Finance, LGT Asset
Management, GT Global and GT Services from
1990 to 1994; Vice President -- Finance, G.T.
Insurance from 1992 to 1994; and Director,
LGT Asset Management, GT Global and GT
Services since 1991.
43
<PAGE>
Kenneth W. Chancey, 51 Vice President -- Mutual Fund Accounting, the
Vice President and Principal Manager since 1992; and Vice President,
Accounting Officer Putnam Fiduciary Trust Company from 1989 to
50 California Street 1992.
San Francisco, CA 94111
Phillip S. Gillespie, Assistant General Counsel of the Manager
Secretary since March 1997, Senior Counsel, Division
50 California Street of Investment Management, U.S. Securities
San Francisco, CA 94111 & Exchange Commission from 1995 to
1997; Senior Counsel, Office of General
Counsel, U.S. Securities & Exchange
Commission from 1993 to 1995; Associate,
Perkins Coie from 1991 to 1993.
Compensation Table
Estimated
Compensation
Name From Trust
- ---- -------------
MANAGEMENT
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES RELATING TO THE FUND
The Manager acts as the investment adviser and administrator for the Fund
pursuant to a contract with the Trust. The Manager does not receive a fee for
providing services under the contract.
DISTRIBUTION SERVICES RELATING TO THE FUND
The Fund's Class A and Class B shares are offered continuously through the
Fund's principal underwriter and distributor, GT Global, on a "best efforts"
basis pursuant to separate Distribution Contracts between the Company and GT
Global.
As described in the Prospectus, the Company has adopted a separate Distribution
Plan with respect to the Class A and Class B shares of the Fund in accordance
with Rule 12b-1 under the 1940 Act (each a "Class A Plan" and "Class B Plan,"
respectively, and collectively, "Plans"). The rate of payments by the Fund under
the Plans, as described in the Prospectus, may not be increased without the
approval of the majority of the outstanding voting securities of the affected
class. All expenses for which GT Global is reimbursed under a Class A Plan will
have been incurred within one year of such reimbursement.
In approving the Plans, the Trustees determined that the adoption of the Plans
was in the best interests of the shareholders of the Fund. Agreements related to
the Plans must also be approved by such vote of the Trustees, including a
majority of Trustees who are not "interested persons" of the Trust (as defined
in the 1940 Act) and who have no direct or indirect financial interests in the
operation of the Plans, or in any agreement related thereto.
44
<PAGE>
Each Plan requires that, at least quarterly, the Trustees review the amounts
expended thereunder and the purposes for which such expenditures were made. Each
Plan requires that so long as it is in effect the selection and nomination of
Trustees who are not "interested persons" of the Trust will be committed to the
discretion of the Trustees who are not "interested persons" of the Trust, as
defined in the 1940 Act.
As discussed in the Prospectus, GT Global collects sales charges on sales of
Class A shares of the Fund, retains certain amounts of such charges and reallows
other amounts of such charges to broker/dealers that sell shares.
GT Global receives any contingent deferred sales charges ("CDSCs") payable with
respect to redemptions of Class B shares and certain Class A shares.
TRANSFER AGENCY AND ACCOUNTING AGENCY SERVICES
The Transfer Agent has been retained by the Fund to perform shareholder
servicing, reporting and general transfer agent functions for it. For these
services, the Transfer Agent receives an annual maintenance fee of $17.50 per
account, a new account fee of $4.00 per account, a per transaction fee of $1.75
for all transactions other than exchanges and a per exchange fee of $2.25. The
Transfer Agent is also reimbursed by the Fund for its out-of-pocket expenses for
such items as postage, forms, telephone charges, stationery and office supplies.
The Manager also serves as the Fund's pricing and accounting agent.
VALUATION OF FUND SHARES
As described in the Prospectus, the Fund's net asset value per share for each
class of shares is determined each day on which the New York Stock Exchange
("NYSE") is open for business ("Business Day") as of the close of regular
trading on the NYSE (currently 4:00 p.m. Eastern Time, unless weather, equipment
failure or other factors contribute to an earlier closing time). Currently, the
NYSE is closed on weekends and on certain days relating to the following
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day, July 4th,
Labor Day, Thanksgiving Day and Christmas Day.
The value of the shares of the Underlying Theme Funds will be their net asset
value at the time the net asset value of the Fund is determined.
INFORMATION RELATING TO SALES
AND REDEMPTIONS
PAYMENT AND TERMS OF OFFERING
Payment for Class A or Class B shares of the Fund purchased should accompany the
purchase order, or funds should be wired to the Transfer Agent as described in
the Prospectus. Payment, other than by wire transfer, must be made by check or
money order drawn on a U.S. bank. Checks or money orders must be payable in U.S.
dollars.
As a condition of this offering, if an order to purchase either class of shares
is canceled due to nonpayment (for example, on account of a check returned for
"not sufficient funds"), the person who made the order will be responsible for
any loss incurred by the Underlying Theme Fund by reason of such cancellation,
45
<PAGE>
and if such purchaser is a shareholder, the Fund shall have the authority as
agent of the shareholder to redeem shares in his or her account at their
then-current net asset value per share to reimburse the Fund for the loss
incurred. Investors whose purchase orders have been canceled due to nonpayment
may be prohibited from placing future orders.
The Fund reserves the right at any time to waive or increase the minimum
requirements applicable to initial or subsequent investments with respect to any
person or class of persons. An order to purchase shares is not binding on the
Fund until it has been confirmed in writing by the Transfer Agent (or other
arrangements made with the Fund, in the case of orders utilizing wire transfer
of funds, as described above) and payment has been received. To protect existing
shareholders, the Fund reserves the right to reject any offer for a purchase of
shares by any individual.
SALES OUTSIDE THE UNITED STATES
Sales of Fund shares made through brokers outside the United States will be at
net asset value plus a sales commission, if any, established by that broker or
by local law. Such a commission, if any, may be more or less than the sales
charges listed in the sales charge table included in the Prospectus.
AUTOMATIC INVESTMENT PLAN -- CLASS A SHARES AND CLASS B SHARES To establish
participation in the Fund's Automatic Investment Plan ("AIP"), investors or
their broker/dealers should specify whether investment will be in Class A shares
or Class B shares and should send the following documents to the Transfer Agent:
(1) an AIP Application; (2) a Bank Authorization Form; and (3) a voided personal
check from the pertinent bank account. The necessary forms are provided at the
back of the Fund's Prospectus. Provided that an investor's bank accepts the Bank
Authorization Form, investment amounts will be drawn on the designated dates
(monthly on the 25th day or beginning quarterly on the 25th day of the month the
investor first selects) in order to purchase full and fractional shares of the
Fund at the public offering price determined on that day. In the event that the
25th day falls on a Saturday, Sunday or holiday, shares will be purchased on the
next business day. If an investor's check is returned because of insufficient
funds or a stop payment order or if the account is closed, the AIP may be
discontinued, and any share purchase made upon deposit of such check may be
cancelled. Furthermore, the shareholder will be liable for any loss incurred by
the Fund by reason of such cancellation. Investors should allow one month for
the establishment of an AIP. An AIP may be terminated by the Transfer Agent or
the Fund upon thirty days' written notice or by the participant at any time
without penalty, upon written notice to the Fund or the Transfer Agent.
LETTER OF INTENT -- CLASS A SHARES
The Letter of Intent ("LOI") is not a binding obligation to purchase the
indicated amount. During such time as Class A shares are held in escrow under an
LOI to ensure payment of applicable sales charges if the indicated amount is not
met, all dividends and capital gain distributions on escrowed shares will be
reinvested in additional Class A shares or paid in cash, as specified by the
shareholder. If the intended investment is not completed within the specified
thirteen-month period, the purchaser must remit to GT Global the difference
between the sales charge actually paid and the sales charge which would have
been applicable if the total Class A purchases had been made at a single time.
If this amount is not paid to GT Global within twenty days after written
request, the appropriate number of escrowed shares will be redeemed and the
proceeds paid to GT Global.
46
<PAGE>
A registered investment adviser, trust company or trust department seeking to
execute an LOI as a single purchaser with respect to accounts over which it
exercises investment discretion is required to provide the Transfer Agent with
information establishing that it has discretionary authority with respect to the
money invested (e.g., by providing a copy of the pertinent investment advisory
agreement). Class A shares purchased in this manner must be registered with the
Transfer Agent so that only the investment adviser, trust company or trust
department, and not the beneficial owner, will be able to place purchase,
redemption and exchange orders.
INDIVIDUAL RETIREMENT ACCOUNTS (IRAS)
Class A or Class B shares of the Fund may be purchased as the underlying
investment for an IRA meeting the requirements of section 408(a) of the Code.
IRA applications are available from brokers or GT Global.
EXCHANGES
Shares of the Fund may be exchanged for shares of other GT Global Mutual Funds,
based on their respective net asset values without imposition of any sales
charges provided that the registration remains identical. Class A shares of the
Fund may be exchanged only for Class A shares of other GT Global Mutual Funds.
Class B shares of the Fund may be exchanged only for Class B shares of other GT
Global Mutual Funds. The exchange privilege is not an option or right to
purchase shares but is permitted under the current policies of the respective GT
Global Mutual Funds. The privilege may be discontinued or changed at any time by
any of the funds upon sixty days prior written notice to the shareholders of
such fund and is available only in states where the exchange may be made
legally. Before purchasing shares through the exercise of the exchange
privilege, a shareholder should obtain and read a copy of the prospectus of the
fund to be purchased and should consider the investment objective(s) of the
fund.
TELEPHONE REDEMPTIONS
A corporation or partnership wishing to utilize telephone redemption services
must submit a "Corporate Resolution" or "Certificate of Partnership" indicating
the names, titles and the required number of signatures of persons authorized to
act on its behalf. The certificate must be signed by a duly authorized
officer(s), and, in the case of a corporation, the corporate seal must be
affixed. All shareholders may request that redemption proceeds be transmitted by
bank wire upon request directly to the shareholder's predesignated account at a
domestic bank or savings institution if the proceeds are at least $1,000. Costs
in connection with the administration of this service, including wire charges,
currently are borne by the Fund. Proceeds of less than $1,000 will be mailed to
the shareholder's registered address of record. The Fund and the Transfer Agent
reserve the right to refuse any telephone instructions and may discontinue the
aforementioned redemption options upon thirty days' written notice.
SYSTEMATIC WITHDRAWAL PLAN
Shareholders owning Class A or Class B shares of the Fund with a value of
$10,000 or more may establish a Systematic Withdrawal Plan ("SWP"). Under an
SWP, a shareholder will receive monthly or quarterly payments, in amounts of not
less than $100 per payment, through the automatic redemption of the necessary
number of shares on the designated dates (monthly on the 25th day or quarterly
on the 25th day of January, April, July and October). In the event that the 25th
47
<PAGE>
day falls on a Saturday, Sunday or holiday, the redemption will take place on
the prior business day. Certificates, if any, for the shares being redeemed must
be held by the Transfer Agent. Checks will be made payable to the designated
recipient and mailed within seven days. If the recipient is other than the
registered shareholder, the signature of each shareholder must be guaranteed on
the SWP application (see "How to Redeem Shares" in the Prospectus). A
corporation (or partnership) must also submit a "Corporation Resolution" (or
"Certificate of Partnership") indicating the names, titles, and signatures of
the individuals authorized to act on its behalf, and the SWP application must be
signed by a duly authorized officer(s) and the corporate seal affixed.
With respect to a SWP, the maximum annual SWP withdrawal is 12% of the initial
account value. Withdrawals in excess of 12% of the initial account value
annually may result in assessment of a contingent deferred sales charge. See
"How to Invest" in the Prospectus.
Shareholders should be aware that such systematic withdrawals may deplete or use
up entirely the initial investment and result in realized long-term or
short-term capital gains or losses. The SWP may be terminated at any time by the
Transfer Agent or the Fund upon thirty days' written notice or by a shareholder
upon written notice to the Fund or its Transfer Agent. Applications and further
details regarding establishment of an SWP are provided at the back of the Fund's
Prospectus.
SUSPENSION OF REDEMPTION PRIVILEGES
The Fund may suspend redemption privileges or postpone the date of payment for
more than seven days after a redemption order is received during any period (1)
when the NYSE is closed other than customary weekend and holiday closings, or
trading on the NYSE is restricted as directed by the SEC, (2) when an emergency
exists, as defined by the SEC, which would prohibit the Fund or the Underlying
Theme Portfolios from disposing of portfolio securities owned by them or in
fairly determining the value of its assets, or (3) as the SEC may otherwise
permit.
REDEMPTIONS IN KIND
It is possible that conditions may arise in the future which would, in the
opinion of the Trust's Board of Trustees, make it undesirable for the Fund to
pay for all redemptions in cash. In such cases, the Board may authorize payment
to be made in Underlying Theme Portfolio securities or other property of the
Fund, so called "redemptions in kind." Payment of redemptions in kind will be
made in readily marketable securities. Such securities would be valued at the
same value assigned to them in computing the net asset value per share.
Shareholders receiving such securities would incur brokerage costs in selling
any such securities so received. [However, despite the foregoing, the Trust has
filed with the SEC an election pursuant to Rule 18f-1 under the 1940 Act. This
means that the Fund will pay in cash all requests for redemption made by any
shareholder of record, limited in amount with respect to each shareholder during
any ninety-day period to the lesser of $250,000 or 1% of the net asset value of
the Fund at the beginning of such period. This election will be irrevocable so
long as Rule 18f-1 remains in effect, unless the SEC by order upon application
permits the withdrawal of such election.]
TAXES
TAXATION OF THE FUND
In order to qualify for treatment as a regulated investment company ("RIC")
under the Code, the Fund must distribute to its shareholders for each taxable
year at least 90% of its investment company taxable income (consisting generally
48
<PAGE>
of net investment income and net short-term capital gain) ("Distribution
Requirement") and must meet several additional requirements. With respect to the
Fund, 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 other income derived with respect to its business
of investing in securities ("Income Requirement"); (2) the Fund must derive less
than 30% of its gross income each taxable year from the sale or other
disposition of securities held for less than three months ("Short-Short
Limitation"); (3) 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, with these other securities 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 (4) 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
(other than U.S. government securities or the securities of other RICs) of any
one issuer.
The Fund will be subject to a nondeductible 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 31 of that year, plus certain other amounts.
TAXATION OF THE FUND'S SHAREHOLDERS
Dividends and other distributions declared by the Fund in, and payable to
shareholders of record as of a date in, October, November or December of any
year will be deemed to have been paid by the Fund and received by the
shareholders on December 31 of that year if the distributions are paid by the
Fund during the following January. Accordingly, those distributions will be
taxed to shareholders for the year in which that December 31 falls.
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 received by the Fund (directly or through
an Underlying Theme Portfolio) from U.S. corporations. However, dividends
received by a corporate shareholder and deducted by it pursuant to the
dividends-received deduction may be subject indirectly to the alternative
minimum tax.
If the Fund shares are sold at a loss after being held for six months or less,
the loss will be treated as long-term, instead of short-term, capital loss to
the extent of any capital gain distributions received on those shares. Investors
also should be aware that if shares are purchased shortly before the record date
for any dividend or other distribution, the shareholder will pay full price for
the shares and receive some portion of the price back as a taxable distribution.
Dividends paid by the Fund to a shareholder who, as to the United States, is a
nonresident alien individual or nonresident alien fiduciary of a trust or
estate, foreign corporation or foreign partnership ("foreign shareholder") will
be subject to U.S. withholding tax (at a rate of 30% or lower treaty rate).
Withholding will not apply if a dividend paid by the Fund to a foreign
shareholder is "effectively connected with the conduct of a U.S. trade or
49
<PAGE>
business," in which case the reporting and withholding requirements applicable
to domestic shareholders will apply. Distributions of net capital gain are not
subject to withholding, but in the case of a foreign shareholder who is a
nonresident alien individual, those distributions ordinarily will be subject to
U.S. income tax at a rate of 30% (or lower treaty rate) if the individual is
physically present in the United States for more than 182 days during the
taxable year and the distributions are attributable to a fixed place of business
maintained by the individual in the United States.
The foregoing is a general and abbreviated summary of certain federal tax
considerations affecting the Fund and its shareholders. Investors are urged to
consult their own tax advisers for more detailed information and for information
regarding any foreign, state and local taxes applicable to distributions
received from the Fund.
ADDITIONAL INFORMATION
LIECHTENSTEIN GLOBAL TRUST
Liechtenstein Global Trust AG, formerly BIL GT Group, is composed of the Manager
and its worldwide affiliates. Other worldwide affiliates of Liechtenstein Global
Trust include LGT Bank in Liechtenstein, formerly Bank in Liechtenstein, an
international financial services institution founded in 1920. LGT Bank in
Liechtenstein has principal offices in Vaduz, Liechtenstein. Its subsidiaries
currently include LGT Bank in Liechtenstein (Deutschland) GmbH, formerly Bank in
Liechtenstein (Frankfurt) GmbH, and LGT Asset Management AG, formerly Bilfinanz
und Verwaltung AG, in Zurich, Switzerland.
Worldwide asset management affiliates also currently include LGT Asset
Management PLC, formerly G.T. Management PLC, in London, England; LGT Asset
Management Ltd., formerly G.T. Management (Asia) Ltd., in Hong Kong; LGT Asset
Management Ltd., formerly G.T. Management (Japan) Ltd., in Tokyo; LGT Asset
Management Pte. Ltd., formerly G.T. Management (Singapore) PTE Ltd., in
Singapore; LGT Asset Management Ltd., formerly G.T. Management (Australia) Ltd.,
in Sydney; and LGT Asset Management GmbH, formerly BIL Asset Management GmbH, in
Frankfurt.
CUSTODIAN
State Street Bank and Trust Company ("State Street"), 225 Franklin Street,
Boston, Massachusetts 02110, acts as custodian of the Underlying Theme
Portfolios' assets.
INDEPENDENT ACCOUNTANTS
The Trust's independent accountants are Coopers & Lybrand L.L.P., One Post
Office Square, Boston, Massachusetts 02109. Coopers & Lybrand L.L.P. conducts
annual audits of the Fund's financial statements, assists in the preparation of
the Fund's federal and state income tax returns and consults with the Trust as
to matters of accounting, regulatory filings, and federal and state income
taxation.
50
<PAGE>
The audited financial statements of the Trust included in this Statement of
Additional Information have been examined by Coopers & Lybrand L.L.P., as stated
in their opinion appearing herein, and are included in reliance upon such
opinion given upon the authority of that firm as experts in accounting and
auditing.
USE OF NAME
The Manager has granted the Trust the right to use the "GT" and "GT Global"
names and has reserved the right to withdraw its consent to the use of such
names by the Trust at any time or to grant the use of such names to any other
company.
SHAREHOLDER LIABILITY
Under certain circumstances, shareholders of the Fund may be held personally
liable for the obligations of the Fund. The Trust's Declaration of Trust
provides that shareholders shall not be subject to any personal liability for
the acts or obligations of the Fund or the Trust and that every written
agreement, obligation or other undertaking made or issued by the Fund or the
Trust shall contain a provision to the effect that shareholders are not
personally liable thereunder. The Declaration of Trust provides for
indemnification out of the Trust's assets under certain circumstances, and
further provides that the Trust shall, upon request, assume the defense of any
act or obligation of the Fund or the Trust and that the Fund will indemnify the
shareholder for all legal and other expenses incurred therewith. Thus, the risk
of any shareholder's incurring financial loss beyond his or her investment,
because of this theoretical shareholder liability, is limited to circumstances
in which the Fund or the Trust itself would be unable to meet its obligations.
INVESTMENT RESULTS
STANDARDIZED RETURNS
The Fund's "Standardized Returns," as referred to in the Prospectus (see "Other
Information -- Performance Information" in the Prospectus), is calculated
separately for Class A and Class B shares of the Fund, as follows: Standardized
Return (average annual total return ("T")) is computed by using the ending
redeeming value ("ERV") of a hypothetical initial investment of $1,000 ("P")
over a period of years ("n") according to the following formula as required by
the SEC: P(1+T) = ERV. The following assumptions will be reflected in
computations made in accordance with this formula: (1) for Class A shares,
deduction of the maximum sales charge of 4.75% from the $1,000 initial
investment; (2) for Class B shares, deduction of the applicable contingent
deferred sales charge imposed on a redemption of Class B shares held for the
period; (3) reinvestment of dividends and other distributions at net asset value
on the reinvestment date determined by the Trust's Board of Directors; and (4) a
complete redemption at the end of any period illustrated.
NON-STANDARDIZED RETURNS
In addition to Standardized Returns, the Fund also may include in
advertisements, sales literature and shareholder reports other total return
performance data ("Non-Standardized Return"). Non-Standardized Return is
calculated separately for Class A and Class B shares of the Fund and may be
calculated according to several different formulas. Non-Standardized Returns may
be quoted for the same or different time periods for which Standardized Returns
are quoted. Non-Standardized Returns may or may not take sales charges into
account; performance data calculated without taking the effect of sales charges
into account will be higher than data including the effect of such charges.
Average annual Non-Standardized Return ("T") is computed by using the ending
redeeming value ("ERV") of a hypothetical initial investment of $1,000 ("P")
over a period of years ("n") according to the following formula as required by
the SEC: P(1+T) = ERV. The following assumptions will be reflected in
51
<PAGE>
computations made in accordance with this formula: (1) no deduction of sales
charges; (2) reinvestment of dividends and other distributions at net asset
value on the reinvestment date determined by the Board; and (3) a complete
redemption at the end of any period illustrated.
The Fund's investment results will vary from time to time depending upon market
conditions, the composition of each Underlying Theme Fund's Underlying Theme
Portfolio and operating expenses of the Fund, so that current or past yield or
total return should not be considered representative of what an investment in
the Fund may earn in any future period. These factors and possible differences
in the methods used in calculating investment results should be considered when
comparing the Fund's investment results with those published for other
investment companies and other investment vehicles. The Fund's results also
should be considered relative to the risks associated with the Fund's investment
objective and policies.
IMPORTANT POINTS TO NOTE ABOUT DATA RELATING TO WORLD EQUITY AND BOND MARKET The
Fund and GT Global may from time to time in advertisements, sales literature and
reports furnished to present or prospective shareholders compare the Fund with,
but not limited to, the following:
(1) The Salomon Brothers Non-U.S. Dollars Indices, which are
measures of the total return performance of high quality non-U.S.
dollar denominated securities in major sectors of the worldwide bond
markets.
(2) The Lehman Brothers Government/Corporate Bond Index, which is a
comprehensive measure of all public obligations of the U.S. Treasury
(excluding flower bonds and foreign targeted issues), all publicly issued
debt of agencies of the U.S. Government (excluding mortgage backed
securities), and all public, fixed rate, non-convertible investment grade
domestic corporate debt rated at least Baa by Moody's Investors Service,
Inc. ("Moody's") or BBB by Standard and Poor's Ratings Group ("S&P"), or,
in the case of nonrated bonds, BBB by Fitch Investors Service, Inc.
("Fitch") (excluding collateralized mortgage obligations).
(3) The Consumer Price Index, which is a measure of the average
change in prices over time in a fixed market basket of goods and services
(e.g., food, clothing, shelter, fuels, transportation fares, charges for
doctors' and dentists' services, prescription medicines, and other goods
and services that people buy for day-to-day living). There is inflation
risk which does not affect a security's value but its purchasing power
i.e. the risk of changing price levels in the economy that affects
security prices or the price of goods and services.
(4) Data and mutual fund rankings published or prepared by Lipper
Analytical Data Services, Inc. ("Lipper"), CDA/Wiesenberger Investment
Companies Service ("CDA/Wiesenberger"), Morningstar, Inc. and/or other
companies that rank and/or compare mutual funds by overall performance,
investment objectives, assets, expense levels, periods of existence and/or
other factors. In this regard each Underlying Theme Fund may be compared
to the Underlying Theme Fund's "peer group" as defined by Lipper,
52
<PAGE>
CDA/Wiesenberger, Morningstar and/or other firms, as applicable, or to
specific funds or groups of funds within or outside of such peer group.
Lipper generally ranks funds on the basis of total return, assuming
reinvestment of distributions, but does not take sales charges or
redemption fees into consideration, and is prepared without regard to tax
consequences. In addition to the mutual fund rankings, the Underlying
Theme Fund's performance may be compared to mutual fund performance
indices prepared by Lipper. Morningstar is a mutual fund rating service
that also rates mutual funds on the basis of risk-adjusted performance.
Morningstar ratings are calculated from a fund's three, five and ten year
average annual returns with appropriate fee adjustments and a risk factor
that reflects fund performance relative to the three-month U.S. Treasury
bill monthly returns. Ten percent of the funds in an investment category
receive five stars and 22.5% receive four stars. The ratings are subject
to change each month.
(5) Bear Stearns Foreign Bond Index, which provides simple average
returns for individual countries and Gross National Product ("GNP")
weighted index, beginning in 1975. The returns are broken down by local
market and currency.
(6) Ibbottson Associates International Bond Index, which provides a
detailed breakdown of local market and currency returns since 1960.
(7) Standard & Poor's 500 Composite Stock Price Index which is a
widely recognized index composed of the capitalization-weighted average of
the price of 500 of the largest publicly traded stocks in the United
States.
(8) Salomon Brothers Broad Investment Grade Index which is a widely
used index composed of U.S. domestic government, corporate and
mortgage-backed fixed income securities.
(9) Dow Jones Industrial Average.
(10) CNBC/Financial News Composite Index.
(11) Morgan Stanley Capital International World Indices, including,
among others, the Morgan Stanley Capital International Europe, Australia,
Far East Index ("EAFE Index"). The EAFE index is an unmanaged index of
more than 1,000 companies in Europe, Australia and the Far East.
(12) Salomon Brothers World Government Bond Index and Salomon
Brothers World Government Bond Index-Non-U.S. are each a widely used
index composed of world government bonds.
(13) The World Bank Publication of Trends in Developing Countries
(TIDE). TIDE provides brief reports on most of the World Bank's borrowing
members. The World Development Report is published annually and looks at
global and regional economic trends and their implications for the
developing economies.
(14) Salomon Brothers Global Telecommunications Index is composed of
telecommunications companies in the developing and emerging countries.
(15) Datastream and Worldscope each is an on-line database retrieval
service for information including, but not limited to, international
financial and economic data.
53
<PAGE>
(16) International Financial Statistics, which is produced by
the International Monetary Fund.
(17) Various publications and annual reports, produced by the
World Bank and its affiliates.
(18) Various publications from the International Bank for
Reconstruction and Development.
(19) Various publications including, but not limited to ratings
agencies such as Moody's, S&P and Fitch.
(20) Wilshire Associates which is an on-line database for
international financial and economic data including performance measure
for a wide range of securities.
(21) Bank Rate National Monitor Index, which an average of the
quoted rates for 100 leading banks and thrifts in ten U.S. cities.
(22) International Finance Corporation ("IFC") Emerging Markets Data
Base which provides detailed statistics on stock and bond markets in
developing countries.
(23) Various publications from the Organization for Economic
Cooperation and Development ("OECD").
(24) Average of Savings Accounts, which is a measure of all kinds of
savings deposits, including longer-term certificates. Savings accounts
offer a guaranteed rate of return on principal, but no opportunity for
capital growth. During a portion of the period, the maximum rates paid on
some savings deposits were fixed by law.
Indices, economic and financial data prepared by the research departments of
various financial organizations, such as Salomon Brothers, Inc., Lehman
Brothers, Merrill Lynch, Pierce, Fenner & Smith, Inc., J.P. Morgan, Morgan
Stanley, Smith Barney Shearson, S.G. Warburg, Jardine Flemming, The Bank for
International Settlements, Asian Development Bank, Bloomberg, L.P., and
Ibbottson Associates, may be used, as well as information reported by the
Federal Reserve and the respective Central Banks of various nations. In
addition, GT Global may use performance rankings, ratings and commentary
reported periodically in national financial publications, including but not
limited to, Money Magazine, Mutual Fund Magazine, Smart Money, Global Finance,
EuroMoney, Financial World, Forbes, Fortune, Business Week, Latin Finance, the
Wall Street Journal, Emerging Markets Weekly, Kiplinger's Guide To Personal
Finance, Barron's, The Financial Times, USA Today, The New York Times, Far
Eastern Economic Review, The Economist and Investors Business Digest. The Fund
may compare its performance to that of other compilations or indices of
comparable quality to those listed above and other indices which may be
developed and made available in the future.
Information relating to foreign market performance, capitalization and
diversification is based on sources believed to be reliable, but which may be
subject to revision and which has not been independently verified by the Fund or
54
<PAGE>
GT Global. The authors and publishers of such material are not to be considered
as "experts" under the 1933 Act, on account of the inclusion of such information
herein.
A portion of the performance figures for each market includes the positive or
negative effects of the currency exchange rates effective at December 31 of each
year between the U.S. dollar and currency of the foreign market (e.g. Japanese
Yen, German Deutschemark, Hong Kong Dollar). A foreign currency which has
strengthened or weakened against the U.S. dollar will positively or negatively
affect the reported returns, as the case may be.
GT Global believes that this information may be useful to investors considering
whether and to what extent to diversify their investments through the purchase
of mutual funds investing in securities on a global basis. However, this data is
not a representation of the past performance of the Fund, nor is it a prediction
of such performance. The performance of the Fund will differ from the historical
performance of relevant indices. The performance of indices does not take
expenses into account, while the Fund incurs expenses in its operations, which
will reduce performance. Each of these factors will cause the performance of the
Fund to differ from relevant indices.
From time to time, the Fund and GT Global may refer to the number of
shareholders in the Fund or the aggregate number of shareholders in all GT
Global Mutual Funds or the dollar amount of the Fund's assets under management
or rankings by DALBAR Surveys, Inc. in advertising materials.
GT Global believes the Fund is an appropriate investment for long-term
investment goals including, but not limited to funding retirement, paying for
education or purchasing a house. GT Global may provide information designed to
help individuals understand their investment goals and explore various financial
strategies. For example, GT Global may describe general principles of investing,
such as asset allocation, diversification and risk tolerance. The Fund does not
represent a complete investment program and the investors should consider the
Fund as appropriate for a portion of their overall investment Underlying Theme
Portfolio with regard to their long-term investment goals. There is no assurance
that any such information will lead to achieving these goals or guarantee future
results.
From time to time, GT Global may refer to or advertise the names of U.S. and
non-U.S. companies and their products although there can be no assurance that
any GT Global Mutual Fund may own the securities of these companies.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical returns
of the capital markets in the United States, including common stocks, small
capitalization stocks, long-term corporate bonds, intermediate-term government
bonds, long-term government bonds, Treasury bills, the U.S. rate of inflation
(based on the CPI), and combinations of various capital markets. The performance
of these capital markets are based on the returns of different indices.
GT Global Mutual Funds may use the performance of these capital markets in order
to demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any of
these capital markets. The risks associated with the security types in any
capital market may or may not correspond directly to those of the funds.
Ibbotson calculates total returns in the same method as the funds. The funds may
also compare performance to that of other compilations or indices that may be
developed and made available in the future.
55
<PAGE>
The Fund may quote various measures of volatility and benchmark correlation such
as beta, standard deviation and R in advertising. In addition, the Fund may
compare these measures to those of other funds. Measures of volatility seek to
compare the Fund's historical share price fluctuations or total returns compared
to those of a benchmark. All measures of volatility and correlation are
calculated using averages of historical data.
The Fund may advertise examples of the effects of periodic investment plans,
including the principle of dollar cost averaging programs. In such a program, an
investor invests a fixed dollar amount in a fund at periodic intervals, thereby
purchasing fewer shares when prices are high and more shares when prices are
low. While such a strategy does not assure a profit or guard against loss in a
declining market, the investor's average cost per share can be lower than if
fixed numbers of shares are purchased at the same intervals. In evaluating such
a plan, investors should consider their ability to continue purchasing shares
through periods of low price levels.
The Fund may be available for purchase through retirement plans or other
programs offering deferral of or exemption from income taxes, which may produce
superior after-tax returns over time. For example, a $10,000 investment earning
a taxable return of 10% annually would have an after-tax value of $17,976 after
ten years, assuming tax was deducted from the return each year at a 39.6% rate.
An equivalent tax-deferred investment would have an after-tax value of $19,626
after ten years, assuming tax was deducted at a 39.6% rate from the deferred
earnings at the end of the ten-year period.
The Fund may describe in its sales material and advertisements how an investor
may invest in GT Global Mutual Funds through various retirement plans that offer
deferral of income taxes on investment earnings and may also enable an investor
to make pre-tax contributions. Because of their advantages, these retirement
accounts and plans may produce returns superior to comparable non-retirement
investments. In sales material and advertisements, the Fund may also discuss
these accounts and plans, which include:
INDIVIDUAL RETIREMENT ACCOUNTS (IRAS): If you have earned income from employment
(including self-employment), you can contribute each year to an IRA up to the
lesser of (1) $2,000 for yourself or $4,000 for you and your spouse, regardless
of whether your spouse is employed or (2) 100% of compensation. Some individuals
may be able to take an income tax deduction for the contribution. Regular
contributions may not be made for the year you become 70 1/2 or thereafter.
Please consult your tax advisor for more information.
ROLLOVER IRAS: Individuals who receive distributions from qualified retirement
plans (other than required distributions) and who wish to keep their savings
growing tax-deferred can roll over (or make a direct transfer of) their
distribution to a Rollover IRA. These accounts can also receive rollovers or
transfers from an existing IRA. If an "eligible rollover distribution" from a
qualified employer-sponsored retirement plan is not directly rolled over to an
IRA (or certain qualified plans), withholding at the rate of 20% will be
required for federal income tax purposes. A distribution from a qualified plan
that is not an "eligible rollover distribution," including a distribution that
is one of a series of substantially equal periodic payments, generally is
subject to regular wage withholding or withholding at the rate of 10% (depending
on the type and amount of the distribution), unless you elect not to have any
withholding apply. Please consult your tax advisor for more information.
56
<PAGE>
SEP-IRAS: Simplified employee pension plans ("SEPs" or "SEP-IRAs") provide
self-employed individuals (and any eligible employees) with benefits similar to
Keogh-type plans or Code Section 401(k) plans, but with fewer administrative
requirements and therefore potential lower annual administration expenses.
CODE SECTION 403()(7) CUSTODIAL ACCOUNTS: Employees of public schools and most
other not-for-profit organizations can make pre-tax salary reduction
contributions to these accounts.
PROFIT-SHARING (INCLUDING SECTION 401()) AND MONEY PURCHASE PENSION PLANS:
Corporations can sponsor these qualified defined contribution plans for their
employees. A Section 401(k) plan, a type of profit-sharing plan, additionally
permits the eligible, participating employees to make pre-tax salary reduction
contributions to the plan (up to certain limitations).
SIMPLE RETIREMENT PLANS: Employers with no more than 100 employees who do not
maintain another retirement plan may establish a Savings Incentive Match Plan
for Employees ("SIMPLE") either as separate IRAs or as part of a Code Section
401(k) plan. SIMPLEs are not subject to the complicated nondiscrimination rules
that generally apply to qualified retirement plans.
GT Global may from time to time in its sales materials and advertising discuss
the risks inherent in investing. The major types of investment risk are market
risk, industry risk, credit risk, interest rate risk, liquidity risk and
inflation risk. Risk represents the possibility that you may lose some or all of
your investment over a period of time. A basic tenet of investing is the greater
the potential reward, the greater the risk.
From time to time, the Fund and GT Global will quote data regarding industries,
companies, individual countries, regions, world stock exchanges, and economic
and demographic statistics from sources GT Global deems reliable, including the
economic and financial data of such financial organizations as:
1) Stock market capitalization: Morgan Stanley Capital International
World Indices, IFC and Datastream.
2) Stock market trading volume: Morgan Stanley Capital International
Industry Indices and IFC.
3) The number of listed companies: IFC, GT Guide to World Equity Markets,
Salomon Brothers, Inc., and S.G. Warburg.
4) Wage rates: U.S. Department of Labor Statistics and Morgan Stanley
Capital International World.
5) International industry performance: Morgan Stanley Capital
International World Indices, Wilshire Associates and Salomon Brothers, Inc.
6) Stock market performance: Morgan Stanley Capital International World
Indices, IFC and Datastream.
57
<PAGE>
7) The Consumer Price Index and inflation rate: The World Bank,
Datastream and IFC.
8) Gross Domestic Product ("GDP"): Datastream and The World Bank.
9) GDP growth rate: IFC, The World Bank and Datastream.
10) Population: The World Bank, Datastream and United Nations.
11) Average annual growth rate (%) of population: The World Bank,
Datastream and United Nations.
12) Age distribution within populations: OECD and United Nations.
13) Total exports and imports by year: IFC, The World Bank and Datastream.
14) Top three companies by country, industry or market: IFC, GT Guide to
World Equity Markets, Salomon Brothers Inc., and S.G. Warburg.
15) Foreign direct investments to developing countries: The World Bank and
Datastream.
16) Supply, consumption, demand and growth in demand of certain products,
services and industries, including, but not limited to electricity, water,
transportation, construction materials, natural resources, technology, other
basic infrastructure, financial services, health care services and supplies,
consumer products and services and telecommunications equipment and services
(sources of such information may include, but would not be limited to, The World
Bank, OECD, IMF, Bloomberg and Datastream).
17) Standard deviation and performance returns for U.S. and non-U.S.
equity and bond markets: Morgan Stanley Capital International.
18) Countries restructuring their debt, including those under the Brady
Plan: the Manager.
19) Political and economic structure of countries: Economist Intelligence
Unit.
20) Government and corporate bonds -- credit ratings, yield to maturity
and performance returns: Salomon Brothers, Inc.
21) Dividend yields for U.S. and non-U.S. companies: Bloomberg.
From time to time, GT Global may include in its advertisement and sales
material, information about privatization which is an economic process involving
the sale of state-owned companies to the private sector.
In advertising and sales materials, GT Global may make reference to or discuss
its products, services and accomplishments. Among these accomplishments are that
in 1983 the Manager provided assistance to the government of Hong Kong in
linking its currency to the U.S. dollar, and that in 1987 Japan's Ministry of
Finance licensed LGT Asset Management Ltd. as one of the first foreign
58
<PAGE>
discretionary investment managers for Japanese investors. Such accomplishments,
however, should not be viewed as an endorsement of the Manager by the government
of Hong Kong, Japan's Ministry of Finance or any other government or government
agency. Nor do any such accomplishments of the Manager provide any assurance
that the GT Global Mutual Funds' investment objectives will be achieved.
GT GLOBAL ADVANTAGE
As part of Liechtenstein Global Trust, GT Global continues a 75-year tradition
of service to individuals and institutions. Today we bring investors a
combination of experience, worldwide resources, a global perspective, investment
talent and a time tested investment discipline. With investment professionals in
nine offices worldwide, we witness world events and economic developments
firsthand.
The key to achieving consistent results is following a disciplined investment
process. Our approach to asset allocation takes advantage of GT Global's
worldwide presence and global perspective. Our "macroeconomic" worldview
determines our overall strategy of regional, country and sector allocations. Our
bottom up process of security selection combines fundamental research with
quantitative analysis through our proprietary models.
Built in checks and balances strengthen the process, enhancing professional
experience and judgment with an objective assessment of risk. Ultimately, each
security we select has passed a ranking system that helps our Underlying Theme
Portfolio teams determine when to buy and when to sell.
DESCRIPTION OF DEBT RATINGS
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Moody's employs the designations "Prime-1" and "Prime-2" to indicate commercial
paper having the highest capacity for timely repayment. Issuers rated Prime-1
(or supporting institutions) have a superior ability for repayment of senior
short-term debt obligations. Prime-1 repayment ability will often be evidenced
by many of the following characteristics: leading market positions in
well-established industries; high rates of return on funds employed;
conservative capitalization structure with moderate reliance on debt and ample
asset protection; broad margins in earnings coverage of fixed financial charges
and high internal cash generation; and well-established access to a range of
financial markets and assured sources of alternate liquidity. Issuers rated
Prime-2 (or supporting institutions) have a strong ability for repayment of
senior short-term debt obligations. This normally will be evidenced by many of
the characteristics cited above but to a lesser degree. Earnings trends and
coverage ratios, while sound may be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
S&P rates commercial paper in four categories ranging from "A-1" for the highest
quality obligations to "D" for the lowest. A-1 -- This highest category
indicates that the degree of safety regarding timely payment is strong. Those
issues determined to possess extremely strong safety characteristics will be
denoted with a plus sign (+) designation. A-2 -- Capacity for timely payment on
issues with this designation is satisfactory. However, the relative degree of
safety is not as high as for issues designated "A-1." A-3 -- Issues carrying
this designation have adequate capacity for timely payment. They are, however,
59
<PAGE>
more vulnerable to the adverse effects of changes in circumstances than
obligations carrying the higher designations. B -- Issues rated "B" are regarded
as having only speculative capacity for timely payment. C -- This rating is
assigned to short-term debt obligations with a doubtful capacity for payment. D
- -- Debt rated "D" is in payment default. The "D" rating category is used when
interest payments or principal payments are not made on the date due, even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period.
DESCRIPTION OF BOND RATINGS
Moody's rates the long-term debt securities issued by various entities from
"Aaa" to "C." Investment Grade Ratings are the first four categories: Aaa --
Best quality. These securities carry the smallest degree of investment risk and
are generally referred to as "gilt edged." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such
issues. Aa -- High quality by all standards. Together with the Aaa group they
comprise what are generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risk appear
somewhat larger than the Aaa securities. A -- Upper-medium-grade obligations.
Factors giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment sometime in
the future. Baa -- Medium-grade obligations (i.e., they are neither highly
protected nor poorly secured). Interest payments and principal security appear
adequate for the present but certain protective elements may be lacking or may
be characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well. Ba -- Have speculative elements and their future cannot
be considered as well-assured. Often the protection of interest and principal
payments may be very moderate, and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position characterizes bonds in
this class. B -- Generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Caa -- Poor standing. Such issues may be in default or there may be present
elements of danger with respect to principal or interest. Ca -- Speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C -- Lowest rated class of bonds. Issues so rated can be regarded as having
extremely poor prospects of ever attaining any real investment standing.
ABSENCE OF RATING: Where no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to the quality of the
issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or
companies that are not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue
or issuer.
4. The issue was privately placed, in which case the rating is
not published in Moody's publications.
60
<PAGE>
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa to B in its corporate bond rating system. The modifier 1
indicates that the company ranks in the higher end of its generic rating
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end of its generic rating category.
S&P rates the securities debt of various entities in categories ranging from
"AAA" to "D" according to quality. Investment grade ratings are the first four
categories: AAA -- Highest rating. Capacity to pay interest and repay principal
is extremely strong. AA -- Very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in a small degree. A --
Has a strong capacity to pay interest and repay principal although it is
somewhat more susceptible to the adverse effects of changes in circumstances and
economic conditions than debt in higher rated categories. BBB -- Regarded as
having adequate capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rated
categories. BB, B, CCC, CC, C -- Debt rated "BB," "B," "CCC," "CC," and "C" is
regarded, on balance, as predominantly speculative with respect to capacity to
pay interest and repay principal in accordance with the terms of the obligation.
"BB" indicates the lowest degree of speculation and "C" the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions. BB -- Has less near-term vulnerability to
default than other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or economic conditions
which could lead to inadequate capacity to meet timely interest and principal
payments. The "BB" rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied "BBB-" rating. B -- Has a greater
vulnerability to default but currently has the capacity to meet interest
payments and principal repayments. Adverse business, financial, or economic
conditions will likely impair capacity or willingness to pay interest and repay
principal. The "B" rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied "BB" or "BB-" rating. CCC -- Has a
currently identifiable vulnerability to default, and is dependent upon favorable
business, financial, and economic conditions to meet timely payment of interest
and repayment of principal. In the event of adverse business, financial, or
economic conditions, it is not likely to have the capacity to pay interest and
repay principal. The "CCC" rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied "B" or "B-" rating.
CC -- Typically applied to debt subordinated to senior debt that is assigned an
actual or implied "CCC" rating. C -- Typically applied to debt subordinated to
senior debt that is assigned an actual or implied "CCC-" debt rating. The "C"
rating may be used to cover a situation where a bankruptcy petition has been
filed, but debt service payments are continued. C1 -- Reserved for income bonds
on which no interest is being paid. D -- In payment default. The "D" category is
used when interest payments or principal payments are not made on the date due
even if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period. This rating will also be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
61
<PAGE>
PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
NR: Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
62
<PAGE>
GT Global New Dimension Fund: Advisor Class
50 California Street, 27th Floor
San Francisco, California 94111
(415) 392-6181
Toll Free: (800) 824-1580
Statement of Additional Information
- --------------------------------------------------------------------------------
________, 1997
This Statement of Additional Information ("SAI") relates to the Advisor Class
shares of GT Global New Dimension Fund (the "Fund"), a diversified series of GT
Global Asset Allocation Trust (the "Trust"), an open-end management investment
company organized as a Massachusetts business trust. The Fund seeks its
investment objective by investing in the following global theme mutual funds: GT
Global Consumer Products and Services Fund; GT Global Financial Services Fund;
GT Global Health Care Fund; GT Global Infrastructure Fund; GT Global Natural
Resources Fund; and GT Global Telecommunications Fund (collectively, the
"Underlying Theme Funds").
Chancellor LGT Asset Management, Inc. (the "Manager") serves as the investment
manager of the Fund. The distributor of the Fund's shares is GT Global, Inc.
("GT Global"). The Fund's transfer agent is GT Global Investor Services, Inc.
("GT Services" or the "Transfer Agent").
This SAI, which is not a prospectus, supplements and should be read in
conjunction with the Fund's current Advisor Class Prospectus dated _______,
1997, a copy of which is available without charge by writing to the above
address or calling the Fund at the toll-free telephone number printed above.
Information contained herein is subject to completion or amendment. A
Registration Statement to these securities has been filed with the Securities
and Exchange Commission. These securities may not be sold nor may offers to buy
be accepted prior to the time the Registration Statement becomes effective. This
SAI shall not constitute an offer to sell or the solicitation of an offer to
buy.
Table of Contents
PAGE NO.
--------
Investment Objective and Policies........................
Options, Futures and Currency Strategies.................
Risk Factors of the Underlying Theme Funds...............
Investment Limitations...................................
Execution of Portfolio Transactions......................
Trustees and Executive Officers..........................
Management...............................................
Valuation of Fund Shares.................................
Information Relating to Sales and Redemptions............
Taxes....................................................
Additional Information...................................
Investment Results.......................................
Description of Debt Ratings..............................
<PAGE>
INVESTMENT OBJECTIVE
AND POLICIES
INVESTMENT OBJECTIVE AND POLICIES OF THE FUND
The following supplements the information contained in the Prospectus concerning
the investment policies of the Fund.
DIRECT INVESTMENTS IN SECURITIES. As stated in the Prospectus, in addition to
investing in the Underlying Theme Funds, the Fund may invest directly in cash
and/or money market instruments.
REPURCHASE AGREEMENTS. The Fund may invest in repurchase agreements. Repurchase
agreements are transactions in which the Fund purchases securities from a bank
or recognized securities dealer and simultaneously commits to resell the
securities to the bank or dealer at an agreed-upon date or upon demand and at a
price reflecting a market rate of interest unrelated to the coupon rate or
maturity of the purchased securities. The Fund maintains custody of the
underlying securities prior to their repurchase; thus, the obligation of the
bank or dealer to pay the repurchase price on the date agreed to is, in effect,
secured by such securities. If the value of these securities is less than the
repurchase price, plus any agreed-upon additional amount, the other party to the
agreement must provide additional collateral so that at all times the collateral
is at least equal to the repurchase price, plus any agreed-upon additional
amount. The difference between the total amount to be received upon repurchase
of the securities and the price that was paid by the Fund upon acquisition is
accrued as interest and included in its net investment income. Repurchase
agreements carry certain risks not associated with direct investments in
securities, including possible declines in the market value of the underlying
securities and delays and costs to the Fund if the other party to a repurchase
agreement becomes insolvent.
MONEY MARKET INSTRUMENTS. The Fund may invest in money market instruments which
may include securities issued or guaranteed by the U.S. government, its agencies
or instrumentalities, commercial paper rated in the highest category by a
nationally recognized statistical rating organization, bank certificates of
deposit, bankers' acceptances and repurchase agreements secured by any of the
foregoing.
U.S. GOVERNMENT SECURITIES. The Fund may invest in various direct obligations of
the U.S. Treasury and obligations issued or guaranteed by the U.S. government or
one of its agencies or instrumentalities (collectively, "U.S. government
securities"). Among the U.S. government securities that may be held by the Fund
are securities that are supported by the full faith and credit of the United
States; securities that are supported by the right of the issuer to borrow from
the U.S. Treasury; and securities that are supported solely by the credit of the
instrumentality. U.S. government securities are described in detail in
"Investment Objectives and Policies of the Underlying Theme Funds."
INVESTMENT OBJECTIVES AND POLICIES OF THE UNDERLYING THEME FUNDS
The following supplements the information contained in the Prospectus concerning
the investment policies and limitations of the Underlying Theme Funds. More
information about the investment policies and restrictions and the investment
limitations of each Underlying Theme Fund is set forth in the Underlying Theme
Funds' prospectus and SAI.
2
<PAGE>
The Underlying Theme Funds are diversified series of GT Investment Funds, Inc.
(the "Company"), a registered open-end management investment company. The GT
Global Consumer Products and Services Fund ("Consumer Products and Services
Fund"), GT Global Financial Services Fund ("Financial Services Fund"), GT Global
Infrastructure Fund ("Infrastructure Fund"), and GT Global Natural Resources
Fund ("Natural Resources Fund") (each, a "Feeder Fund," and, collectively, the
"Feeder Funds") each seeks to achieve its investment objective by investing all
of its investable assets in the Global Financial Services Portfolio, Global
Infrastructure Portfolio, Global Natural Resources Portfolio and Global Consumer
Products and Services Portfolio (each, a "Portfolio," and, collectively, the
"Portfolios"), respectively.
Each of the Portfolios is a subtrust (a "series") of Global Investment Portfolio
(an open-end management investment company) with an investment objective that is
identical to that of its corresponding Underlying Theme Fund. Whenever the
phrase "all of the Underlying Theme Fund's investable assets" is used herein, it
means that the only investment securities held by a Feeder Fund will be its
interest in its corresponding Portfolio. A Feeder Fund may withdraw its
investment in its corresponding Portfolio at any time, if the Board of Directors
of the Company determines that it is in the best interests of the Feeder Fund
and its shareholders to do so. Upon any such withdrawal, a Feeder Fund's assets
would be invested in accordance with the investment policies of its
corresponding Portfolio described below and in the Underlying Theme Funds'
Prospectus.
The investment objective of each Feeder Fund is long-term capital growth. The
investment objectives of the GT Global Health Care Fund and GT Global
Telecommunications Fund are long-term capital appreciation and long-term growth
of capital, respectively. The Portfolios and GT Global Health Care Fund and GT
Global Telecommunications Fund, together, are referred to herein as the
"Underlying Theme Portfolios."
SELECTION OF EQUITY INVESTMENTS. With respect to the Natural Resources
Portfolio, the Manager has identified four areas that it expects will create
investment opportunities: (i) improving supply/demand fundamentals, which may
result in higher commodity prices; (ii) privatization of state-owned natural
resource businesses; (iii) management which can improve production efficiencies
without correspondingly increasing commodity prices; and (iv) service companies
with emerging technologies that can enhance productivity or reduce production
costs. Of course, there is no certainty that these factors will produce the
anticipated results.
With respect to the Telecommunications Fund, the Manager has identified four
areas that it expects will create investment opportunities: (i) deregulation of
companies in the industry, which will allow competition to promote greater
efficiencies; (ii) privatization of state-owned telecommunications businesses;
(iii) development of infrastructure in underdeveloped countries and upgrading of
services in other countries; and (iv) emerging technologies that will enhance
productivity and reduce costs in the telecommunications industry. Of course,
there is no certainty that these factors will produce the anticipated results.
There may be times when, in the opinion of the Manager, prevailing market,
economic or political conditions warrant reducing the proportion of the
Underlying Theme Portfolios' assets invested in equity securities and increasing
the proportion held in cash (U.S. dollars, foreign currencies or multinational
currency units) or invested in debt securities or high quality money market
instruments issued by corporations, or the U.S., or a foreign government. A
3
<PAGE>
portion of each Underlying Theme Portfolio's assets normally will be held in
cash (U.S. dollars, foreign currencies or multinational currency units) or
invested in foreign or domestic high quality money market instruments pending
investment of proceeds from new sales of Underlying Theme Fund shares, to
provide for ongoing expenses and to satisfy redemptions.
For each Underlying Theme Portfolio's investment purposes, an issuer is
typically considered as located in a particular country if it (a) is organized
under the laws of or has its principal office in a particular country, or (b)
normally derives 50% or more of its total revenues from business in that
country, provided that, in the Manager's view, the value of such issuer's
securities will tend to reflect such country's development to a greater extent
than developments elsewhere. However, these are not absolute requirements, and
certain companies incorporated in a particular country and considered by the
Manager to be located in that country may have substantial foreign operations or
subsidiaries and/or export sales exceeding in size the assets or sales in that
country.
In certain countries, governmental restrictions and other limitations on
investment may affect an Underlying Theme Portfolio's ability to invest in such
countries. In addition, in some instances only special classes of securities may
be purchased by foreigners and the market prices, liquidity and rights with
respect to those securities may vary from shares owned by nationals. The Manager
is not aware at this time of the existence of any investment or exchange control
regulations which might substantially impair the operations of the Underlying
Theme Portfolios as described in the Underlying Theme Funds' Prospectus and
Statement of Additional Information. Restrictions may in the future, however,
make it undesirable to invest in certain countries. None of the Underlying Theme
Portfolios has a present intention of making any significant investment in any
country or stock market in which the Manager considers the political or economic
situation to threaten an Underlying Theme Portfolio with substantial or total
loss of its investment in such country or market.
INVESTMENTS IN OTHER INVESTMENT COMPANIES. Each Underlying Theme Portfolio may
invest in the securities of investment companies within the limits of the
Investment Company Act of 1940, as amended (the "1940 Act"). These limitations
currently provide that, in general, an Underlying Theme Portfolio may purchase
shares of an investment company unless (a) such a purchase would cause an
Underlying Theme Portfolio to own in the aggregate more than 3% of the total
outstanding voting stock of the investment company or (b) such a purchase would
cause the Underlying Theme Portfolio to have more than 5% of its assets invested
in the investment company or more than 10% of its assets invested in an
aggregate of all such investment companies. The foregoing restrictions do not
apply to the investment of the Financial Services Fund, Infrastructure Fund,
Natural Resources Fund and Consumer Products and Services Fund in their
corresponding Portfolios. Investment in closed-end investment companies may
involve the payment of substantial premiums above the value of such companies'
portfolio securities. Each Underlying Theme Portfolio does not intend to invest
in such investment companies unless, in the judgment of the Manager, the
potential benefits of such investments justify the payment of any applicable
premiums. The return on such securities will be reduced by operating expenses of
such companies, including payments to the investment managers of those
investment companies.
DEPOSITORY RECEIPTS. An Underlying Theme Portfolio may hold securities of
foreign issuers in the form of American Depository Receipts ("ADRs"), American
Depository Shares ("ADSs") and European Depository Receipts ("EDRs") or other
securities convertible into securities of eligible foreign issuers. These
4
<PAGE>
securities may not necessarily be denominated in the same currency as the
securities for which they may be exchanged. ADRs and ADSs are typically issued
by an American bank or trust company and evidence ownership of underlying
securities issued by a foreign corporation. EDRs, which are sometimes referred
to as Continental Depository Receipts ("CDRs"), are issued in Europe typically
by foreign banks and trust companies and evidence ownership of either foreign or
domestic securities. Generally, ADRs and ADSs in registered form are designed
for use in U.S. securities markets and EDRs in bearer form are designed for use
in European securities markets. For purposes of each Underlying Theme
Portfolio's investment policies, an Underlying Theme Portfolio's investments in
ADRs, ADSs and EDRs will be deemed to be investments in the equity securities
representing securities of foreign issuers into which they may be converted.
ADR facilities may be established as either "unsponsored" or "sponsored." While
ADRs issued under these two types of facilities are in some respects similar,
there are distinctions between them relating to the rights and obligations of
ADR holders and the practices of market participants. A depository may establish
an unsponsored facility without participation by (or even necessarily the
acquiescence of) the issuer of the deposited securities, although typically the
depository requests a letter of non-objection from such issuer prior to the
establishment of the facility. Holders of unsponsored ADRs generally bear all
the costs of such facilities. The depository usually charges fees upon the
deposit and withdrawal of the deposited securities, the conversion of dividends
into U.S. dollars, the disposition of non-cash distributions, and the
performance of other services. The depository of an unsponsored facility
frequently is under no obligation to distribute shareholder communications
received from the issuer of the deposited securities or to pass-through voting
rights to ADR holders in respect of the deposited securities. Sponsored ADR
facilities are created in generally the same manner as unsponsored facilities,
except that the issuer of the deposited securities enters into a deposit
agreement with the depository. The deposit agreement sets out the rights and
responsibilities of the issuer, the depository and the ADR holders. With
sponsored facilities, the issuer of the deposited securities generally will bear
some of the costs relating to the facility (such as dividend payment fees of the
depository), although ADR holders continue to bear certain other costs (such as
deposit and withdrawal fees). Under the terms of most sponsored arrangements,
depositories agree to distribute notices of shareholder meetings and voting
instructions, and to provide shareholder communications and other information to
the ADR holders at the request of the issuer of the deposited securities. The
Underlying Theme Portfolios may invest in both sponsored and unsponsored ADRs.
WARRANTS OR RIGHTS. Warrants or rights may be acquired by an Underlying Theme
Portfolio in connection with other securities or separately and provide the
Underlying Theme Portfolio with the right to purchase at a later date other
securities of the issuer.
LENDING OF UNDERLYING THEME PORTFOLIO SECURITIES. For the purpose of realizing
additional income, each Underlying Theme Portfolio may make secured loans of its
securities holdings amounting to not more than 30% of its total assets.
Securities loans are made to broker/dealers or institutional investors pursuant
to agreements requiring that the loans be continuously secured by collateral at
least equal at all times to the value of the securities lent plus any accrued
interest, "marked to market" on a daily basis. The Underlying Theme Portfolios
may pay reasonable administrative and custodial fees in connection with the
loans of their securities. While the securities loan is outstanding, an
5
<PAGE>
Underlying Theme Portfolio will continue to receive the equivalent of the
interest or dividends paid by the issuer on the securities, as well as interest
on the investment of the collateral or a fee from the borrower. An Underlying
Theme Portfolio will have a right to call each loan and obtain the securities on
five business days' notice. An Underlying Theme Portfolio will not have the
right to vote equity securities while they are being lent, but it may call in a
loan in anticipation of any important vote. Loans will only be made to firms
deemed by the Manager to be of good standing and will not be made unless, in the
judgment of the Manager, the consideration to be earned from such loans would
justify the risk. The risks in lending portfolio securities, as with other
extensions of secured credit, consist of possible delays in receiving additional
collateral or in recovery of the securities and possible loss of rights in the
collateral should the borrower fail financially.
COMMERCIAL BANK OBLIGATIONS. For the purposes of each Underlying Theme
Portfolio's investment policies with respect to bank obligations, obligations of
foreign branches of U.S. banks and of foreign banks are obligations of the
issuing bank and may be general obligations of the parent bank. Such obligations
may, however, be limited by the terms of a specific obligation and by government
regulation. As with investments in non-U.S. securities in general, investments
in the obligations of foreign branches of U.S. banks and of foreign banks may
subject each Underlying Theme Portfolio to investment risks that are different
in some respects from those of investments in obligations of U.S. issuers.
Although each Underlying Theme Portfolio will typically acquire obligations
issued and supported by the credit of U.S. or foreign banks having total assets
at the time of purchase of $1 billion or more, this $1 billion figure is not an
investment policy or restriction of each Underlying Theme Portfolio. For the
purposes of calculation with respect to the $1 billion figure, the assets of a
bank will be deemed to include the assets of its U.S. and non-U.S. branches.
REPURCHASE AGREEMENTS. A repurchase agreement is a transaction in which an
Underlying Theme Portfolio purchases a security from a bank or recognized
securities dealer and simultaneously commits to resell that security to the bank
or dealer at an agreed upon price, date, and market rate of interest unrelated
to the coupon rate or maturity of the purchased security. Although repurchase
agreements carry certain risks not associated with direct investments in
securities, including possible decline in the market value of the underlying
securities and delays and costs to the Underlying Theme Portfolio if the other
party to the repurchase agreement becomes bankrupt, the Underlying Theme
Portfolios intend to enter into repurchase agreements only with banks and
dealers believed by the Manager to present minimal credit risks in accordance
with guidelines established by the Company's Board of Directors, or the
Underlying Theme Portfolios' Board of Trustees, as applicable. The Manager will
review and monitor the creditworthiness of such institutions under the
applicable Board's general supervision.
Each Underlying Theme Portfolio will invest only in repurchase agreements
collateralized at all times in an amount at least equal to the repurchase price
plus accrued interest. To the extent that the proceeds from any sale of such
collateral upon a default in the obligation to repurchase were less than the
repurchase price, an Underlying Theme Portfolio would suffer a loss. If the
financial institution which is party to the repurchase agreement petitions for
bankruptcy or otherwise becomes subject to bankruptcy or other liquidation
proceedings, there may be restrictions on an Underlying Theme Portfolio's
ability to sell the collateral and an Underlying Theme Portfolio could suffer a
loss. However, with respect to financial institutions whose bankruptcy or
liquidation proceedings are subject to the U.S. Bankruptcy Code, each Underlying
Theme Portfolio intends to comply with provisions under such Code that would
allow the immediate resale of such collateral. Each Underlying Theme Portfolio
will not enter into a repurchase agreement with a maturity of more than seven
days if, as a result, more than 15% of the value of its net assets (except for
Health Care Fund, more than 10% of the value of its total assets) would be
invested in such repurchase agreements and other illiquid investments.
6
<PAGE>
BORROWING, REVERSE REPURCHASE AGREEMENTS AND "ROLL" TRANSACTIONS. Each
Underlying Theme Portfolio's borrowings will not exceed 33-1/3% of its total
assets, i.e., the Underlying Theme Portfolio's total assets at all times will
equal at least 300% of the amount of outstanding borrowings. If market
fluctuations in the value of an Underlying Theme Portfolio's securities holdings
or other factors cause the ratio of an Underlying Theme Portfolio's total assets
to outstanding borrowings to fall below 300%, within three days (excluding
Sundays and holidays) of such event that Underlying Theme Portfolio may be
required to sell portfolio securities to restore the 300% asset coverage, even
though from an investment standpoint such sales might be disadvantageous. Each
Underlying Theme Portfolio may also borrow up to 5% of its total assets for
temporary or emergency purposes other than to meet redemptions. Any borrowing by
an Underlying Theme Portfolio may cause greater fluctuation in the value of its
shares than would be the case if that Underlying Theme Portfolio did not borrow.
Each Underlying Theme Portfolio's fundamental investment limitations permit the
Underlying Theme Portfolio to borrow money for leveraging purposes. However,
each Underlying Theme Portfolio (except the Health Care Fund) is currently
prohibited, pursuant to a non-fundamental investment policy, from borrowing
money in order to purchase securities. Nevertheless, this policy may be changed
in the future by the Company's Board of Directors or the Underlying Theme
Portfolios' Board of Trustees, as applicable. In the event that an Underlying
Theme Portfolio employs leverage in the future, it would be subject to certain
additional risks. Use of leverage creates an opportunity for greater growth of
capital but would exaggerate any increases or decreases in the net asset value
of the Financial Services Fund, Infrastructure Fund, Natural Resources Fund,
Consumer Products and Services Fund or an Underlying Theme Portfolio. When the
income and gains on securities purchased with the proceeds of borrowings exceed
the costs of such borrowings, an Underlying Theme Portfolio's earnings or the
Underlying Theme Fund's net asset value will increase faster than otherwise
would be the case; conversely, if such income and gains fail to exceed such
costs, an Underlying Theme Portfolio's earnings or the Underlying Theme Fund's
net asset value would decline faster than would otherwise be the case.
Each Underlying Theme Portfolio may enter into reverse repurchase agreements. A
reverse repurchase agreement is a borrowing transaction in which the Underlying
Theme Portfolio transfers possession of a security to another party, such as a
bank or broker/dealer, in return for cash, and agrees to repurchase the security
in the future at an agreed upon price, which includes an interest component.
Each Underlying Theme Portfolio may also engage in "roll" borrowing
transactions, which involve the sale of Government National Mortgage Association
certificates or other securities together with a commitment (for which the
Underlying Theme Portfolio may receive a fee) to purchase similar, but not
identical, securities at a future date. Each Underlying Theme Portfolio will
maintain, in a segregated account with a custodian, cash or liquid securities in
an amount sufficient to cover its obligations under "roll" transactions and
reverse repurchase agreements with broker/dealers. No segregation is required
for reverse repurchase agreements with banks.
SHORT SALES. Each Underlying Theme Portfolio (except the Health Care Fund) is
authorized to make short sales of securities. A short sale is a transaction in
which an Underlying Theme Portfolio sells a security in anticipation that the
market price of that security will decline. An Underlying Theme Portfolio may
make short sales (i) as a form of hedging to offset potential declines in long
positions in securities it owns, or anticipates acquiring, or in similar
securities, and (ii) in order to maintain flexibility in its securities
holdings.
7
<PAGE>
When an Underlying Theme Portfolio makes a short sale of a security it does not
own, it must borrow the security sold short and deliver it to the broker/dealer
or other intermediary through which it made the short sale. The Underlying Theme
Portfolio may have to pay a fee to borrow particular securities and will often
be obligated to pay over any payments received on such borrowed securities.
An Underlying Theme Portfolio's obligation to replace the borrowed security when
the borrowing is called or expires will be secured by collateral deposited with
the intermediary. The Underlying Theme Portfolio will also be required to
deposit collateral with its custodian to the extent, if any, necessary so that
the value of both collateral deposits in the aggregate is at all times equal to
at least 100% of the current market value of the security sold short. Depending
on arrangements made with the intermediary from which it borrowed the security
regarding payment of any amounts received by that Underlying Theme Portfolio on
such security, an Underlying Theme Portfolio may not receive any payments
(including interest) on its collateral deposited with such intermediary.
If the price of the security sold short increases between the time of the short
sale and the time an Underlying Theme Portfolio replaces the borrowed security,
that Underlying Theme Portfolio will incur a loss; conversely, if the price
declines, the Underlying Theme Portfolio will realize a gain. Any gain will be
decreased, and any loss increased, by the transaction costs associated with the
transaction. Although an Underlying Theme Portfolio's gain is limited by the
price at which it sold the security short, its potential loss theoretically is
unlimited.
No Underlying Theme Portfolio will make a short sale if, after giving effect to
such sale, the market value of the securities sold short exceeds 25% of the
value of its total assets or the Underlying Theme Portfolio's aggregate short
sales of the securities of any one issuer exceed the lesser of 2% of the
Underlying Theme Portfolio's net assets or 2% of the securities of any class of
the issuer. Moreover, an Underlying Theme Portfolio may engage in short sales
only with respect to securities listed on a national securities exchange. An
Underlying Theme Portfolio may make short sales "against the box" without
respect to such limitations. In this type of short sale, at the time of the sale
the Underlying Theme Portfolio owns the security it has sold short or has the
immediate and unconditional right to acquire at no additional cost the identical
security.
RISKS ASSOCIATED WITH DEBT SECURITIES. The value of the debt securities held by
each Underlying Theme Portfolio generally will vary conversely with market
interest rates. If interest rates in a market fall, the value of the debt
securities held by each Underlying Theme Portfolio ordinarily will rise. If
market interest rates increase, however, the debt securities owned by each
Underlying Theme Portfolio in that market will be likely to decrease in value.
The Infrastructure Portfolio, Natural Resources Portfolio and Consumer Products
and Services Portfolio may each invest up to 20% of its total assets in debt
securities rated below investment grade. Such investments involve a high degree
of risk. However, the Infrastructure Portfolio, Natural Resources Portfolio and
Consumer Products and Services Portfolio will not invest in debt securities that
are in default as to payment of principal and interest.
Debt rated Baa by Moody's Investor Services, Inc. ("Moody") is considered by
Moody's to have speculative characteristics. Debt rated BB, B, CCC, CC or C by
Standard & Poor's Rating Group ("S&P") and debt rated Ba, B, Caa, Ca or C by
8
<PAGE>
Moody's is regarded, on balance, as predominantly speculative with respect to
the issuer's capacity to pay interest and repay principal in accordance with the
terms of the obligation. For S&P, BB indicates the lowest degree of speculation
for such lower quality debt and C the highest degree of speculation. For
Moody's, Baa indicates the lowest degree of speculation for such lower quality
debt and C the highest degree of speculation. While such lower quality debt will
likely have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions. Debt rated C
by Moody's or S&P is the lowest rated debt that is not in default as to
principal or interest, and such issues so rated can be regarded as having
extremely poor prospects of ever attaining any real investment standing. Lower
quality debt securities also are generally considered to be subject to greater
risk than securities with higher ratings with regard to a deterioration of
general economic conditions. These lower quality debt securities are the
equivalent of high yield, high risk bonds, commonly known as "junk bonds."
Ratings of debt securities represent the rating agency's opinion regarding their
quality and are not a guarantee of quality. Rating agencies attempt to evaluate
the safety of principal and interest payments and do not evaluate the risks of
fluctuations in market value. Also, rating agencies may fail to make timely
changes in credit ratings in response to subsequent events, so that an issuer's
current financial condition may be better or worse than a rating indicates.
The market values of lower quality debt securities tend to reflect individual
developments of the issuer to a greater extent than do higher quality
securities, which react primarily to fluctuations in the general level of
interest rates. In addition, lower quality debt securities tend to be more
sensitive to economic conditions and generally have more volatile prices than
higher quality securities. Issuers of lower quality securities are often highly
leveraged and may not have available to them more traditional methods of
financing. For example, during an economic downturn or a sustained period of
rising interest rates, highly leveraged issuers of lower quality securities may
experience financial stress. During such periods, 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 developments affecting the issuer, such as the issuer's inability to
meet specific projected business forecasts or the unavailability of additional
financing. The risk of loss due to default by the issuer is significantly
greater for the holders of lower quality securities because such securities are
generally unsecured and may be subordinated to the claims of other creditors of
the issuer.
Lower quality debt securities of corporate issuers frequently have call or
buy-back features which would permit an issuer to call or repurchase the
security from the Underlying Theme Portfolios. If an issuer exercises these
provisions in a declining interest rate market, the Underlying Theme Portfolios
may have to replace the security with a lower yielding security, resulting in a
decreased return for investors. In addition, the Underlying Theme Portfolios may
have difficulty disposing of lower quality securities because they may have a
thin trading market. There may be no established retail secondary market for
many of these securities, and each of the Underlying Theme Portfolios
anticipates that such securities could be sold only to a limited number of
dealers or institutional investors. The lack of a liquid secondary market also
may have an adverse impact on market prices of such instruments and may make it
more difficult for the Underlying Theme Portfolios to obtain accurate market
quotations for purposes of valuing the Underlying Theme Portfolios' portfolio
investments. The Underlying Theme Portfolios may also acquire lower quality debt
securities during an initial underwriting or which are sold without registration
under applicable securities laws. Such securities involve special considerations
and risks.
9
<PAGE>
In addition to the foregoing, factors that could have an adverse effect on the
market value of lower quality debt securities in which the Underlying Theme
Portfolios may invest include: (i) potential adverse publicity; (ii) heightened
sensitivity to general economic or political conditions; and (iii) the likely
adverse impact of a major economic recession. An Underlying Theme Portfolio may
also incur additional expenses to the extent it is required to seek recovery
upon a default in the payment of principal or interest on portfolio holdings,
and the Underlying Theme Portfolio may have limited legal recourse in the event
of a default.
The Manager attempts to minimize the speculative risks associated with
investments in lower quality securities through credit analysis and by carefully
monitoring current trends in interest rates, political developments and other
factors.
OPTIONS, FUTURES AND CURRENCY STRATEGIES
SPECIAL RISKS OF OPTIONS, FUTURES AND CURRENCY STRATEGIES
The use of options, futures contracts and forward currency contracts ("Forward
Contracts") involves special considerations and risks, as described below. Risks
pertaining to particular instruments are described in the sections that follow.
(1) Successful use of most of these instruments depends upon
the Manager's ability to predict movements of the overall securities
and currency markets, which requires different skills than predicting
changes in the prices of individual securities. While the Manager is
experienced in the use of these instruments, there can be no assurance
that any particular strategy adopted will succeed.
(2) There might be imperfect correlation, or even no
correlation, between price movements of an instrument and price
movements of the investments being hedged. For example, if the value of
an instrument used in a short hedge increased by less than the decline
in value of the hedged investment, the hedge would not be fully
successful. Such a lack of correlation might occur due to factors
unrelated to the value of the investments being hedged, such as
speculative or other pressures on the markets in which the hedging
instrument is traded. The effectiveness of hedges using hedging
instruments on indices will depend on the degree of correlation between
price movements in the index and price movements in the investments
being hedged.
(3) Hedging strategies, if successful, can reduce risk of loss
by wholly or partially offsetting the negative effect of unfavorable
price movements in the investments being hedged. However, hedging
strategies can also reduce opportunity for gain by offsetting the
positive effect of favorable price movements in the hedged investments.
For example, if an Underlying Theme Portfolio entered into a short
hedge because the Manager projected a decline in the price of a
security in the Underlying Theme Portfolio's portfolio, and the price
of that security increased instead, the gain from that increase might
be wholly or partially offset by a decline in the price of the hedging
instrument. Moreover, if the price of the hedging instrument declined
by more than the increase in the price of the security, the Underlying
Theme Portfolio could suffer a loss. In either such case, the
Underlying Theme Portfolio would have been in a better position had it
not hedged at all.
(4) As described below, the Underlying Theme Portfolio might
be required to maintain assets as "cover," maintain segregated accounts
10
<PAGE>
or make margin payments when it takes positions in instruments
involving obligations to third parties (I.E., instruments other than
purchased options). If the Underlying Theme Portfolio were unable to
close out its positions in such instruments, it might be required to
continue to maintain such assets or accounts or make such payments
until the position expired or matured. The requirements might impair
the Underlying Theme Portfolio's ability to sell a portfolio security
or make an investment at a time when it would otherwise be favorable to
do so, or require that the Underlying Theme Portfolio sell a portfolio
security at a disadvantageous time. The Underlying Theme Portfolio's
ability to close out a position in an instrument prior to expiration or
maturity depends on the existence of a liquid secondary market or, in
the absence of such a market, the ability and willingness of the other
party to the transaction ("contra party") to enter into a transaction
closing out the position. Therefore, there is no assurance that any
position can be closed out at a time and price that is favorable to the
Underlying Theme Portfolio.
WRITING CALL OPTIONS
Each Underlying Theme Portfolio may write (sell) call options on securities,
indices and currencies. Call options generally will be written on securities and
currencies that, in the opinion of the Manager are not expected to make any
major price moves in the near future but that, over the long term, are deemed to
be attractive investments for the Underlying Theme Portfolios.
A call option gives the holder (buyer) the right to purchase a security or
currency at a specified price (the exercise price) at any time until (American
style) or on (European style) a certain date (the expiration date). So long as
the obligation of the writer of a call option continues, he or she may be
assigned an exercise notice, requiring him or her to deliver the underlying
security or currency against payment of the exercise price. This obligation
terminates upon the expiration of the call option, or such earlier time at which
the writer effects a closing purchase transaction by purchasing an option
identical to that previously sold.
Underlying Theme Portfolio securities or currencies on which call options may be
written will be purchased solely on the basis of investment considerations
consistent with each Underlying Theme Portfolio's investment objective. When
writing a call option, an Underlying Theme Portfolio, in return for the premium,
gives up the opportunity for profit from a price increase in the underlying
security or currency above the exercise price, and retains the risk of loss
should the price of the security or currency decline. Unlike one who owns
securities or currencies not subject to an option, an Underlying Theme Portfolio
has no control over when it may be required to sell the underlying securities or
currencies, since most options may be exercised at any time prior to the
option's expiration. If a call option that an Underlying Theme Portfolio has
written expires, the Underlying Theme Portfolio will realize a gain in the
amount of the premium; however, such gain may be offset by a decline in the
market value of the underlying security or currency during the option period. If
the call option is exercised, the Underlying Theme Portfolio will realize a gain
or loss from the sale of the underlying security or currency, which will be
increased or offset by the premium received. Each Underlying Theme Portfolio
does not consider a security or currency covered by a call option to be
"pledged" as that term is used in that Underlying Theme Portfolio's policy that
limits the pledging or mortgaging of its assets.
Writing call options can serve as a limited short hedge because declines in the
value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security or currency
11
<PAGE>
appreciates to a price higher than the exercise price of the call option, it can
be expected that the option will be exercised and an Underlying Theme Portfolio
will be obligated to sell the security or currency at less than its market
value.
The premium that an Underlying Theme Portfolio receives for writing a call
option is deemed to constitute the market value of an option. The premium the
Underlying Theme Portfolio will receive from writing a call option will reflect,
among other things, the current market price of the underlying investment, the
relationship of the exercise price to such market price, the historical price
volatility of the underlying investment, and the length of the option period. In
determining whether a particular call option should be written, the Manager will
consider the reasonableness of the anticipated premium and the likelihood that a
liquid secondary market will exist for those options.
Closing transactions will be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security or currency from
being called, or to permit the sale of the underlying security or currency.
Furthermore, effecting a closing transaction will permit an Underlying Theme
Portfolio to write another call option on the underlying security or currency
with either a different exercise price or expiration date, or both.
Each Underlying Theme Portfolio will pay transaction costs in connection with
the writing of options and in entering into closing purchase contracts.
Transaction costs relating to options activity are normally higher than those
applicable to purchases and sales of portfolio securities.
The exercise price of the options may be below, equal to or above the current
market values of the underlying securities, indices or currencies at the time
the options are written. From time to time, an Underlying Theme Portfolio may
purchase an underlying security or currency for delivery in accordance with the
exercise of an option, rather than delivering such security or currency from its
portfolio. In such cases, additional costs will be incurred.
An Underlying Theme Portfolio will realize a profit or loss from a closing
purchase transaction if the cost of the transaction is less or more,
respectively, than the premium received from writing the option. Because
increases in the market price of a call option generally will reflect increases
in the market price of the underlying security or currency, any loss resulting
from the repurchase of a call option is likely to be offset in whole or in part
by appreciation of the underlying security or currency owned by an Underlying
Theme Portfolio.
WRITING PUT OPTIONS
Each Underlying Theme Portfolio may write put options on securities, indices and
currencies. A put option gives the purchaser of the option the right to sell,
and the writer (seller) the obligation to buy, the underlying security or
currency at the exercise price at any time until (American style) or on
(European style) the expiration date. The operation of put options in other
respects, including their related risks and rewards, is substantially identical
to that of call options.
An Underlying Theme Portfolio generally would write put options in circumstances
where the Manager wishes to purchase the underlying security or currency for an
Underlying Theme Portfolio's holdings at a price lower than the current market
price of the security or currency. In such event, an Underlying Theme Portfolio
would write a put option at an exercise price that, reduced by the premium
received on the option, reflects the lower price it is willing to pay. Since the
Underlying Theme Portfolio would also receive interest on debt securities or
currencies maintained to cover the exercise price of the option, this technique
could be used to enhance current return during periods of market uncertainty.
12
<PAGE>
The risk in such a transaction would be that the market price of the underlying
security or currency would decline below the exercise price less the premium
received.
Writing put options can serve as a limited long hedge because increases in the
value of the hedged investment would be offset to the extent of the premium
received for writing the option. However, if the security or currency
depreciates to a price lower than the exercise price of the put option, it can
be expected that the put option will be exercised and an Underlying Theme
Portfolio will be obligated to purchase the security or currency at greater than
its market value.
PURCHASING PUT OPTIONS
Each Underlying Theme Portfolio may purchase put options on securities, indices
and currencies. As the holder of a put option, an Underlying Theme Portfolio
would have the right to sell the underlying security or currency at the exercise
price at any time until (American style) or on (European style) the expiration
date. An Underlying Theme Portfolio may enter into closing sale transactions
with respect to such options, exercise such option or permit such option to
expire.
Each Underlying Theme Portfolio may purchase a put option on an underlying
security or currency ("protective put") owned by the Underlying Theme Portfolio
in order to protect against an anticipated decline in the value of the security
or currency. Such hedge protection is provided only during the life of the put
option when the Underlying Theme Portfolio, as the holder of the put option, is
able to sell the underlying security or currency at the put exercise price
regardless of any decline in the underlying security's market price or
currency's exchange value. For example, a put option may be purchased in order
to protect unrealized appreciation of a security or currency when the Manager
deems it desirable to continue to hold the security or currency because of tax
considerations. The premium paid for the put option and any transaction costs
would reduce any profit otherwise available for distribution when the security
or currency is eventually sold.
An Underlying Theme Portfolio may also purchase put options at a time when it
does not own the underlying security or currency. By purchasing put options on a
security or currency it does not own, that Underlying Theme Portfolio seeks to
benefit from a decline in the market price of the underlying security or
currency. If the put option is not sold when it has remaining value, and if the
market price of the underlying security or currency remains equal to or greater
than the exercise price during the life of the put option, the Underlying Theme
Portfolio will lose its entire investment in the put option. In order for the
purchase of a put option to be profitable, the market price of the underlying
security or currency must decline sufficiently below the exercise price to cover
the premium and transaction costs, unless the put option is sold in a closing
sale transaction.
PURCHASING CALL OPTIONS
Each Underlying Theme Portfolio may purchase call options on securities, indices
and currencies. As the holder of a call option, the Underlying Theme Portfolio
would have the right to purchase the underlying security or currency at the
exercise price at any time until (American style) or on (European style) the
expiration date. An Underlying Theme Portfolio may enter into closing sale
transactions with respect to such options, exercise such options or permit such
options to expire.
Call options may be purchased by an Underlying Theme Portfolio for the purpose
of acquiring the underlying security or currency for its portfolio. Utilized in
this fashion, the purchase of call options would enable an Underlying Theme
Portfolio to acquire the security or currency at the exercise price of the call
option plus the premium paid. At times, the net cost of acquiring the security
or currency in this manner may be less than the cost of acquiring the security
or currency directly. This technique may also be useful to an Underlying Theme
13
<PAGE>
Portfolio in purchasing a large block of securities that would be more difficult
to acquire by direct market purchases. So long as it holds such a call option,
rather than the underlying security or currency itself, the Underlying Theme
Portfolio is partially protected from any unexpected decline in the market price
of the underlying security or currency and, in such event, could allow the call
option to expire, incurring a loss only to the extent of the premium paid for
the option.
An Underlying Theme Portfolio may also purchase call options on underlying
securities or currencies it owns in order to protect unrealized gains on call
options previously written by it. A call option could be purchased for this
purpose where tax considerations make it inadvisable to realize such gains
through a closing purchase transaction. Call options may also be purchased at
times to avoid realizing losses that would result in a reduction of the
Underlying Theme Portfolio's current return. For example, where an Underlying
Theme Portfolio has written a call option on an underlying security or currency
having a current market value below the price at which such security or currency
was purchased by that Underlying Theme Portfolio, an increase in the market
price could result in the exercise of the call option written by the Underlying
Theme Portfolio and the realization of a loss on the underlying security or
currency. Accordingly, the Underlying Theme Portfolio could purchase a call
option on the same underlying security or currency, which could be exercised to
fulfill the Underlying Theme Portfolio's delivery obligations under its written
call (if it is exercised). This strategy could allow the Underlying Theme
Portfolio to avoid selling the portfolio security or currency at a time when it
has an unrealized loss; however, the Underlying Theme Portfolio would have to
pay a premium to purchase the call option plus transaction costs.
Aggregate premiums paid for put and call options will not exceed 5% of each
Underlying Theme Portfolio's total assets at the time of each purchase.
An Underlying Theme Portfolio may attempt to accomplish objectives similar to
those involved in using Forward Contracts, by purchasing put or call options on
currencies. A put option gives the Underlying Theme Portfolio as purchaser the
right (but not the obligation) to sell a specified amount of currency at the
exercise price at any time until (American style) or on (European style) the
expiration date of the option. A call option gives the Underlying Theme
Portfolio as purchaser the right (but not the obligation) to purchase a
specified amount of currency at the exercise price at any time until (American
style) or on (European style) the expiration date of the option. An Underlying
Theme Portfolio might purchase a currency put option, for example, to protect
itself against a decline in the dollar value of a currency in which it holds or
anticipates holding securities. If the currency's value should decline against
the dollar, the loss in currency value should be offset, in whole or in part, by
an increase in the value of the put. If the value of the currency instead should
rise against the dollar, any gain to an Underlying Theme Portfolio would be
reduced by the premium it had paid for the put option. A currency call option
might be purchased, for example, in anticipation of, or to protect against, a
rise in the value against the dollar of a currency in which an Underlying Theme
Portfolio anticipates purchasing securities.
Options may be either listed on an exchange or traded in over-the-counter
("OTC") markets. Listed options are third-party contracts (I.E., performance of
the obligations of the purchaser and seller is guaranteed by the exchange or
clearing corporation) and have standardized strike prices and expiration dates.
OTC options are two-party contracts with negotiated strike prices and expiration
dates. An Underlying Theme Portfolio will not purchase an OTC option unless it
believes that daily valuations for such options are readily obtainable. OTC
options differ from exchange-traded options in that OTC options are transacted
14
<PAGE>
with dealers directly and not through a clearing corporation (which guarantees
performance). Consequently, there is a risk of non-performance by the dealer.
Since no exchange is involved, OTC options are valued on the basis of an average
of the last bid prices obtained from dealers, unless a quotation from only one
dealer is available, in which case only that dealer's price will be used. In the
case of OTC options, there can be no assurance that a liquid secondary market
will exist for any particular option at any specific time.
The staff of the Securities and Exchange Commission ("SEC") considers purchased
OTC options to be illiquid securities. An Underlying Theme Portfolio may also
sell OTC options and, in connection therewith, segregate assets or cover its
obligations with respect to OTC options written by the Underlying Theme
Portfolio. The assets used as cover for OTC options written by an Underlying
Theme Portfolio will be considered illiquid unless the OTC options are sold to
qualified dealers who agree that the Underlying Theme Portfolio may repurchase
any OTC option it writes at a maximum price to be calculated by a formula set
forth in the option agreement. The cover for an OTC option written subject to
this procedure would be considered illiquid only to the extent that the maximum
repurchase price under the formula exceeds the intrinsic value of the option.
An Underlying Theme Portfolio's ability to establish and close out positions in
exchange-listed options depends on the existence of a liquid market. An
Underlying Theme Portfolio intends to purchase or write only those
exchange-traded options for which there appears to be a liquid secondary market.
However, there can be no assurance that such a market will exist at any
particular time. Closing transactions can be made for OTC options only by
negotiating directly with the contra party or by a transaction in the secondary
market if any such market exists. Although an Underlying Theme Portfolio will
enter into OTC options only with contra parties that are expected to be capable
of entering into closing transactions with the Underlying Theme Portfolio, there
is no assurance that the Underlying Theme Portfolio will in fact be able to
close out an OTC option position at a favorable price prior to expiration. In
the event of insolvency of the contra party, the Underlying Theme Portfolio
might be unable to close out an OTC option position at any time prior to its
expiration.
INDEX OPTIONS
Puts and calls on indices are similar to puts and calls on securities or futures
contracts except that all settlements are in cash and gain or loss depends on
changes in the index in question (and thus on price movements in the securities
market or a particular market sector generally) rather than on price movements
in individual securities or futures contracts. When an Underlying Theme
Portfolio writes a call on an index, it receives a premium and agrees that,
prior to the expiration date, the purchaser of the call, upon exercise of the
call, will receive from the Underlying Theme Portfolio an amount of cash if the
closing level of the index upon which the call is based is greater than the
exercise price of the call. The amount of cash is equal to the difference
between the closing price of the index and the exercise price of the call times
a specified multiple (the "multiplier"), which determines the total dollar value
for each point of such difference. When an Underlying Theme Portfolio buys a
call on an index, it pays a premium and has the same rights as to such call as
are indicated above. When an Underlying Theme Portfolio buys a put on an index,
it pays a premium and has the right, prior to the expiration date, to require
the seller of the put, upon the Underlying Theme Portfolio's exercise of the
put, to deliver to the Underlying Theme Portfolio an amount of cash if the
closing level of the index upon which the put is based is less than the exercise
price of the put, which amount of cash is determined by the multiplier, as
described above for calls. When the Underlying Theme Portfolio writes a put on
15
<PAGE>
an index, it receives a premium and the purchaser has the right, prior to the
expiration date, to require the Underlying Theme Portfolio to deliver to it an
amount of cash equal to the difference between the closing level of the index
and the exercise price times the multiplier, if the closing level is less than
the exercise price.
The risks of investment in index options may be greater than options on
securities. Because index options are settled in cash, when an Underlying Theme
Portfolio writes a call on an index it cannot provide in advance for its
potential settlement obligations by acquiring and holding the underlying
securities. An Underlying Theme Portfolio can offset some of the risk of writing
a call index option position by holding a diversified portfolio of securities
similar to those on which the underlying index is based. However, an Underlying
Theme Portfolio cannot, as a practical matter, acquire and hold a portfolio
containing exactly the same securities as underlie the index and, as a result,
bears a risk that the value of the securities held will vary from the value of
the index.
Even if an Underlying Theme Portfolio could assemble a securities portfolio that
exactly reproduced the composition of the underlying index, it still would not
be fully covered from a risk standpoint because of the "timing risk" inherent in
writing index options. When an 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 options, the Underlying Theme Portfolio, as
the call writer, will not know that it has been assigned until the next business
day at the earliest. The time lag between exercise and notice of assignment
poses no risk for the writer of a covered call on a specific underlying
security, such as common stock, because there the writer's obligation is to
deliver the underlying security, not to pay its value as of a fixed time in the
past. So long as the writer already owns the underlying security, it can satisfy
its settlement obligations by simply delivering it, and the risk that its value
may have declined since the exercise date is borne by the exercising holder. In
contrast, even if the writer of an index call holds securities that exactly
match the composition of the underlying index, it will not be able to satisfy
its assignment obligations by delivering those securities against payment of the
exercise price. Instead, it will be required to pay cash in an amount based on
the closing index value on the exercise date; and by the time it learns that it
has been assigned, the index may have declined, with a corresponding decline in
the value of its securities portfolio. This "timing risk" is an inherent
limitation on the ability of index call writers to cover their risk exposure by
holding securities positions.
If an Underlying Theme Portfolio has purchased an index option and exercises it
before the closing index value for that day is available, it runs the risk that
the level of the underlying index may subsequently change. If such a change
causes the exercised option to fall out-of-the-money, the Underlying Theme
Portfolio 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.
INTEREST RATE, CURRENCY AND STOCK INDEX FUTURES CONTRACTS
Each Underlying Theme Portfolio may enter into interest rate or currency futures
contracts, and may enter into stock index futures contracts (collectively,
"Futures" or "Futures Contracts"), as a hedge against changes in prevailing
levels of interest rates, currency exchange rates or stock price levels in order
to establish more definitely the effective return on securities or currencies
held or intended to be acquired by the Underlying Theme Portfolio. An Underlying
Theme Portfolio's hedging may include sales of Futures as an offset against the
effect of expected increases in interest rates, and decreases in currency
exchange rates and stock prices, and purchases of Futures as an offset against
the effect of expected declines in interest rates, and increases in currency
exchange rates or stock prices.
16
<PAGE>
Each Underlying Theme Portfolio only will enter into Futures Contracts that are
traded on futures exchanges and are standardized as to maturity date and
underlying financial instrument. Futures exchanges and trading thereon in the
United States are regulated under the Commodity Exchange Act by the Commodity
Futures Trading Commission ("CFTC"). Futures are exchanged in London at the
London International Financial Futures Exchange.
Although techniques other than sales and purchases of Futures Contracts could be
used to reduce an Underlying Theme Portfolio's exposure to interest rate,
currency exchange rate and stock market fluctuations, that Underlying Theme
Portfolio may be able to hedge its exposure more effectively and at a lower cost
through using Futures Contracts.
A Futures Contract provides for the future sale by one party and purchase by
another party of a specified amount of a specific financial instrument (security
or currency) for a specified price at a designated date, time and place. A stock
index Futures Contract provides for the delivery, at a designated date, time and
place, of an amount of cash equal to a specified dollar amount times the
difference between the stock index value at the close of trading on the contract
and the price at which the Futures Contract is originally struck; no physical
delivery of stocks comprising the index is made. Brokerage fees are incurred
when a Futures Contract is bought or sold, and margin deposits must be
maintained at all times the Futures Contract is outstanding.
Although Futures Contracts typically require future delivery of and payment for
financial instruments or currencies, Futures Contracts usually are closed out
before the delivery date. Closing out an open Futures Contract sale or purchase
is effected by entering into an offsetting Futures Contract purchase or sale,
respectively, for the same aggregate amount of the identical financial
instrument or currency and the same delivery date. If the offsetting purchase
price is less than the original sale price, the Underlying Theme Portfolio
realizes a gain; if it is more, the Underlying Theme Portfolio realizes a loss.
Conversely, if the offsetting sale price is more than the original purchase
price, the Underlying Theme Portfolio realizes a gain; if it is less, the
Underlying Theme Portfolio realizes a loss. The transaction costs must also be
included in these calculations. There can be no assurance, however, that an
Underlying Theme Portfolio will be able to enter into an offsetting transaction
with respect to a particular Futures Contract at a particular time. If an
Underlying Theme Portfolio is not able to enter into an offsetting transaction,
that Underlying Theme Portfolio will continue to be required to maintain the
margin deposits on the Futures Contract.
As an example of an offsetting transaction, the contractual obligations arising
from the sale of one Futures Contract of September Deutschemarks on an exchange
may be fulfilled at any time before delivery under the Futures Contract is
required (I.E., on a specified date in September, the "delivery month") by the
purchase of another Futures Contract of September Deutschemarks on the same
exchange. In such instance, the difference between the price at which the
Futures Contract was sold and the price paid for the offsetting purchase, after
allowance for transaction costs, represents the profit or loss to the Underlying
Theme Portfolio.
Each Underlying Theme Portfolio's Futures transactions will be entered into for
hedging purposes; that is, Futures Contracts will be sold to protect against a
decline in the price of securities or currencies that an Underlying Theme
Portfolio owns, or Futures Contracts will be purchased to protect the Underlying
Theme Portfolio against an increase in the price of securities or currencies it
has committed to purchase or expects to purchase.
17
<PAGE>
"Margin" with respect to Futures Contracts is the amount of funds that must be
deposited by an Underlying Theme Portfolio in order to initiate Futures trading
and maintain the Underlying Theme Portfolio's open positions in Futures
Contracts. A margin deposit made when the Futures Contract is entered into
("initial margin") is intended to ensure the Underlying Theme Portfolio's
performance under the Futures Contract. The margin required for a particular
Futures Contract is set by the exchange on which the Futures Contract is traded
and may be significantly modified from time to time by the exchange during the
term of the Futures Contract.
Subsequent payments, called "variation margin," to and from the futures
commission merchant through which the Underlying Theme Portfolio entered into
the Futures Contract will be made on a daily basis as the price of the
underlying security, currency or index fluctuates making the Futures Contract
more or less valuable, a process known as marking-to-market.
RISKS OF USING FUTURES CONTRACTS. The prices of Futures Contracts are volatile
and are influenced by, among other things, actual and anticipated changes in
interest rates and currency exchange rates, and in stock market movements, which
in turn are affected by fiscal and monetary policies and national and
international political and economic events.
There is a risk of imperfect correlation between changes in prices of Futures
Contracts and prices of the securities or currencies in an Underlying Theme
Portfolio's portfolio being hedged. The degree of imperfection of correlation
depends upon circumstances such as variations in speculative market demand for
Futures and for securities or currencies, including technical influences in
Futures trading; and differences between the financial instruments being hedged
and the instruments underlying the standard Futures Contracts available for
trading. A decision of whether, when and how to hedge involves skill and
judgment, and even a well-conceived hedge may be unsuccessful to some degree
because of unexpected market behavior or interest or currency rate trends.
Because of the low margin deposits required, Futures trading involves an
extremely high degree of leverage. As a result, a relatively small price
movement in a Futures Contract may result in immediate and substantial loss, as
well as gain, to the investor. For example, if at the time of purchase, 10% of
the value of the Futures Contract is deposited as margin, a subsequent 10%
decrease in the value of the Futures Contract would result in a total loss of
the margin deposit, before any deduction for the transaction costs, if the
account were then closed out. A 15% decrease would result in a loss equal to
150% of the original margin deposit, if the Futures Contract were closed out.
Thus, a purchase or sale of a Futures Contract may result in losses in excess of
the amount invested in the Futures Contract.
Most U.S. Futures exchanges limit the amount of fluctuation permitted in Futures
Contract and options on Futures Contracts prices during a single trading day.
The daily limit establishes the maximum amount that the price of a Futures
Contract or option may vary either up or down from the previous day's settlement
price at the end of a trading session. Once the daily limit has been reached in
a particular type of Futures Contract or option, no trades may be made on that
day at a price beyond that limit. The daily limit governs only price movement
during a particular trading day and therefore does not limit potential losses,
because the limit may prevent the liquidation of unfavorable positions. Futures
Contract and option prices have occasionally moved to the daily limit for
several consecutive trading days with little or no trading, thereby preventing
prompt liquidation of positions and subjecting some traders to substantial
losses.
18
<PAGE>
If an Underlying Theme Portfolio were unable to liquidate a Futures or option on
Futures position due to the absence of a liquid secondary market or the
imposition of price limits, it could incur substantial losses. The Underlying
Theme Portfolio would continue to be subject to market risk with respect to the
position. In addition, except in the case of purchased options, the Underlying
Theme Portfolio would continue to be required to make daily variation margin
payments and might be required to maintain the position being hedged by the
Future or option or to maintain cash or securities in a segregated account.
Certain characteristics of the Futures market might increase the risk that
movements in the prices of Futures Contracts or options on Futures might not
correlate perfectly with movements in the prices of the investments being
hedged. For example, all participants in the Futures and options on Futures
markets are subject to daily variation margin calls and might be compelled to
liquidate Futures or options on Futures positions whose prices are moving
unfavorably to avoid being subject to further calls. These liquidations could
increase price volatility of the instruments and distort the normal price
relationship between the Futures or options and the investments being hedged.
Also, because initial margin deposit requirements in the Futures market are less
onerous than margin requirements in the securities markets, there might be
increased participation by speculators in the Futures markets. This
participation also might cause temporary price distortions. In addition,
activities of large traders in both the Futures and securities markets involving
arbitrage, "program trading" and other investment strategies might result in
temporary price distortions.
OPTIONS ON FUTURES CONTRACTS
Options on Futures Contracts are similar to options on securities or currencies
except that options on Futures Contracts give the purchaser the right, in return
for the premium paid, to assume a position in a Futures Contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the period of the option. Upon
exercise of the option, the delivery of the Futures position by the writer of
the option to the holder of the option will be accompanied by delivery of the
accumulated balance in the writer's Futures margin account, which represents the
amount by which the market price of the Futures Contract, at exercise, exceeds
(in the case of a call) or is less than (in the case of a put) the exercise
price of the option on the Futures Contract. If an option is exercised on the
last trading day prior to the expiration date of the option, the settlement will
be made entirely in cash equal to the difference between the exercise price of
the option and the closing level of the securities, currencies or index upon
which the Futures Contract is based on the expiration date. Purchasers of
options who fail to exercise their options prior to the exercise date suffer a
loss of the premium paid.
The purchase of call options on Futures can serve as a long hedge, and the
purchase of put options on Futures can serve as a short hedge. Writing call
options on Futures can serve as a limited short hedge, and writing put options
on Futures can serve as a limited long hedge, using a strategy similar to that
used for writing options on securities, foreign currencies or indices.
If an Underlying Theme Portfolio writes an option on a Futures Contract, it will
be required to deposit initial and variation margin pursuant to requirements
similar to those applicable to Futures Contracts. Premiums received from the
writing of an option on a Futures Contract are included in the initial margin
deposit.
19
<PAGE>
An Underlying Theme Portfolio may seek to close out an option position by
selling an option covering the same Futures Contract and having the same
exercise price and expiration date. The ability to establish and close out
positions on such options is subject to the maintenance of a liquid secondary
market.
LIMITATIONS ON USE OF FUTURES, OPTIONS ON FUTURES AND CERTAIN OPTIONS ON
CURRENCIES
To the extent that an Underlying Theme Portfolio enters into Futures Contracts,
options on Futures Contracts, and options on foreign currencies traded on a
CFTC-regulated exchange, in each case other than for BONA FIDE hedging purposes
(as defined by the CFTC), the aggregate initial margin and premiums required to
establish those positions (excluding the amount by which options are
"in-the-money") will not exceed 5% of the liquidation value of the Underlying
Theme Portfolio, after taking into account unrealized profits and unrealized
losses on any contracts the Underlying Theme Portfolio has entered into. In
general, a call option on a Futures Contract is "in-the-money" if the value of
the underlying Futures Contract exceeds the strike, I.E., exercise, price of the
call; a put option on a Futures Contract is "in-the-money" if the value of the
underlying Futures Contract is exceeded by the strike price of the put. This
guideline may be modified by the Company's Board of Directors and the Underlying
Theme Portfolio's Board of Trustees, as applicable, without a shareholder vote.
This limitation does not limit the percentage of an Underlying Theme Portfolio's
assets at risk to 5%.
FORWARD CURRENCY CONTRACTS
A Forward Contract is an obligation, usually arranged with a commercial bank or
other currency dealer, to purchase or sell a currency against another currency
at a future date and price as agreed upon by the parties. An Underlying Theme
Portfolio either may accept or make delivery of the currency at the maturity of
the Forward Contract. An Underlying Theme Portfolio may also, if its contra
party agrees prior to maturity, enter into a closing transaction involving the
purchase or sale of an offsetting contract.
An Underlying Theme Portfolio engages in forward currency transactions in
anticipation of, or to protect itself against, fluctuations in exchange rates.
An Underlying Theme Portfolio might sell a particular foreign currency forward,
for example, when it holds bonds denominated in a foreign currency but
anticipates, and seeks to be protected against, a decline in the currency
against the U.S. dollar. Similarly, an Underlying Theme Portfolio might sell the
U.S. dollar forward when it holds bonds denominated in U.S. dollars but
anticipates, and seeks to be protected against, a decline in the U.S. dollar
relative to other currencies. Further, an Underlying Theme Portfolio might
purchase a currency forward to "lock in" the price of securities denominated in
that currency that it anticipates purchasing.
Forward Contracts are traded in the interbank market conducted directly between
currency traders (usually large commercial banks) and their customers. A Forward
Contract generally has no deposit requirement, and no commissions are charged at
any stage for trades. Each Underlying Theme Portfolio will enter into such
Forward Contracts with major U.S. or foreign banks and securities or currency
dealers in accordance with guidelines approved by the Underlying Theme
Portfolios' Board of Trustees or the Company's Board of Directors, as
applicable.
An Underlying Theme Portfolio may enter into Forward Contracts either with
respect to specific transactions or with respect to overall investments of that
Underlying Theme Portfolio. The precise matching of the Forward Contract amounts
and the value of specific securities generally will not be possible because the
20
<PAGE>
future value of such securities in foreign currencies will change as a
consequence of market movements in the value of those securities between the
date the Forward Contract is entered into and the date it matures. Accordingly,
it may be necessary for that Underlying Theme Portfolio to purchase additional
foreign currency on the spot (I.E., cash) market (and bear the expense of such
purchase) if the market value of the security is less than the amount of foreign
currency the Underlying Theme Portfolio is obligated to deliver and if a
decision is made to sell the security and make delivery of the foreign currency.
Conversely, it may be necessary to sell on the spot market some of the foreign
currency the Underlying Theme Portfolio is obligated to deliver. The projection
of short-term currency market movements is extremely difficult, and the
successful execution of a short-term hedging strategy is highly uncertain.
Forward Contracts involve the risk that anticipated currency movements will not
be predicted accurately, causing an Underlying Theme Portfolio to sustain losses
on these contracts and transaction costs.
At or before the maturity of a Forward Contract requiring an Underlying Theme
Portfolio to sell a currency, that Underlying Theme Portfolio either may sell a
security and use the sale proceeds to make delivery of the currency or retain
the security and offset its contractual obligation to deliver the currency by
purchasing a second contract pursuant to which the Underlying Theme Portfolio
will obtain, on the same maturity date, the same amount of the currency that it
is obligated to deliver. Similarly, an Underlying Theme Portfolio may close out
a Forward Contract requiring it to purchase a specified currency by, if its
contra party agrees, entering into a second contract entitling it to sell the
same amount of the same currency on the maturity date of the first contract. An
Underlying Theme Portfolio would realize a gain or loss as a result of entering
into such an offsetting Forward Contract under either circumstance to the extent
the exchange rate or rates between the currencies involved moved between the
execution dates of the first contract and the offsetting contract.
The cost to an Underlying Theme Portfolio of engaging in Forward Contracts
varies with factors such as the currencies involved, the length of the contract
period and the market conditions then prevailing. Because Forward Contracts are
usually entered into on a principal basis, no fees or commissions are involved.
The use of Forward Contracts does not eliminate fluctuations in the prices of
the underlying securities an Underlying Theme Portfolio owns or intends to
acquire, but it does establish a rate of exchange in advance. In addition, while
Forward Contract sales limit the risk of loss due to a decline in the value of
the hedged currencies, they also limit any potential gain that might result
should the value of the currencies increase.
FOREIGN CURRENCY STRATEGIES -- SPECIAL CONSIDERATIONS
An Underlying Theme Portfolio may use options on foreign currencies, Futures on
foreign currencies, options on Futures on foreign currencies and Forward
Contracts to hedge against movements in the values of the foreign currencies in
which the Underlying Theme Portfolio's securities are denominated. Such currency
hedges can protect against price movements in a security that the Underlying
Theme Portfolio owns or intends to acquire that are attributable to changes in
the value of the currency in which it is denominated. Such hedges do not,
however, protect against price movements in the securities that are attributable
to other causes.
An Underlying Theme Portfolio might seek to hedge against changes in the value
of a particular currency when no Futures Contract, Forward Contract or option
involving that currency is available or one of such contracts is more expensive
than certain other contracts. In such cases, the Underlying Theme Portfolio may
21
<PAGE>
hedge against price movements in that currency by entering into a contract on
another currency or basket of currencies, the values of which the Manager
believes will have a positive correlation to the value of the currency being
hedged. The risk that movements in the price of the contract will not correlate
perfectly with movements in the price of the currency being hedged is magnified
when this strategy is used.
The value of Futures Contracts, options on Futures Contracts, Forward Contracts
and options on foreign currencies depends on the value of the underlying
currency relative to the U.S. dollar. Because foreign currency transactions
occurring in the interbank market might involve substantially larger amounts
than those involved in the use of Futures Contracts, Forward Contracts or
options, the Underlying Theme Portfolio could be disadvantaged by dealing in the
odd lot market (generally consisting of transactions of less than $1 million)
for the underlying foreign currencies at prices that are less favorable than for
round lots.
There is no systematic reporting of last sale information for foreign currencies
or any regulatory requirements that quotations available through dealers or
other market sources be firm or revised on a timely basis. Quotation information
generally is representative of very large transactions in the interbank market
and thus might not reflect odd-lot transactions where rates might be less
favorable. The interbank market in foreign currencies is a global,
round-the-clock market. To the extent the U.S. options or Futures markets are
closed while the markets for the underlying currencies remain open, significant
price and rate movements might take place in the underlying markets that cannot
be reflected in the markets for the Futures contracts or options until they
reopen.
Settlement of Futures Contracts, Forward Contracts and options involving foreign
currencies might be required to take place within the country issuing the
underlying currency. Thus, the Underlying Theme Portfolio might be required to
accept or make delivery of the underlying foreign currency in accordance with
any U.S. or foreign regulations regarding the maintenance of foreign banking
arrangements by U.S. residents and might be required to pay any fees, taxes and
charges associated with such delivery assessed in the issuing country.
COVER
Transactions using Forward Contracts, Futures Contracts and options (other than
options that an Underlying Theme Portfolio has purchased) expose the Underlying
Theme Portfolio to an obligation to another party. An Underlying Theme Portfolio
will not enter into any such transactions unless it owns either (1) an
offsetting ("covered") position in securities, currencies, or other options,
Forward Contracts or Futures Contracts, or (2) cash, receivables and short-term
debt securities with a value sufficient at all times to cover its potential
obligations not covered as provided in (1) above. Each Underlying Theme
Portfolio will comply with SEC guidelines regarding cover for these instruments
and, if the guidelines so require, set aside cash or liquid securities.
Assets used as cover or held in a segregated account cannot be sold while the
position in the corresponding Forward Contract, Futures Contract or option is
open, unless they are replaced with other appropriate assets. If a large portion
of an Underlying Theme Portfolio's assets is used for cover or otherwise set
aside, it could affect portfolio management or the Underlying Theme Portfolio's
ability to meet redemption requests or other current obligations.
22
<PAGE>
RISK FACTORS OF THE UNDERLYING THEME FUNDS
ILLIQUID SECURITIES
Each Underlying Theme Portfolio may invest up to 15% of its net assets (except
for the Health Care Fund, which may invest up to 10% of its total assets) in
illiquid securities. Securities may be considered illiquid if an Underlying
Theme Portfolio cannot reasonably expect within seven days to sell the
securities for approximately the amount at which that Underlying Theme Portfolio
values such securities. See "Investment Limitations of the Underlying Theme
Funds." The sale of illiquid securities, if they can be sold at all, generally
will require more time and result in higher brokerage charges or dealer
discounts and other selling expenses than will the sale of liquid securities
such as securities eligible for trading on U.S. securities exchanges or in OTC
markets. Moreover, restricted securities, which may be illiquid for purposes of
this limitation, often sell, if at all, at a price lower than similar securities
that are not subject to restrictions on resale.
Illiquid securities include those that are subject to restrictions contained in
the securities laws of other countries. However, securities that are freely
marketable in the country where they are principally traded, but would not be
freely marketable in the United States, will not be considered illiquid. Where
registration is required, an Underlying Theme Portfolio may be obligated to pay
all or part of the registration expenses and a considerable period may elapse
between the time of the decision to sell and the time the Underlying Theme
Portfolio may be permitted to sell a security under an effective registration
statement. If, during such a period, adverse market conditions were to develop,
the Underlying Theme Portfolio might obtain a less favorable price than
prevailed when it decided to sell.
Not all restricted securities are illiquid. In recent years a large
institutional market has developed for certain securities that are not
registered under the Securities Act of 1933, as amended ("1933 Act"), including
private placements, repurchase agreements, commercial paper, foreign securities
and corporate bonds and notes. These instruments are often restricted securities
because the securities are sold in transactions not requiring registration.
Institutional investors generally will not seek to sell these instruments to the
general public, but instead will often depend either on an efficient
institutional market in which such unregistered securities can be readily resold
or on an issuer's ability to honor a demand for repayment. Therefore, the fact
that there are contractual or legal restrictions on resale to the general public
or certain institutions is not dispositive of the liquidity of such investments.
Rule 144A under the 1933 Act establishes a "safe harbor" from the registration
requirements of the 1933 Act for resales of certain securities to qualified
institutional buyers. Institutional markets for restricted securities have
developed as a result of Rule 144A, providing both readily ascertainable values
for restricted securities and the ability to liquidate an investment to satisfy
share redemption orders. Such markets include automated systems for the trading,
clearance and settlement of unregistered securities of domestic and foreign
issuers, such as the PORTAL System sponsored by the National Association of
Securities Dealers, Inc. An insufficient number of qualified institutional
buyers interested in purchasing Rule 144A-eligible restricted securities held by
an Underlying Theme Portfolio, however, could affect adversely the marketability
of such portfolio securities and the Underlying Theme Portfolio might be unable
to dispose of such securities promptly or at favorable prices.
With respect to liquidity determinations generally, the Portfolios' Board of
Trustees or the Company's Board of Directors, as applicable, has the ultimate
responsibility for determining whether specific securities, including restricted
23
<PAGE>
securities pursuant to Rule 144A. Under the 1933 Act, are liquid or illiquid.
Each Board has delegated the function of making day-to-day determinations of
liquidity to the Manager, in accordance with procedures approved by that Board.
The Manager takes into account a number of factors in reaching liquidity
decisions, including, but not limited to, (i) the frequency of trading in the
security; (ii) the number of dealers that make quotes for the security; (iii)
the number of dealers that have undertaken to make a market in the security;
(iv) the number of other potential purchasers; and (v) the nature of the
security and how trading is effected (e.g., the time needed to sell the
security, how offers are solicited and the mechanics of transfer). The Manager
monitors the liquidity of securities held by each Underlying Theme Portfolio and
periodically reports such determinations to the Underlying Theme Portfolios'
Board of Trustees or the Company's Board of Directors, as applicable. The
Manager believes that carefully selected investments in joint ventures,
cooperatives, partnerships and state enterprises which are illiquid
(collectively, "Special Situations") could enable the Underlying Theme Portfolio
to achieve capital appreciation substantially exceeding the appreciation the
Underlying Theme Portfolio would realize if it did not make such investments.
However, in order to attempt to limit investment risk, each of the Underlying
Theme Portfolios will invest no more than 5% of its total assets in Special
Situations.
FOREIGN SECURITIES
POLITICAL, SOCIAL AND ECONOMIC RISKS. Investing in securities of non-U.S.
companies may entail additional risks due to the potential political, social and
economic instability of certain countries and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on foreign
investment convertibility of currencies into U.S. dollars and on repatriation of
capital invested. In the event of such expropriation, nationalization or other
confiscation by any country, an Underlying Theme Portfolio could lose its entire
investment in any such country.
RELIGIOUS, POLITICAL AND ETHNIC INSTABILITY. Certain countries in which an
Underlying Theme Portfolio may invest may have groups that advocate radical
religious or revolutionary philosophies or support ethnic independence. Any
disturbance on the part of such individuals could carry the potential for
widespread destruction or confiscation of property owned by individuals and
entities foreign to such country and could cause the loss of an Underlying Theme
Portfolio's investment in those countries. Instability may also result from,
among other things: (i) authoritarian governments or military involvement in
political and economic decision-making, including changes in government through
extra-constitutional means; (ii) popular unrest associated with demands for
improved political, economic and social conditions; and (iii) hostile relations
with neighboring or other countries. Such political, social and economic
instability could disrupt the principal financial markets in which an Underlying
Theme Portfolio invests and adversely affect the value of an Underlying Theme
Portfolio's assets.
FOREIGN INVESTMENT RESTRICTIONS. Certain countries prohibit or impose
substantial restrictions on investments in their capital markets, particularly
their equity markets, by foreign entities such as an Underlying Theme Portfolio.
These restrictions or controls may at times limit or preclude investments in
certain securities and may increase the cost and expenses of an Underlying Theme
Portfolio. For example, certain countries require prior governmental approval
before investments by foreign persons may be made, or may limit the amount of
investment by foreign persons in a particular company or limit the investment by
foreign persons to only a specific class of securities of a company that may
have less advantageous terms than securities of the company available for
purchase by nationals. Moreover, the national policies of certain countries may
restrict investment opportunities in issuers or industries deemed sensitive to
national interests. In addition, some countries require governmental approval
for the repatriation of investment income, capital or the proceeds of securities
24
<PAGE>
sales by foreign investors. In addition, if there is a deterioration in a
country's balance of payments or for other reasons, a country may impose
restrictions on foreign capital remittances abroad. An Underlying Theme
Portfolio could be adversely affected by delays in, or a refusal to grant, any
required governmental approval for repatriation, as well as by the application
to it of other restrictions on investments.
NON-UNIFORM CORPORATE DISCLOSURE STANDARDS AND GOVERNMENTAL REGULATION. Foreign
companies are subject to accounting, auditing and financial standards and
requirements that differ, in some cases significantly, from those applicable to
U.S. companies. In particular, the assets, liabilities and profits appearing on
the financial statements of such a company may not reflect its financial
position or results of operations in the way they would be reflected had such
financial statements been prepared in accordance with U.S. generally accepted
accounting principles. Most of the securities held by an Underlying Theme
Portfolio will not be registered with the SEC or regulators of any foreign
country, nor will the issuers thereof be subject to the SEC's reporting
requirements. Thus, there will be less available information concerning most
foreign issuers of securities held by an Underlying Theme Portfolio than is
available concerning U.S. issuers. In instances where the financial statements
of an issuer are not deemed to reflect accurately the financial situation of the
issuer, the Manager will take appropriate steps to evaluate the proposed
investment, which may include on-site inspection of the issuer, interviews with
its management and consultations with accountants, bankers and other
specialists. There is substantially less publicly available information about
foreign companies than there are reports and ratings published about U.S.
companies and the U.S. government. In addition, where public information is
available, it may be less reliable than such information regarding U.S. issuers.
Issuers of securities in foreign jurisdictions are generally not subject to the
same degree of regulation as are U.S. issuers with respect to such matters as
restrictions on market manipulation, insider trading rules, shareholder proxy
requirements and timely disclosure of information.
CURRENCY FLUCTUATIONS. Because each Underlying Theme Portfolio, under normal
circumstances, will invest a substantial portion of its total assets in the
securities of foreign issuers which are denominated in foreign currencies, the
strength or weakness of the U.S. dollar against such foreign currencies will
account for part of an Underlying Theme Portfolio's investment performance. A
decline in the value of any particular currency against the U.S. dollar will
cause a decline in the U.S. dollar value of that Underlying Theme Portfolio's
holdings of securities and cash denominated in such currency and, therefore,
will cause an overall decline in the appropriate Underlying Theme Fund's net
asset value and any net investment income and capital gains derived from such
securities to be distributed in U.S. dollars to shareholders of the Underlying
Theme Fund. Moreover, if the value of the foreign currencies in which an
Underlying Theme Portfolio receives its income falls relative to the U.S. dollar
between receipt of the income and the making of Underlying Theme Portfolio
distributions, the Underlying Theme Portfolio may be required to liquidate
securities in order to make distributions if the Underlying Theme Portfolio has
insufficient cash in U.S. dollars to meet distribution requirements.
The rate of exchange between the U.S. dollar and other currencies is determined
by several factors, including the supply and demand for particular currencies,
central bank efforts to support particular currencies, the relative movement of
interest rates, and pace of business activity in the other countries and the
United States, and other economic and financial conditions affecting the world
economy.
25
<PAGE>
Although each Underlying Theme Portfolio values its assets daily in terms of
U.S. dollars, the Underlying Theme Portfolios do not intend to convert their
holdings of foreign currencies into U.S. dollars on a daily basis. Each
Underlying Theme Portfolio will do so, from time to time, and investors should
be aware of the costs of currency conversion. Although foreign exchange dealers
do not charge a fee for conversion, they do realize a profit based on the
difference ("spread") between the prices at which they buy and sell various
currencies. Thus, a dealer may offer to sell a foreign currency to an Underlying
Theme Portfolio at one rate, while offering a lesser rate of exchange should an
Underlying Theme Portfolio desire to sell that currency to the dealer.
ADVERSE MARKET CHARACTERISTICS. Securities of many foreign issuers may be less
liquid and their prices more volatile than securities of comparable U.S.
issuers. In addition, foreign securities markets and brokers generally are
subject to less governmental supervision and regulation than in the United
States, and foreign securities transactions usually are subject to fixed
commissions, which generally are higher than negotiated commissions on U.S.
transactions. In addition, foreign securities transactions may be subject to
difficulties associated with the settlement of such transactions. Delays in
settlement could result in temporary periods when assets of an Underlying Theme
Portfolio are uninvested and no return is earned thereon. The inability of an
Underlying Theme Portfolio to make intended security purchases due to settlement
problems could cause that Underlying Theme Portfolio to miss attractive
investment opportunities. Inability to dispose of a portfolio security due to
settlement problems either could result in losses to that Underlying Theme
Portfolio due to subsequent declines in value of the portfolio security or, if
that Underlying Theme Portfolio has entered into a contract to sell the
security, could result in possible liability to the purchaser. The Manager will
consider such difficulties when determining the allocation of an Underlying
Theme Portfolio's assets, although the Manager does not believe that such
difficulties will have a material adverse effect on an Underlying Theme
Portfolio's portfolio trading activities.
Each Underlying Theme Portfolio may use foreign custodians, which may involve
risks in addition to those related to its use of U.S. custodians. Such risks
include uncertainties relating to determining and monitoring the foreign
custodian's financial strength, reputation and standing; maintaining appropriate
safeguards concerning that Underlying Theme Portfolio's investments; and
possible difficulties in obtaining and enforcing judgments against such
custodians.
WITHHOLDING TAXES. Each Underlying Theme Portfolio's net investment income from
foreign issuers may be subject to withholding taxes by the foreign issuer's
country, thereby reducing that Underlying Theme Portfolio's net investment
income or delaying the receipt of income when those taxes may be recaptured. See
"Taxes."
CONCENTRATION. To the extent an Underlying Theme Portfolio invests a
significant portion of its assets in securities of issuers located in a
particular country or region of the world, such Underlying Theme Portfolio may
be subject to greater risks and may experience greater volatility than a fund
that is more broadly diversified geographically.
SPECIAL CONSIDERATIONS AFFECTING WESTERN EUROPEAN COUNTRIES. The countries that
are members of the European Economic Community ("Common Market") (Belgium,
Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands,
Portugal, Spain, and the United Kingdom) eliminated certain import tariffs and
quotas and other trade barriers with respect to one another over the past
several years. The Manager believes that this deregulation should improve the
prospects for economic growth in many Western European countries. Among other
things, the deregulation could enable companies domiciled in one country to
avail themselves of lower labor costs existing in other countries. In addition,
26
<PAGE>
this deregulation could benefit companies domiciled in one country by opening
additional markets for their goods and services in other countries. Since,
however, it is not clear what the exact form or effect of these Common Market
reforms will be on business in Western Europe, it is impossible to predict the
long-term impact of the implementation of these programs on the securities owned
by an Underlying Theme Portfolio.
SPECIAL CONSIDERATIONS AFFECTING RUSSIA AND EASTERN EUROPEAN COUNTRIES.
Investing in Russia and Eastern European countries involves a high degree of
risk and special considerations not typically associated with investing in the
United States securities markets, and should be considered highly speculative.
Such risks include: (1) delays in settling portfolio transactions and risk of
loss arising out of the system of share registration and custody; (2) the risk
that it may be impossible or more difficult than in other countries to obtain
and/or enforce a judgement; (3) pervasiveness of corruption and crime in the
economic system; (4) currency exchange rate volatility and the lack of available
currency hedging instruments; (5) higher rates of inflation (including the risk
of social unrest associated with periods of hyper-inflation) and high
unemployment; (6) controls on foreign investment and local practices disfavoring
foreign investors and limitations on repatriation of invested capital, profits
and dividends, and on a fund's ability to exchange local currencies for U.S.
dollars; (7) political instability and social unrest and violence; (8) the risk
that the governments of Russia and Eastern European countries may decide not to
continue to support the economic reform programs implemented recently and could
follow radically different political and/or economic policies to the detriment
of investors, including non-market-oriented policies such as the support of
certain industries at the expense of other sectors or investors, or a return to
the centrally planned economy that existed when such countries had a communist
form of government; (9) the financial condition of companies in these countries,
including large amounts of inter-company debt which may create a payments crisis
on a national scale; (10) dependency on exports and the corresponding importance
of international trade; (11) the risk that the tax system in these countries
will not be reformed to prevent inconsistent, retroactive and/or exorbitant
taxation; and (12) the underdeveloped nature of the securities markets.
SPECIAL CONSIDERATIONS AFFECTING JAPAN. Japan's economic growth has declined
significantly since 1990. The general government position has deteriorated as a
result of weakening economic growth and stimulative measures taken to support
economic activity and to restore financial stability. Although the decline in
interest rates and fiscal stimulation packages have helped to contain
recessionary forces, uncertainties remain. Japan is also heavily dependent upon
international trade, so its economy is especially sensitive to trade barriers
and disputes. Japan has had difficult relations with its trading partners,
particularly the United States, where the trade imbalance is the greatest. It is
possible that trade sanctions and other protectionist measures could impact
Japan adversely in both the short and the long term.
The common stocks of many Japanese companies trade at high price-earnings
ratios. Differences in accounting methods make it difficult to compare the
earnings of Japanese companies with those of companies in other countries,
especially in the U.S. In general, however, reported net income in Japan is
understated relative to U.S. accounting standards and this is one reason why
price-earnings ratios of the stocks of Japanese companies have tended
historically to be higher than those for U.S. stocks. In addition, Japanese
companies have tended to have higher growth rates than U.S. companies and
Japanese interest rates have generally been lower than in the U.S., both of
which factors tend to result in lower discount rates and higher price-earnings
ratios in Japan than in the U.S.
27
<PAGE>
The Japanese securities markets are less regulated than those in the United
States. Evidence has emerged from time to time of distortion of market prices to
serve political or other purposes. Shareholders' rights are not always equally
enforced. In addition, Japan's banking industry is undergoing problems related
to bad loans and declining values in real estate.
SPECIAL CONSIDERATIONS AFFECTING PACIFIC REGION COUNTRIES. Certain of the risks
associated with international investments are heightened for investments in
Pacific region countries. For example, some of the currencies of Pacific region
countries have experienced steady devaluations relative to the U.S. dollar, and
major adjustments have been made periodically in certain of such currencies.
Certain countries, such as India, face serious exchange constraints.
Jurisdictional disputes also exist between South Korea and North Korea. In
addition, the Underlying Theme Portfolios' intend to invest in Hong Kong, which
reverted to Chinese Administration on July 1, 1997. Investments in Hong Kong may
be subject to expropriation, national, nationalization or confiscation, in which
case an Underlying Theme Portfolio could lose its entire investment in Hong
Kong. In addition, the reversion of Hong Kong also presents a risk that the Hong
Kong dollar will be devalued and a risk of possible loss of investor confidence
in Hong Kong's currency, stock market and assets.
SPECIAL CONSIDERATIONS AFFECTING LATIN AMERICAN COUNTRIES. Most Latin American
countries have experienced substantial, and in some periods extremely high,
rates of inflation for many years. Inflation and rapid fluctuations in inflation
rates have had and may continue to have very negative effects on the economies
and securities markets of certain Latin American countries. Certain Latin
American countries are also among the largest debtors to commercial banks and
foreign governments. At times certain Latin American countries have declared
moratoria on the payment of principal and/or interest on external debt. In
addition, certain Latin American securities markets have experienced high
volatility in recent years.
Latin American countries may also close certain sectors of their economies to
equity investments by foreigners. Further due to the absence of securities
markets and publicly owned corporations and due to restrictions on direct
investment by foreign entities, investments may only be made in certain Latin
American countries solely or primarily through governmentally approved
investment vehicles or companies.
Certain Latin American countries may have managed currencies that are maintained
at artificial levels to the U.S. dollar rather than at levels determined by the
market. This type of system can lead to sudden and large adjustments in the
currency which, in turn, can have a disruptive and negative effect on foreign
investors. For example, in late 1994, the value of the Mexican peso lost more
than one-third of its value relative to the U.S. dollar.
SPECIAL CONSIDERATIONS AFFECTING EMERGING MARKETS. Investing in the securities
of companies in emerging markets may entail special risks relating to potential
political and economic instability and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on foreign
investment, convertibility of currencies into U.S. dollars and on repatriation
of capital invested. In the event of such expropriation, nationalization or
other confiscation by any country, an Underlying Theme Portfolio could lose its
entire investment in any such country.
Emerging securities markets are substantially smaller, less developed, less
liquid and more volatile than the major securities markets. The limited size of
28
<PAGE>
emerging securities markets and limited trading value in issuers compared to the
volume of trading in U.S. securities could cause prices to be erratic for
reasons apart from factors that affect the quality of the securities. For
example, limited market size may cause prices to be unduly influenced by traders
who control large positions. Adverse publicity and investors' perceptions,
whether or not based on fundamental analysis, may decrease the value and
liquidity of portfolio securities, especially in these markets. In addition,
securities traded in certain emerging markets may be subject to risks due to the
inexperience of financial intermediaries, a lack of modern technology, the lack
of a sufficient capital base to expand business operations, and the possibility
of permanent or temporary termination of trading.
Settlement mechanisms in emerging securities markets may be less efficient and
reliable than in more developed markets. In such emerging securities there may
be share registration and delivery delays or failures.
Many emerging market countries have experienced substantial, and in some periods
extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates and corresponding currency devaluations have had
and may continue to have negative effects on the economies and securities
markets of certain emerging market countries.
PRIVATIZATIONS. The governments of some foreign countries have been engaged in
programs of selling part or all of their stakes in government owned or
controlled enterprises ("privatizations"). The Manager believes that
privatizations may offer opportunities for significant capital appreciation and
intends to invest assets of the Underlying Theme Funds in privatizations in
appropriate circumstances. In certain foreign countries, the ability of foreign
entities such as the Underlying Theme Funds to participate in privatizations may
be limited by local law, or the terms on which the Underlying Theme Funds may be
permitted to participate may be less advantageous than those for local
investors. There can be no assurance that foreign governments will continue to
sell companies currently owned or controlled by them or that privatization
programs will be successful.
TEMPORARY DEFENSIVE STRATEGIES
Each Underlying Theme Portfolio retains the flexibility to respond promptly to
changes in market and economic conditions. Accordingly, in the interest of
preserving shareholders' capital and consistent with each Underlying Theme
Portfolio's investment objective, the Manager may employ a temporary defensive
investment strategy if it determines such a strategy to be warranted due to
market, economic or political conditions. Under a defensive strategy, each
Underlying Theme Portfolio may invest up to 100% of its total assets in cash
(U.S. dollars, foreign currencies or multinational currency units) and/or high
quality debt securities or money market instruments issued by corporations, the
U.S. or a foreign government. In addition, for temporary defensive purposes,
such as during times of international political or economic uncertainty, most or
all of each Underlying Theme Portfolio's investments may be made in the United
States and denominated in U.S. dollars. To the extent any Underlying Theme
Portfolio adopts a temporary defensive posture, it will not be invested so as to
achieve directly its investment objective.
In addition, pending investment of proceeds from new sales of the shares or to
meet its ordinary daily cash needs, each Underlying Theme Portfolio may hold
cash (U.S. dollars, foreign currencies or multinational currency units) and may
invest in foreign or domestic high quality money market instruments. Money
market instruments in which each Underlying Theme Portfolio may invest include,
but are not limited to, U.S. or foreign government securities; high-grade
commercial paper; bank certificates of deposit; bankers' acceptances; and
29
<PAGE>
repurchase agreements related to any of the foregoing. High-grade commercial
paper refers to commercial paper rated A-l by S&P or P-l by Moody's or, if not
rated, determined by the Manager to be of comparable quality.
RISKS ASSOCIATED WITH DEBT SECURITIES
The value of the debt securities held by each Underlying Theme Portfolio
generally will vary conversely with market interest rates. If interest rates in
a market fall, the value of the debt securities held by each Underlying Theme
Portfolio ordinarily will rise. If market interest rates increase, however, the
debt securities owned by each Underlying Theme Portfolio in that market will be
likely to decrease in value.
The Infrastructure Portfolio, Natural Resources Portfolio and Consumer Products
and Services Portfolio may each invest up to 20% of its total assets in debt
securities rated below investment grade. Such investments involve a high degree
of risk. However, the Infrastructure Portfolio, Natural Resources Portfolio and
Consumer Products and Services Portfolio will not invest in debt securities that
are in default as to payment of principal and interest.
Debt rated Baa by Moody's is considered by Moody's to have speculative
characteristics. Debt rated BB, B, CCC, CC or C by S&P and debt rated Ba, B,
Caa, Ca or C by Moody's is regarded, on balance, as predominantly speculative
with respect to the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligation. For S&P, BB indicates the lowest
degree of speculation for such lower quality debt and C the highest degree of
speculation. For Moody's, Baa indicates the lowest degree of speculation for
such lower quality debt and C the highest degree of speculation. While such
lower quality debt will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposures to adverse
conditions. Debt rated C by Moody's or S&P is the lowest rated debt that is not
in default as to principal or interest, and such issues so rated can be regarded
as having extremely poor prospects of ever attaining any real investment
standing. Lower quality debt securities also are generally considered to be
subject to greater risk than securities with higher ratings with regard to a
deterioration of general economic conditions. These lower quality debt
securities are the equivalent of high yield, high risk bonds, commonly known as
"junk bonds."
Ratings of debt securities represent the rating agency's opinion regarding their
quality and are not a guarantee of quality. Rating agencies attempt to evaluate
the safety of principal and interest payments and do not evaluate the risks of
fluctuations in market value. Also, rating agencies may fail to make timely
changes in credit ratings in response to subsequent events, so that an issuer's
current financial condition may be better or worse than a rating indicates.
The market values of lower quality debt securities tend to reflect individual
developments of the issuer to a greater extent than do higher quality
securities, which react primarily to fluctuations in the general level of
interest rates. In addition, lower quality debt securities tend to be more
sensitive to economic conditions and generally have more volatile prices than
higher quality securities. Issuers of lower quality securities are often highly
leveraged and may not have available to them more traditional methods of
financing. For example, during an economic downturn or a sustained period of
rising interest rates, highly leveraged issuers of lower quality securities may
experience financial stress. During such periods, 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 developments affecting the issuer, such as the issuer's inability to
meet specific projected business forecasts or the unavailability of additional
30
<PAGE>
financing. The risk of loss due to default by the issuer is significantly
greater for the holders of lower quality securities because such securities are
generally unsecured and may be subordinated to the claims of other creditors of
the issuer.
Lower quality debt securities of corporate issuers frequently have call or
buy-back features which would permit an issuer to call or repurchase the
security from the Underlying Theme Portfolios. If an issuer exercises these
provisions in a declining interest rate market, the Underlying Theme Portfolios
may have to replace the security with a lower yielding security, resulting in a
decreased return for investors. In addition, the Underlying Theme Portfolios may
have difficulty disposing of lower quality securities because they may have a
thin trading market. There may be no established retail secondary market for
many of these securities, and each of the Underlying Theme Portfolios
anticipates that such securities could be sold only to a limited number of
dealers or institutional investors. The lack of a liquid secondary market also
may have an adverse impact on market prices of such instruments and may make it
more difficult for the Underlying Theme Portfolios to obtain accurate market
quotations for purposes of valuing the Underlying Theme Portfolios portfolio
investments. The Underlying Theme Portfolios may also acquire lower quality debt
securities during an initial underwriting or which are sold without registration
under applicable securities laws. Such securities involve special considerations
and risks.
In addition to the foregoing, factors that could have an adverse effect on the
market value of lower quality debt securities in which the Underlying Theme
Portfolios may invest include: (i) potential adverse publicity; (ii) heightened
sensitivity to general economic or political conditions; and (iii) the likely
adverse impact of a major economic recession. An Underlying Theme Portfolio may
also incur additional expenses to the extent it is required to seek recovery
upon a default in the payment of principal or interest on portfolio holdings,
and the Underlying Theme Portfolio may have limited legal recourse in the event
of a default.
The Manager attempts to minimize the speculative risks associated with
investments in lower quality securities through credit analysis and by carefully
monitoring current trends in interest rates, political developments and other
factors.
The Prospectus and the Statement of Additional Information of the Underlying
Theme Funds contain more detailed information about this organizational
structure of the Financial Services Fund, Infrastructure Fund, Natural Resources
Fund and Consumer Products and Services Fund and their corresponding Portfolios,
including information related to: (i) the investment objective, policies and
restrictions of the Underlying Theme Funds and their Underlying Theme
Portfolios; (ii) the Board of Directors and officers of the Underlying Theme
Funds, the Trustees and officers of the Portfolios, the administrator of the
Underlying Theme Funds and the investment manager and administrator of the
Portfolios; (iii) portfolio transactions and brokerage commissions; (iv) the
Underlying Theme Funds' and Portfolios' shares, including the rights and
liabilities of their shareholders; (v) additional performance information,
including the method used to calculate yield and total return; and (vi) the
determination of the value of the shares of such Funds.
31
<PAGE>
INVESTMENT LIMITATIONS
INVESTMENT LIMITATIONS OF THE FUND
FUNDAMENTAL LIMITATIONS. The following fundamental limitations of the Fund
cannot be changed without the affirmative vote of the lesser of (i) 67% of the
Fund's shares represented at a meeting at which more than 50% of the outstanding
shares are represented, or (ii) more than 50% of the outstanding shares. If a
percentage restriction is adhered to at the time of an investment or
transaction, a later increase or decrease in percentage resulting from a change
in values or portfolio securities or amount of total assets will not be
considered a violation of any of the following limitations.
The Fund will not:
(1) issue senior securities or borrow money, except as permitted under the
Investment Company Act of 1940 ("1940 Act") and then not in excess of 33
1/3% of the Fund's total assets (including the amount of the senior
securities issued but reduced by any liabilities not constituting senior
securities) at the time of the issuance or borrowing, except that the Fund
may borrow up to an additional 5% of its total assets (not including the
amount borrowed) for temporary or emergency purposes.
(2) make loans, except through loans of portfolio securities or through
repurchase agreements, provided that for purposes of this restriction, the
acquisition of bonds, debentures, other debt securities or instruments, or
participations or other interests therein and investments in government
obligations, commercial paper, certificates of deposit, bankers'
acceptances or similar instruments will not be considered the making of a
loan.
(3) engage in the business of underwriting securities of other issuers, except
to the extent that the Fund might be considered an underwriter under the
federal securities laws in connection with its disposition of portfolio
securities.
(4) purchase or sell real estate, except that investments in securities of
issuers that invest in real estate and investments in mortgage-backed
securities, mortgage participations or other instruments supported by
interests in real estate are not subject to this limitation, and except
that the Fund may exercise rights under agreements relating to such
securities, including the right to enforce security interests and to hold
real estate acquired by reason of such enforcement until that real estate
can be liquidated in an orderly manner.
(5) purchase or sell physical commodities unless acquired as a result of owning
securities or other instruments, but the Fund may purchase, sell or enter
into financial options and futures, forward and spot currency contracts,
swap transactions and other financial contracts or derivative instruments.
Because of its investment objective and policies, the Fund will concentrate more
than 25% of its assets in the mutual fund industry. In accordance with the
Fund's investment program set forth in the Prospectus, the Fund may invest more
than 25% of its assets in the Underlying Theme Funds. However, each of the
32
<PAGE>
Underlying Theme Portfolios will not concentrate more than 25% of its total
assets in any one industry.
NON-FUNDAMENTAL LIMITATIONS. The following investment restrictions applying to
the Fund are non-fundamental and may be changed by the vote of the Fund's board
without shareholder approval.
The Fund will not:
(1) invest more than 15% of its net assets in illiquid securities, a term which
means securities that cannot be disposed of within seven days in the
ordinary course of business at approximately the amount at which the Fund
has valued the securities and includes, among other things, repurchase
agreements maturing in more than seven days.
(2) purchase portfolio securities while borrowings in excess of 5% of its total
assets are outstanding.
(3) purchase securities on margin, except for short-term credit necessary for
clearance of portfolio transactions and except that the Fund may make
margin deposits in connection with its use of financial options and
futures, forward and spot currency contracts, swap transactions and other
financial contract or derivative instruments.
(4) engage in short sales of securities or maintain a short position, except
that the Fund may (a) sell short "against the box" and (b) maintain short
positions in connection with its use of financial options an futures,
forward and spot currency contracts, swap transactions and other financial
contracts or derivative instruments.
(5) purchase securities of other investment companies, except to the extent
permitted by the 1940 Act or under the terms of any exemptive order granted
by the Securities and Exchange Commission ("SEC") and except that this
limitation does not apply to securities received or acquired as dividends,
through offers of exchange, or as a result of reorganization,
consolidation, or merger.
Notwithstanding the forgoing investment limitations, the Fund may invest in
Underlying Theme Funds that have adopted investment limitations that may be more
or less restrictive than those listed above. As a result, the Fund may engage
indirectly in investment strategies that are prohibited under the investment
limitations listed above. The investment limitations and other investment
policies and restrictions of each Underlying Theme Fund are described in its
prospectus and statement of additional information.
Under Section 12(d)(1)(G) of the 1940 Act, the Fund may invest substantially all
of its assets in the Underlying Theme Funds.
INVESTMENT LIMITATIONS OF THE UNDERLYING THEME FUNDS AND PORTFOLIOS
FEEDER FUNDS
The Financial Services Fund, Infrastructure Fund, Natural Resources Fund and
Consumer Products and Services Fund each has the following fundamental
33
<PAGE>
investment policy to enable it to invest in the Financial Services Portfolio,
Infrastructure Portfolio, Natural Resources Portfolio and Consumer Products and
Services Portfolio, respectively:
Notwithstanding any other investment policy of the Underlying Theme Fund, the
Underlying Theme Fund may invest all of its investable assets (cash, securities
and receivables related to securities) in an open-end management investment
company having substantially the same investment objective, policies and
limitations as the Underlying Theme Fund.
All other fundamental investment policies, and the non-fundamental policies, of
each Feeder Fund and its corresponding Portfolio are identical. Therefore,
although the following discusses the investment policies of each Underlying
Theme Portfolio and its Board of Trustees, it applies equally to each Feeder
Fund and its Board of Directors.
Each Underlying Theme Portfolio has adopted the following investment limitations
as fundamental policies which (unless otherwise noted) may not be changed
without approval by the affirmative vote of the lesser of (i) 67% of that
Underlying Theme Portfolio's shares represented at a meeting at which more than
50% of the outstanding shares are represented, or (ii) more than 50% of the
outstanding shares. Whenever a Feeder Fund is requested to vote on a change in
the investment limitations of its corresponding Portfolio, such Feeder Fund will
hold a meeting of its shareholders and will cast its votes as instructed by its
shareholders.
Each Underlying Theme Portfolio may not:
(1) Buy or sell real estate (including real estate limited
partnerships); however, each Underlying Theme Portfolio may invest in
debt securities secured by real estate or interests therein or issued
by companies which invest in real estate or interests therein,
including real estate investment trusts;
(2) Buy or sell commodities or commodity contracts, except
that each Underlying Theme Portfolio may purchase and sell financial
and currency futures contracts and options thereon, and may purchase
and sell currency forward contracts, options on foreign currencies and
may otherwise engage in other transactions in foreign currencies;
(3) Underwrite securities of other issuers, except to the
extent that the disposition of an investment position may technically
cause it to be considered an underwriter as that term is defined under
the 1933 Act;
(4) Make loans, except that each Underlying Theme Portfolio
may purchase debt securities and enter into repurchase agreements and
may make loans of portfolio securities;
(5) Purchase securities on margin, provided that each
Underlying Theme Portfolio may obtain such short-term credits as may be
necessary for the clearance of purchases and sales of securities;
except that it may make margin deposits in connection with futures
contracts;
(6) Borrow money except from banks not in excess of 331/3% of
the value of each Underlying Theme Portfolio's total assets, (including
the amount borrowed), less all liabilities and indebtedness (other than
34
<PAGE>
the borrowing). This restriction shall not prevent any Underlying Theme
Portfolio from entering into reverse repurchase agreements, provided
that reverse repurchase agreements, and any other transactions
constituting borrowing by an underlying Theme Portfolio may not exceed
one-third of that Underlying Theme Portfolio's total assets.
Transactions involving options, futures contracts, options on futures
contracts and forward currency contracts, as described in the
Prospectus and this Statement of Additional Information, and collateral
arrangements relating thereto will not be deemed to be borrowings;
(7) Mortgage, pledge, or hypothecate any of its assets,
provided that this restriction shall not apply to the transfer of
securities in connection with any permissible borrowing or to
collateral arrangements in connection with permissible activities; or
(8) Invest in direct interests or leases in oil, gas, or other
mineral exploration or development programs; however, each Underlying
Theme Portfolio may invest in the securities of companies that engage
in these activities.
In addition, each Underlying Theme Portfolio has adopted as a fundamental
investment policy a classification as a "diversified" portfolio under the 1940
Act. This means that, with respect to 75% of the Underlying Theme Portfolio's
total assets, no more than 5% will be invested in the securities of any one
issuer, and the Underlying Theme Portfolio will purchase no more than 10% of the
outstanding voting securities of any one issuer. This policy cannot be changed
without approval by the holders of a majority of the Underlying Theme
Portfolio's outstanding voting securities as defined above and in the Underlying
Theme Funds' Prospectus.
The following investment policies of each Underlying Theme Portfolio are not
fundamental policies and may be changed by vote of the Underlying Theme
Portfolios' Board of Trustees without shareholder approval. No Underlying Theme
Portfolio may:
(1) Invest in securities of an issuer if the investment
would cause the Underlying Theme Portfolio to own more than 10% of any
class of securities of any one issuer;
(2) Invest in companies for the purpose of exercising
control or management;
(3) Invest more than 15% of its net assets in illiquid
securities, including securities that are illiquid by virtue of the
absence of a readily available market;
(4) Invest more than 5% of its total assets in securities of
companies having, together with their predecessors, a record of less
than three years of continuous operation;
(5) Purchase or retain the securities of any issuer, if
those individual officers and Trustees of the Underlying Theme
Portfolio, the Underlying Theme Portfolio's investment adviser, or
distributor, each owning beneficially more than 1/2 of 1% of the
securities of such issuer, together own more than 5% of the securities
of such issuer;
(6) Enter into a futures contract, an option on a futures
contract, or an option on foreign currency traded on a CFTC-regulated
exchange, in each case other than for BONA FIDE hedging purposes (as
defined by the CFTC), if the aggregate initial margin and premiums
35
<PAGE>
required to establish all of those positions (excluding the amount by
which options are "in-the-money") exceeds 5% of the liquidation value
of the Underlying Theme Portfolio's portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the
Underlying Theme Portfolio has entered into;
(7) Borrow money except for temporary or emergency purposes
(not for leveraging) in excess of 331/3% of the value of the
Underlying Theme Portfolio's total assets (while borrowings exceed 5%
of the Infrastructure Portfolio's and Natural Resources Portfolio's
total assets, such Underlying Theme Portfolio will not make any
additional investments); and
(8) Invest more than 10% of its total assets in shares of
other investment companies and may not invest more than 5% of its
total assets in any one investment company or acquire more than 3% of
the outstanding voting securities of any one investment company.
Investors should refer to the Underlying Theme Funds' Prospectus for further
information with respect to the investment objective of each Feeder Fund, which
may not be changed without the approval of shareholders, and its corresponding
Underlying Theme Portfolio's investment objective, which may be changed without
the approval of its shareholders, and other investment policies, techniques and
limitations, which may or may not be changed without shareholder approval.
HEALTH CARE FUND
The Health Care Fund has adopted the following investment limitations as
fundamental policies, which (unless otherwise noted) may not be changed without
approval by the affirmative vote of the lesser of (i) 67% of its shares
represented at a meeting at which more than 50% of the outstanding shares are
represented, or (ii) more than 50% of the outstanding shares.
The Health Care Fund may not:
(1) Invest more than 10% of its total assets in securities
which cannot be readily resold to the public because of legal or
contractual restrictions or for which no readily available market
exists, which for this purpose includes repurchase agreements maturing
in more than seven days;
(2) Invest in companies for the purpose of exercising
control or management;
(3) Purchase or sell real estate; provided that the Health
Care Fund may invest in securities secured by real estate or interests
therein or issued by companies that invest in real estate or interests
therein;
(4) Purchase securities on margin or make short sales,
except for short-term credits necessary for clearance of portfolio
transactions, and except that the Health Care Fund may make short sales
and maintain short positions and may make margin deposits in connection
with its use of options, futures contracts and options on futures
contracts;
(5) Underwrite securities of other issuers, except to the
extent that, in connection with the disposition of portfolio securities,
the Health Care Fund may be deemed to be an underwriter under federal
securities laws;
36
<PAGE>
(6) Make loans, except through loans of portfolio securities
as authorized by the Prospectus and except through repurchase
agreements, provided that for purposes of this limitation the
acquisition of portfolio securities consistent with the Health Care
Fund's investment objective and policies shall not be deemed to be the
making of a loan;
(7) Purchase or sell commodities or commodity contracts,
except that consistent with the Health Care Fund's investment objective
and policies it may use financial and currency futures instruments and
options thereon for hedging purposes;
(8) Issue senior securities, except that for purposes of
this limitation the Health Care Fund may borrow money in such amounts
and in such fashion as is permitted under the 1940 Act and the rules
thereunder;
(9) Mortgage, pledge or hypothecate or in any manner
transfer, as security for indebtedness, any securities owned or held by
the Health Care Fund, except as may be necessary in connection with
permitted borrowings; provided, however, that this does not prohibit
escrow, collateral or margin arrangements in connection with its use of
options, futures contracts and options on futures contracts;
(10) Invest in oil, gas or mineral-related programs or
leases; or
(11) Purchase any security if as a result more than 5% of
the Health Care Fund's total assets would be invested in securities of
companies which together with any predecessors have been in operation
for less than three years.
In addition, the Health Care Fund has adopted as a fundamental investment policy
the classification as a "diversified" fund under the 1940 Act, which means that,
with respect to 75% of its total assets, no more than 5% will be invested in the
securities of any one issuer, and it will purchase no more than 10% of the
outstanding voting securities of any one issuer. This policy cannot be changed
without approval by the holders of a majority of the Health Care Fund's
outstanding voting securities as defined above and in the Underlying Theme
Funds' Prospectus.
Investors should refer to the Underlying Theme Funds' Prospectus for further
information with respect to the Health Care Fund's investment objective, which
may not be changed without the approval of its shareholders, and other
investment policies, techniques and limitations, which may be changed without
shareholder approval.
TELECOMMUNICATIONS FUND
The Telecommunications Fund has adopted the following investment limitations as
fundamental policies, which (unless otherwise noted) may not be changed without
approval by the affirmative vote of the lesser of (i) 67% of its shares
represented at a meeting at which more than 50% of the outstanding shares are
represented, or (ii) more than 50% of the outstanding shares.
The Telecommunications Fund may not:
(1) Buy or sell real estate (including real estate limited
partnerships); however, the Telecommunications Fund may invest in debt
securities secured by real estate or interests therein or issued by
37
<PAGE>
companies which invest in real estate or interests therein, including
real estate investment trusts;
(2) Purchase or sell commodities or commodity contracts,
except that the Telecommunications Fund may purchase and sell financial
and currency futures contracts and options thereon, and may purchase
and sell currency forward contracts, options on foreign currencies and
may otherwise engage in other transactions in foreign currencies;
(3) Engage in the business of underwriting securities of other
issuers, except to the extent that the disposition of an investment
position may technically cause it to be considered an underwriter as
that term is defined under the 1933 Act;
(4) Make loans, except that the Telecommunications Fund may
purchase debt securities and enter into repurchase agreements and may
make loans of portfolio securities;
(5) Purchase securities on margin, provided that the
Telecommunications Fund may obtain such short-term credits as may be
necessary for the clearance of purchases and sales of securities;
except that it may make margin deposits in connection with futures
contracts;
(6) Borrow money except from banks not in excess of 33-1/3% of
the value of the Telecommunications Fund's total assets, including the
amount borrowed, less all liabilities and indebtedness (other than the
borrowing). This restriction shall not prevent the Telecommunications
Fund from entering into reverse repurchase agreements, provided that
reverse repurchase agreements, and any other transactions constituting
borrowing by it may not exceed one-third of its total assets.
Transactions involving options, futures contracts, options on futures
contracts and forward currency contracts, as described in the
Prospectus and this Statement of Additional Information, and collateral
arrangements relating thereto will not be deemed to be borrowings;
(7) Mortgage, pledge, or hypothecate any of its assets,
provided that this restriction shall not apply to the transfer of
securities in connection with any permissible borrowing or to
collateral arrangements in connection with permissible activities; or
(8) Invest in direct interests or leases in oil, gas, or other
mineral exploration or development programs; however, the
Telecommunications Fund may invest in the securities of companies that
engage in these activities.
In addition, the Telecommunications Fund has adopted as a fundamental investment
policy the classification as a "diversified" fund under the 1940 Act, which
means that, with respect to 75% of its total assets, no more than 5% will be
invested in the securities of any one issuer, and it will purchase no more than
10% of the outstanding voting securities of any one issuer. This policy cannot
be changed without approval by the holders of a majority of the
Telecommunications Fund's outstanding voting securities as defined above and in
the Underlying Theme Funds' Prospectus.
38
<PAGE>
The following operating policies of the Telecommunications Fund are not
fundamental policies and may be changed by vote of the Company's Board of
Directors without shareholder approval. The Telecommunications Fund may not:
(1) Invest in securities of an issuer if the investment
would cause the Telecommunications Fund to own more than 10% of any
class of securities of any one issuer;
(2) Invest in companies for the purpose of exercising
control or management;
(3) Invest more than 15% of its net assets in illiquid
securities, including securities that are illiquid by virtue of the
absence of a readily available market;
(4) Invest more than 5% of its total assets in securities of
companies having, together with their predecessors, a record of less
than three years of continuous operation;
(5) Purchase or retain the securities of any issuer, if
those individual officers and Directors of the Company, the
Telecommunications Fund's investment adviser, or distributor, each
owning beneficially more than 1/2 of 1% of the securities of such
issuer, together own more than 5% of the securities of such issuer;
(6) Enter into a futures contract, an option on a futures
contract, or an option on foreign currency traded on a CFTC-regulated
exchange, in each case other than for BONA FIDE hedging purposes (as
defined by the CFTC), if the aggregate initial margin and premiums
required to establish all of those positions (excluding the amount by
which options are "in-the-money") exceeds 5% of the liquidation value of
the Telecommunications Fund's portfolio, after taking into account
unrealized profits and unrealized losses on any contracts the
Telecommunications Fund has entered into; or
(7) Borrow money except for temporary or emergency purposes
(not for leveraging) not in excess of 331/3% of the value of the
Telecommunications Fund's total assets. While borrowings exceed 5% of
the Telecommunications Fund's total assets, the Telecommunications Fund
will not make any additional investments.
The Telecommunications Fund has the authority to invest up to 10% of its total
assets in shares of other investment companies, and in real estate investment
trusts. The Telecommunications Fund may not invest more than 5% of its total
assets in any one investment company or acquire more than 3% of the outstanding
voting securities of any one investment company.
Investors should refer to the Underlying Theme Funds' Prospectus for further
information with respect to the Telecommunications Fund's investment objective,
which may not be changed without the approval of shareholders, and other
investment policies, techniques and limitations, which may be changed without
shareholder approval.
If a percentage restriction on investment or utilization of assets in an
investment policy or restriction is adhered to at the time an investment is
made, a later change in percentage ownership of a security or kind of securities
resulting from changing market values or a similar type of event will not be
considered a violation of the Underlying Theme Fund's or Underlying Theme
Portfolio's investment policies or restrictions. The Underlying Theme Fund or
39
<PAGE>
Underlying Theme Portfolio may exchange securities, exercise conversion or
subscription rights, warrants or other rights to purchase common stock or other
equity securities and may hold, except to the extent limited by the 1940 Act,
any such securities so acquired without regard to the Underlying Theme Fund's or
Underlying Theme Portfolio's investment policies and restrictions. The original
cost of the securities so acquired will be included in any subsequent
determination of the Underlying Theme Fund's or Underlying Theme Portfolio's
compliance with the investment percentage limitations referred to above and in
the Prospectus.
EXECUTION OF PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities for the Fund
(normally shares of the Underlying Theme Funds) are placed on behalf of the Fund
by the Manager. As stated in the Prospectus, the Manager will exercise no
discretion in investing the assets of the Fund other than to make investments in
government securities and money market instruments and to rebalance the
percentage of the Fund's assets in each Underlying Theme Fund.
Subject to policies established by the Underlying Theme Funds' Board of
Directors and the Underlying Theme Portfolios' Board of Trustees, the Manager is
responsible for the execution of each Underlying Theme Fund's and Underlying
Theme Portfolio's securities transactions and the selection of broker/dealers
who execute such transactions on behalf of each Underlying Theme Portfolio. In
executing portfolio transactions, the Manager seeks the best net results for
each Underlying Theme Portfolio, taking into account such factors as the price
(including the applicable brokerage commission or dealer spread), size of the
order, difficulty of execution and operational facilities of the firm involved.
Although the Manager generally seeks reasonably competitive commission rates and
spreads, payment of the lowest commission or spread is not necessarily
consistent with the best net results. While each Underlying Theme Portfolio may
engage in soft dollar arrangements for research services, as described below,
each Underlying Theme Portfolio has no obligation to deal with any broker/dealer
or group of broker/dealers in the execution of portfolio transactions.
Consistent with the interests of each Underlying Theme Portfolio, the Manager
may select broker/dealers to execute that Underlying Theme Portfolio's portfolio
transaction on the basis of the research and brokerage services they provide to
the Manager for its use in managing that Underlying Theme Portfolio and its
other advisory accounts. Such services may include furnishing analyses, reports
and information concerning issuers, industries, securities, geographic regions,
economic factors and trends, portfolio strategy, and performance of accounts;
and effecting securities transactions and performing functions incidental
thereto (such as clearance and settlement). Research and brokerage services
received from such broker is in addition to, and not in lieu of, the services
required to be performed by the Manager under the applicable Investment
Management and Administration Contract (defined below). A commission paid to
such broker may be higher than that which another qualified broker would have
charged for effecting the same transaction, provided that the Manager determines
in good faith that such commission is reasonable in terms either of that
particular transaction or the overall responsibility of the Manager to that
Underlying Theme Portfolio and its other clients and that the total commissions
paid by the Underlying Theme Portfolio will be reasonable in relation to the
benefits received by that Underlying Theme Portfolio over the long term.
Research services may also be received from dealers who execute Underlying Theme
Portfolio transactions in OTC markets.
40
<PAGE>
The Manager may allocate brokerage transactions to broker/dealers who have
entered into arrangements under which the broker/dealer allocates a portion of
the commissions paid by an Underlying Theme Portfolio toward payment of that
Underlying Theme Portfolio's expenses, such as custodian fees.
Investment decisions for an Underlying Theme Portfolio and for other investment
accounts managed by the Manager are made independently of each other in light of
differing conditions. However, the same investment decision occasionally may be
made for two or more of such accounts, including an Underlying Theme Portfolio.
In such cases, simultaneous transactions may occur. Purchases or sales are then
allocated as to price or amount in a manner deemed fair and equitable to all
accounts involved. While in some cases this practice could have a detrimental
effect upon the price or value of the security as far as an Underlying Theme
Portfolio is concerned, in other cases the Manager believes that coordination
and the ability to participate in volume transactions will be beneficial to that
Underlying Theme Portfolio.
Under a policy adopted by the Trust's Board of Directors and the Underlying
Theme Portfolios' Board of Trustees, and subject to the policy of obtaining the
best net results, the Manager may consider a broker/dealer's sale of the shares
of the Underlying Theme Funds and the other portfolios for which the Manager
serves as investment manager or administrator in selecting broker/dealers for
the execution of portfolio transactions. This policy does not imply a commitment
to execute portfolio transactions through all broker/dealers that sell shares of
the Underlying Theme Funds and such other portfolios.
Each Underlying Theme Portfolio contemplates purchasing most foreign equity
securities in OTC markets or stock exchanges located in the countries in which
the respective principal offices of the issuers of the various securities are
located, if that is the best available market. The fixed commissions paid in
connection with most such foreign stock transactions generally are higher than
negotiated commissions on U.S. transactions. There generally is less government
supervision and regulation of foreign stock exchanges and brokers than in the
United States. Foreign security settlements may in some instances be subject to
delays and related administrative uncertainties.
Foreign equity securities may be held by an Underlying Theme Portfolio in the
form of ADRs, ADSs, EDRs, CDRs or securities convertible into foreign equity
securities. ADRs, ADSs, EDRs and CDRs may be listed on stock exchanges, or
traded in the OTC markets in the United States or Europe, as the case may be.
ADRs, like other securities traded in the United States, will be subject to
negotiated commission rates. The foreign and domestic debt securities and money
market instruments in which an Underlying Theme Portfolio may invest are
generally traded in the OTC markets.
An Underlying Theme Portfolio does not have any obligation to deal with any
broker/dealer or group of broker/dealers in the execution of securities
transactions. Each Underlying Theme Portfolio contemplates that, consistent with
the policy of obtaining the best net results, brokerage transactions may be
conducted through certain companies that are members of Liechtenstein Global
Trust. The Company's Board of Directors or the Underlying Theme Portfolios'
Board of Trustees, as applicable, has adopted procedures in conformity with Rule
17e-1 under the 1940 Act to ensure that all brokerage commissions paid to such
affiliates are reasonable and fair in the context of the market in which they
are operating. Any such transactions will be effected and related compensation
paid only in accordance with applicable SEC regulations.
41
<PAGE>
UNDERLYING THEME PORTFOLIO TRADING AND TURNOVER
The Fund's portfolio turnover rate is expected to be low, since the Fund will
only periodically rebalance its portfolio. The Fund's annual portfolio turnover
rate is not expected to exceed ___% annually.
The portfolio turnover rates of the Underlying Theme Funds have ranged from __%
to __% during their most recent fiscal years. There can be no assurance that the
portfolio turnover rates of the Underlying Theme Funds will remain within this
range during subsequent fiscal years. Higher portfolio turnover rates may result
in higher expenses being incurred by the Underlying Theme Funds.
TRUSTEES AND EXECUTIVE OFFICERS
The Trust's Trustees and Executive Officers are listed below.
<TABLE>
<CAPTION>
Name, Position(s) with the Principal Occupations and Business
COMPANY AND ADDRESS EXPERIENCE FOR THE PAST 5 YEARS
------------------- -------------------------------
<S> <C>
Daniel R. Waltcher, 33 Managing Director and Senior Counsel
Trustee and President of the Manager since July 1995; Associate,
50 California Street Simpson Thacher & Bartlett from September
San Francisco, CA 94111 1989 through June 1995.
James R. Tufts, 38 Chief Information Officer for the
Vice President and Manager since October 1996; President,
Chief Financial Officer GT Services since 1995; Senior
50 California Street Vice President -- Finance and
San Francico, CA 94111 Administration, GT Global, GT Services
and G.T. Insurance from 1994 to 1995;
Senior Vice President -- Finance and
Administration, LGT Asset Management from
1994 to October 1996; Vice President --
Finance, LGT Asset Management, GT Global
and GT Services from 1990 to 1994; Vice
President -- Finance, G.T. Insurance from
1992 to 1994; and Director, LGT Asset
Management, GT Global and GT Services
since 1991.
Kenneth W. Chancey, 51 Vice President -- Mutual Fund Accounting,
Vice President and Principal the Manager since 1992; and Vice
Accounting Officer President, Putnam Fiduciary Trust Company
50 California Street from 1989 to 1992.
San Francisco, CA 94111
Phillip S. Gillespie, Assistant General Counsel of the Manager
Secretary since March 1997, Senior Counsel,
50 California Street Division of Investment Management, U.S.
San Francisco, CA 94111 Securities & Exchange Commission from
1995 to 1997, Senior Counsel, Office of
General Counsel, U.S. Securities &
Exchange Commission from 1993 to 1995;
Associate, Perkins Coie from 1991 to 1993.
</TABLE>
42
<PAGE>
Compensation Table
Estimated
Compensation
Name from Trust
- ---- ----------
MANAGEMENT
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES RELATING TO THE FUND
The Manager acts as the investment adviser and administrator for the Fund
pursuant to a contract with the Trust. The Manager does not receive a fee for
providing services under the contract.
DISTRIBUTION SERVICES RELATING TO THE FUND
The Fund's Advisor Class shares are offered continuously through the Fund's
principal underwriter and distributor, GT Global, on a "best efforts" basis
without a sales charge or contingent deferred sales charge.
TRANSFER AGENCY AND ACCOUNTING AGENCY SERVICES
The Transfer Agent has been retained by the Fund to perform shareholder
servicing, reporting and general transfer agent functions for it. For these
services, the Transfer Agent receives an annual maintenance fee of $17.50 per
account, a new account fee of $4.00 per account, a per transaction fee of $1.75
for all transactions other than exchanges and a per exchange fee of $2.25. The
Transfer Agent is also reimbursed by the Fund for its out-of-pocket expenses for
such items as postage, forms, telephone charges, stationery and office supplies.
The Manager also serves as the Fund's pricing and accounting agent.
VALUATION OF FUND SHARES
As described in the Advisor Class Prospectus, the Fund's net asset value per
share for each class of shares is determined each day on which the New York
Stock Exchange ("NYSE") is open for business ("Business Day") as of the close of
regular trading on the NYSE (currently 4:00 p.m. Eastern Time, unless weather,
equipment failure or other factors contribute to an earlier closing time).
Currently, the NYSE is closed on weekends and on certain days relating to the
following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
July 4th, Labor Day, Thanksgiving Day and Christmas Day.
The value of the shares of the Underlying Theme Funds will be their net asset
value at the time the net asset value of the Fund is determined.
43
<PAGE>
INFORMATION RELATING TO SALES
AND REDEMPTIONS
PAYMENT AND TERMS OF OFFERING
Payment for Advisor Class shares of the Fund purchased should accompany the
purchase order, or funds should be wired to the Transfer Agent as described in
the Prospectus. Payment, other than by wire transfer, must be made by check or
money order drawn on An U.S. bank. Checks or money orders must be payable in
U.S. dollars.
As a condition of this offering, if an order to purchase either class of shares
is canceled due to nonpayment (for example, on account of a check returned for
"not sufficient funds"), the person who made the order will be responsible for
any loss incurred by the Underlying Theme Fund by reason of such cancellation,
and if such purchaser is a shareholder, the Fund shall have the authority as
agent of the shareholder to redeem shares in his or her account at their
then-current net asset value per share to reimburse the Fund for the loss
incurred. Investors whose purchase orders have been canceled due to nonpayment
may be prohibited from placing future orders.
The Fund reserves the right at any time to waive or increase the minimum
requirements applicable to initial or subsequent investments with respect to any
person or class of persons. An order to purchase shares is not binding on the
Fund until it has been confirmed in writing by the Transfer Agent (or other
arrangements made with the Fund, in the case of orders utilizing wire transfer
of funds, as described above) and payment has been received. To protect existing
shareholders, the Fund reserves the right to reject any offer for a purchase of
shares by any individual.
SALES OUTSIDE THE UNITED STATES
Sales of Fund shares made through brokers outside the United States will be at
net asset value plus a sales commission, if any, established by that broker or
by local law.
EXCHANGES
Shares of the Fund may be exchanged for shares of other GT Global Mutual Funds,
based on their respective net asset values without imposition of any sales
charges provided that the registration remains identical. Advisor Class shares
of the Fund may be exchanged only for Advisor Class shares of other GT Global
Mutual Funds. The exchange privilege is not an option or right to purchase
shares but is permitted under the current policies of the respective GT Global
Mutual Funds. The privilege may be discontinued or changed at any time by any of
the funds upon sixty days prior written notice to the shareholders of such fund
and is available only in states where the exchange may be made legally. Before
purchasing shares through the exercise of the exchange privilege, a shareholder
should obtain and read a copy of the prospectus of the fund to be purchased and
should consider the investment objective(s) of the fund.
TELEPHONE REDEMPTIONS
A corporation or partnership wishing to utilize telephone redemption services
must submit a "Corporate Resolution" or "Certificate of Partnership" indicating
the names, titles and the required number of signatures of persons authorized to
act on its behalf. The certificate must be signed by a duly authorized
officer(s), and, in the case of a corporation, the corporate seal must be
affixed. All shareholders may request that redemption proceeds be transmitted by
bank wire upon request directly to the shareholder's predesignated account at a
domestic bank or savings institution if the proceeds are at least $1,000. Costs
in connection with the administration of this service, including wire charges,
currently are borne by the Fund. Proceeds of less than $1,000 will be mailed to
the shareholder's registered address of record. The Fund and the Transfer Agent
reserve the right to refuse any telephone instructions and may discontinue the
aforementioned redemption options upon thirty days' written notice.
44
<PAGE>
SUSPENSION OF REDEMPTION PRIVILEGES
The Fund may suspend redemption privileges or postpone the date of payment for
more than seven days after a redemption order is received during any period (1)
when the NYSE is closed other than customary weekend and holiday closings, or
trading on the NYSE is restricted as directed by the SEC, (2) when an emergency
exists, as defined by the SEC, which would prohibit the Fund or the Underlying
Theme Portfolios from disposing of portfolio securities owned by them or in
fairly determining the value of its assets, or (3) as the SEC may otherwise
permit.
REDEMPTIONS IN KIND
It is possible that conditions may arise in the future which would, in the
opinion of the Trust's Board of Trustees, make it undesirable for the Fund to
pay for all redemptions in cash. In such cases, the Board may authorize payment
to be made in portfolio securities or other property of the Fund, so called
"redemptions in kind." Payment of redemptions in kind will be made in readily
marketable securities. Such securities would be valued at the same value
assigned to them in computing the net asset value per share. Shareholders
receiving such securities would incur brokerage costs in selling any such
securities so received. [However, despite the foregoing, the Trust has filed
with the SEC an election pursuant to Rule 18f-1 under the 1940 Act. This means
that the Fund will pay in cash all requests for redemption made by any
shareholder of record, limited in amount with respect to each shareholder during
any ninety-day period to the lesser of $250,000 or 1% of the net asset value of
the Fund at the beginning of such period. This election will be irrevocable so
long as Rule 18f-1 remains in effect, unless the SEC by order upon application
permits the withdrawal of such election.]
TAXES
TAXATION OF THE FUND
In order to qualify for treatment as a regulated investment company ("RIC")
under the Code, the Fund must distribute to its shareholders for each taxable
year at least 90% of its investment company taxable income (consisting generally
of net investment income and net short-term capital gain) ("Distribution
Requirement") and must meet several additional requirements. With respect to the
Fund, 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 other income derived with respect to its business
of investing in securities ("Income Requirement"); (2) the Fund must derive less
than 30% of its gross income each taxable year from the sale or other
disposition of securities, or any of the following, that were held for less than
three months ("Short-Short Limitation"); (3) 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, with these other securities 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 (4) 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 (other than U.S. government securities or the securities
of other RICs) of any one issuer.
The Fund will be subject to a nondeductible 4% excise tax ("Excise Tax") to the
extent it fails to distribute by the end of any calendar year substantially all
45
<PAGE>
of its ordinary income for that year and capital gain net income for the
one-year period ending on October 31 of that year, plus certain other amounts.
TAXATION OF THE FUND'S SHAREHOLDERS
Dividends and other distributions declared by the Fund in, and payable to
shareholders of record as of a date in, October, November or December of any
year will be deemed to have been paid by the Fund and received by the
shareholders on December 31 of that year if the distributions are paid by the
Fund during the following January. Accordingly, those distributions will be
taxed to shareholders for the year in which that December 31 falls.
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 received by the Fund (directly or through
an Underlying Theme Portfolio) from U.S. corporations. However, dividends
received by a corporate shareholder and deducted by it pursuant to the
dividends-received deduction may be subject indirectly to the alternative
minimum tax.
If the Fund shares are sold at a loss after being held for six months or less,
the loss will be treated as long-term, instead of short-term, capital loss to
the extent of any capital gain distributions received on those shares. Investors
also should be aware that if shares are purchased shortly before the record date
for any dividend or other distribution, the shareholder will pay full price for
the shares and receive some portion of the price back as a taxable distribution.
Dividends paid by the Fund to a shareholder who, as to the United States, is a
nonresident alien individual or nonresident alien fiduciary of a trust or
estate, foreign corporation or foreign partnership ("foreign shareholder") will
be subject to U.S. withholding tax (at a rate of 30% or lower treaty rate).
Withholding will not apply if a dividend paid by the Fund to a foreign
shareholder is "effectively connected with the conduct of An U.S. trade or
business," in which case the reporting and withholding requirements applicable
to domestic shareholders will apply. Distributions of net capital gain are not
subject to withholding, but in the case of a foreign shareholder who is a
nonresident alien individual, those distributions ordinarily will be subject to
U.S. income tax at a rate of 30% (or lower treaty rate) if the individual is
physically present in the United States for more than 182 days during the
taxable year and the distributions are attributable to a fixed place of business
maintained by the individual in the United States.
The foregoing is a general and abbreviated summary of certain federal tax
considerations affecting the Fund and its shareholders. Investors are urged to
consult their own tax advisers for more detailed information and for information
regarding any foreign, state and local taxes applicable to distributions
received from the Fund.
ADDITIONAL INFORMATION
LIECHTENSTEIN GLOBAL TRUST
Liechtenstein Global Trust AG, formerly BIL GT Group, is composed of the Manager
and its worldwide affiliates. Other worldwide affiliates of Liechtenstein Global
Trust include LGT Bank in Liechtenstein, formerly Bank in Liechtenstein, an
international financial services institution founded in 1920. LGT Bank in
46
<PAGE>
Liechtenstein has principal offices in Vaduz, Liechtenstein. Its subsidiaries
currently include LGT Bank in Liechtenstein (Deutschland) GmbH, formerly Bank in
Liechtenstein (Frankfurt) GmbH, and LGT Asset Management AG, formerly Bilfinanz
und Verwaltung AG, in Zurich, Switzerland.
Worldwide asset management affiliates also currently include LGT Asset
Management PLC, formerly G.T. Management PLC, in London, England; LGT Asset
Management Ltd., formerly G.T. Management (Asia) Ltd., in Hong Kong; LGT Asset
Management Ltd., formerly G.T. Management (Japan) Ltd., in Tokyo; LGT Asset
Management Pte. Ltd., formerly G.T. Management (Singapore) PTE Ltd., in
Singapore; LGT Asset Management Ltd., formerly G.T. Management (Australia) Ltd.,
in Sydney; and LGT Asset Management GmbH, formerly BIL Asset Management GmbH, in
Frankfurt.
CUSTODIAN
State Street Bank and Trust Company ("State Street"), 225 Franklin Street,
Boston, Massachusetts 02110, acts as custodian of the Underlying Theme
Portfolios' assets.
INDEPENDENT ACCOUNTANTS
The Trust's independent accountants are Coopers & Lybrand L.L.P., One Post
Office Square, Boston, Massachusetts 02109. Coopers & Lybrand L.L.P. conducts
annual audits of the Fund's financial statements, assists in the preparation of
the Fund's federal and state income tax returns and consults with the Trust as
to matters of accounting, regulatory filings, and federal and state income
taxation.
The audited financial statements of the Trust included in this Statement of
Additional Information have been examined by Coopers & Lybrand L.L.P., as stated
in their opinion appearing herein, and are included in reliance upon such
opinion given upon the authority of that firm as experts in accounting and
auditing.
USE OF NAME
The Manager has granted the Trust the right to use the "GT" and "GT Global"
names and has reserved the right to withdraw its consent to the use of such
names by the Trust at any time or to grant the use of such names to any other
company.
SHAREHOLDER LIABILITY
Under certain circumstances, shareholders of the Fund may be held personally
liable for the obligations of the Fund. The Trust's Declaration of Trust
provides that shareholders shall not be subject to any personal liability for
the acts or obligations of a Fund or the Trust and that every written agreement,
obligation or other undertaking made or issued by the Fund or the Trust shall
contain a provision to the effect that shareholders are not personally liable
thereunder. The Declaration of Trust provides for indemnification out of the
Trust's assets under certain circumstances, and further provides that the Trust
shall, upon request, assume the defense of any act or obligation of the Fund or
the Trust and that the Fund will indemnify the shareholder for all legal and
other expenses incurred therewith. Thus, the risk of any shareholder's incurring
financial loss beyond his or her investment, because of this theoretical
shareholder liability, is limited to circumstances in which the Fund or the
Trust itself would be unable to meet its obligations.
47
<PAGE>
INVESTMENT RESULTS
STANDARDIZED RETURNS
The Fund's "Standardized Returns," as referred to in the Prospectus (see "Other
Information -- Performance Information" in the Prospectus), is calculated
separately for Class A, Class B and Advisor Class shares of the Fund, as
follows: Standardized Return (average annual total return ("T")) is computed by
using the ending redeeming value ("ERV") of a hypothetical initial investment of
$1,000 ("P") over a period of years ("n") according to the following formula as
required by the SEC: P(1+T) = ERV. The following assumptions will be reflected
in computations made in accordance with this formula: (1) for Class A shares,
deduction of the maximum sales charge of 4.75% from the $1,000 initial
investment; (2) for Class B shares, deduction of the applicable contingent
deferred sales charge imposed on a redemption of Class B shares held for the
period; (3) for Advisor Class shares, deduction of a sales charge is not
applicable; (4) reinvestment of dividends and other distributions at net asset
value on the reinvestment date determined by the Trust's Board of Directors; and
(5) a complete redemption at the end of any period illustrated.
NON-STANDARDIZED RETURNS
In addition to Standardized Returns, the Fund also may include in
advertisements, sales literature and shareholder reports other total return
performance data ("Non-Standardized Return"). Non-Standardized Return is
calculated separately for Class A, Class B and Advisor Class shares of the Fund
and may be calculated according to several different formulas. Non-Standardized
Returns may be quoted for the same or different time periods for which
Standardized Returns are quoted. Non-Standardized Returns for Class A and Class
B shares may or may not take sales charges into account; performance data
calculated without taking the effect of sales charges into account will be
higher than data including the effect of such charges. Advisor Class shares are
not subject to sales charges.
Average annual Non-Standardized Return ("T") is computed by using the ending
redeeming value ("ERV") of a hypothetical initial investment of $1,000 ("P")
over a period of years ("n") according to the following formula as required by
the SEC: P(1+T) = ERV. The following assumptions will be reflected in
computations made in accordance with this formula: (1) no deduction of sales
charges; (2) reinvestment of dividends and other distributions at net asset
value on the reinvestment date determined by the Board; and (3) a complete
redemption at the end of any period illustrated.
The Fund's investment results will vary from time to time depending upon market
conditions, the composition of each Underlying Theme Fund's portfolio and
operating expenses of the Fund, so that current or past yield or total return
should not be considered representative of what an investment in the Fund may
earn in any future period. These factors and possible differences in the methods
used in calculating investment results should be considered when comparing the
Fund's investment results with those published for other investment companies
and other investment vehicles. The Fund's results also should be considered
relative to the risks associated with the Fund's investment objective and
policies.
IMPORTANT POINTS TO NOTE ABOUT DATA RELATING TO WORLD EQUITY AND BOND MARKET
The Fund and GT Global may from time to time in advertisements, sales literature
and reports furnished to present or prospective shareholders compare the Fund
with, but not limited to, the following:
48
<PAGE>
(1) The Salomon Brothers Non-U.S. Dollars Indices, which are
measures of the total return performance of high quality non-U.S. dollar
denominated securities in major sectors of the worldwide bond markets.
(2) The Lehman Brothers Government/Corporate Bond Index, which
is a comprehensive measure of all public obligations of the U.S.
Treasury (excluding flower bonds and foreign targeted issues), all
publicly issued debt of agencies of the U.S. Government (excluding
mortgage backed securities), and all public, fixed rate, non-convertible
investment grade domestic corporate debt rated at least Baa by Moody's
Investors Service, Inc. ("Moody's") or BBB by Standard and Poor's
Ratings Group ("S&P"), or, in the case of nonrated bonds, BBB by Fitch
Investors Service, Inc. ("Fitch") (excluding collateralized mortgage
obligations).
(3) The Consumer Price Index, which is a measure of the
average change in prices over time in a fixed market basket of goods and
services (e.g., food, clothing, shelter, fuels, transportation fares,
charges for doctors' and dentists' services, prescription medicines, and
other goods and services that people buy for day-to-day living). There
is inflation risk which does not affect a security's value but its
purchasing power i.e. the risk of changing price levels in the economy
that affects security prices or the price of goods and services.
(4) Data and mutual fund rankings published or prepared by
Lipper Analytical Data Services, Inc. ("Lipper"), CDA/Wiesenberger
Investment Companies Service ("CDA/Wiesenberger"), Morningstar, Inc.
and/or other companies that rank and/or compare mutual funds by overall
performance, investment objectives, assets, expense levels, periods of
existence and/or other factors. In this regard each Underlying Theme
Fund may be compared to the Underlying Theme Fund's "peer group" as
defined by Lipper, CDA/Wiesenberger, Morningstar and/or other firms, as
applicable, or to specific funds or groups of funds within or outside of
such peer group. Lipper generally ranks funds on the basis of total
return, assuming reinvestment of distributions, but does not take sales
charges or redemption fees into consideration, and is prepared without
regard to tax consequences. In addition to the mutual fund rankings, the
Underlying Theme Fund's performance may be compared to mutual fund
performance indices prepared by Lipper. Morningstar is a mutual fund
rating service that also rates mutual funds on the basis of
risk-adjusted performance. Morningstar ratings are calculated from a
fund's three, five and ten year average annual returns with appropriate
fee adjustments and a risk factor that reflects fund performance
relative to the three-month U.S. Treasury bill monthly returns. Ten
percent of the funds in an investment category receive five stars and
22.5% receive four stars. The ratings are subject to change each month.
(5) Bear Stearns Foreign Bond Index, which provides simple
average returns for individual countries and Gross National Product
("GNP") weighted index, beginning in 1975. The returns are broken down
by local market and currency.
(6) Ibbottson Associates International Bond Index, which
provides a detailed breakdown of local market and currency returns since
1960.
49
<PAGE>
(7) Standard & Poor's 500 Composite Stock Price Index which is
a widely recognized index composed of the capitalization-weighted
average of the price of 500 of the largest publicly traded stocks in the
United States.
(8) Salomon Brothers Broad Investment Grade Index which is a
widely used index composed of U.S. domestic government, corporate and
mortgage-backed fixed income securities.
(9) Dow Jones Industrial Average.
(10) CNBC/Financial News Composite Index.
(11) Morgan Stanley Capital International World Indices,
including, among others, the Morgan Stanley Capital International
Europe, Australia, Far East Index ("EAFE Index"). The EAFE index is an
unmanaged index of more than 1,000 companies in Europe, Australia and
the Far East.
(12) Salomon Brothers World Government Bond Index and Salomon
Brothers World Government Bond Index-Non-U.S. are each a widely used
index composed of world government bonds.
(13) The World Bank Publication of Trends in Developing
Countries (TIDE). TIDE provides brief reports on most of the World
Bank's borrowing members. The World Development Report is published
annually and looks at global and regional economic trends and their
implications for the developing economies.
(14) Salomon Brothers Global Telecommunications Index is
composed of telecommunications companies in the developing and emerging
countries.
(15) Datastream and Worldscope each is an on-line database
retrieval service for information including, but not limited to,
international financial and economic data.
(16) International Financial Statistics, which is produced by
the International Monetary Fund.
(17) Various publications and annual reports, produced by the
World Bank and its affiliates.
(18) Various publications from the International Bank for
Reconstruction and Development.
(19) Various publications including, but not limited to
ratings agencies such as Moody's, S&P and Fitch.
(20) Wilshire Associates which is an on-line database for
international financial and economic data including performance measure
for a wide range of securities.
(21) Bank Rate National Monitor Index, which an average of the
quoted rates for 100 leading banks and thrifts in ten U.S. cities.
50
<PAGE>
(22) International Finance Corporation ("IFC") Emerging
Markets Data Base which provides detailed statistics on stock and bond
markets in developing countries.
(23) Various publications from the Organization for Economic
Cooperation and Development ("OECD").
(24) Average of Savings Accounts, which is a measure of all
kinds of savings deposits, including longer-term certificates. Savings
accounts offer a guaranteed rate of return on principal, but no
opportunity for capital growth. During a portion of the period, the
maximum rates paid on some savings deposits were fixed by law.
Indices, economic and financial data prepared by the research departments of
various financial organizations, such as Salomon Brothers, Inc., Lehman
Brothers, Merrill Lynch, Pierce, Fenner & Smith, Inc., J.P. Morgan, Morgan
Stanley, Smith Barney Shearson, S.G. Warburg, Jardine Flemming, The Bank for
International Settlements, Asian Development Bank, Bloomberg, L.P., and
Ibbottson Associates, may be used, as well as information reported by the
Federal Reserve and the respective Central Banks of various nations. In
addition, GT Global may use performance rankings, ratings and commentary
reported periodically in national financial publications, including but not
limited to, Money Magazine, Mutual Fund Magazine, Smart Money, Global Finance,
EuroMoney, Financial World, Forbes, Fortune, Business Week, Latin Finance, the
Wall Street Journal, Emerging Markets Weekly, Kiplinger's Guide To Personal
Finance, Barron's, The Financial Times, USA Today, The New York Times, Far
Eastern Economic Review, The Economist and Investors Business Digest. The Fund
may compare its performance to that of other compilations or indices of
comparable quality to those listed above and other indices which may be
developed and made available in the future.
Information relating to foreign market performance, capitalization and
diversification is based on sources believed to be reliable, but which may be
subject to revision and which has not been independently verified by the Fund or
GT Global. The authors and publishers of such material are not to be considered
as "experts" under the 1933 Act, on account of the inclusion of such information
herein.
A portion of the performance figures for each market includes the positive or
negative effects of the currency exchange rates effective at December 31 of each
year between the U.S. dollar and currency of the foreign market (e.g. Japanese
Yen, German Deutschemark, Hong Kong Dollar). A foreign currency which has
strengthened or weakened against the U.S. dollar will positively or negatively
affect the reported returns, as the case may be.
GT Global believes that this information may be useful to investors considering
whether and to what extent to diversify their investments through the purchase
of mutual funds investing in securities on a global basis. However, this data is
not a representation of the past performance of the Fund, nor is it a prediction
of such performance. The performance of the Fund will differ from the historical
performance of relevant indices. The performance of indices does not take
expenses into account, while the Fund incurs expenses in its operations, which
will reduce performance. Each of these factors will cause the performance of the
Fund to differ from relevant indices.
From time to time, the Fund and GT Global may refer to the number of
shareholders in the Fund or the aggregate number of shareholders in all GT
51
<PAGE>
Global Mutual Funds or the dollar amount of the Fund's assets under management
or rankings by DALBAR Surveys, Inc. in advertising materials.
GT Global believes the Fund is an appropriate investment for long-term
investment goals including, but not limited to funding retirement, paying for
education or purchasing a house. GT Global may provide information designed to
help individuals understand their investment goals and explore various financial
strategies. For example, GT Global may describe general principles of investing,
such as asset allocation, diversification and risk tolerance. The Fund does not
represent a complete investment program and the investors should consider the
Fund as appropriate for a portion of their overall investment portfolio with
regard to their long-term investment goals. There is no assurance that any such
information will lead to achieving these goals or guarantee future results.
From time to time, GT Global may refer to or advertise the names of U.S. and
non-U.S. companies and their products although there can be no assurance that
any GT Global Mutual Fund may own the securities of these companies.
Ibbotson Associates of Chicago, Illinois (Ibbotson) provides historical returns
of the capital markets in the United States, including common stocks, small
capitalization stocks, long-term corporate bonds, intermediate-term government
bonds, long-term government bonds, Treasury bills, the U.S. rate of inflation
(based on the CPI), and combinations of various capital markets. The performance
of these capital markets are based on the returns of different indices.
GT Global Mutual Funds may use the performance of these capital markets in order
to demonstrate general risk-versus-reward investment scenarios. Performance
comparisons may also include the value of a hypothetical investment in any of
these capital markets. The risks associated with the security types in any
capital market may or may not correspond directly to those of the funds.
Ibbotson calculates total returns in the same method as the funds. The funds may
also compare performance to that of other compilations or indices that may be
developed and made available in the future.
The Fund may quote various measures of volatility and benchmark correlation such
as beta, standard deviation and R in advertising. In addition, the Fund may
compare these measures to those of other funds. Measures of volatility seek to
compare the Fund's historical share price fluctuations or total returns compared
to those of a benchmark. All measures of volatility and correlation are
calculated using averages of historical data.
The Fund may advertise examples of the effects of periodic investment plans,
including the principle of dollar cost averaging programs. In such a program, an
investor invests a fixed dollar amount in a fund at periodic intervals, thereby
purchasing fewer shares when prices are high and more shares when prices are
low. While such a strategy does not assure a profit or guard against loss in a
declining market, the investor's average cost per share can be lower than if
fixed numbers of shares are purchased at the same intervals. In evaluating such
a plan, investors should consider their ability to continue purchasing shares
through periods of low price levels.
The Fund may be available for purchase through retirement plans or other
programs offering deferral of or exemption from income taxes, which may produce
superior after-tax returns over time. For example, a $10,000 investment earning
a taxable return of 10% annually would have an after-tax value of $17,976 after
52
<PAGE>
ten years, assuming tax was deducted from the return each year at a 39.6% rate.
An equivalent tax-deferred investment would have an after-tax value of $19,626
after ten years, assuming tax was deducted at a 39.6% rate from the deferred
earnings at the end of the ten-year period.
The Fund may describe in its sales material and advertisements how an investor
may invest in GT Global Mutual Funds through various retirement plans that offer
deferral of income taxes on investment earnings and may also enable an investor
to make pre-tax contributions. Because of their advantages, these retirement
accounts and plans may produce returns superior to comparable non-retirement
investments. In sales material and advertisements, the Fund may also discuss
these accounts and plans, which include:
INDIVIDUAL RETIREMENT ACCOUNTS (IRAS): If you have earned income from
employment (including self-employment), you can contribute each year to an IRA
Up to the lesser of (1) $2,000 for yourself or $4,000 for you and your spouse,
regardless of whether your spouse is employed or (2) 100% of compensation. Some
individuals may be able to take an income tax deduction for the contribution.
Regular contributions may not be made for the year you become 70-1/2 or
thereafter. Please consult your tax advisor for more information.
ROLLOVER IRAS: Individuals who receive distributions from qualified retirement
plans (other than required distributions) and who wish to keep their savings
growing tax-deferred can roll over (or make a direct transfer of) their
distribution to a Rollover IRA. These accounts can also receive rollovers or
transfers from an existing IRA. If an "eligible rollover distribution" from a
qualified employer-sponsored retirement plan is not directly rolled over to an
IRA (or certain qualified plans), withholding at the rate of 20% will be
required for federal income tax purposes. A distribution from a qualified plan
that is not an "eligible rollover distribution," including a distribution that
is one of a series of substantially equal periodic payments, generally is
subject to regular wage withholding or withholding at the rate of 10% (depending
on the type and amount of the distribution), unless you elect not to have any
withholding apply. Please consult your tax advisor for more information.
SEP-IRAS: Simplified employee pension plans ("SEPs" or "SEP-IRAs") provide
self-employed individuals (and any eligible employees) with benefits similar to
Keogh-type plans or Code Section 401(k) plans, but with fewer administrative
requirements and therefore potential lower annual administration expenses.
CODE SECTION 403(b)(7) CUSTODIAL ACCOUNTS: Employees of public schools and most
other not-for-profit organizations can make pre-tax salary reduction
contributions to these accounts.
PROFIT-SHARING (INCLUDING SECTION 401(k)) AND MONEY PURCHASE PENSION PLANS:
Corporations can sponsor these qualified defined contribution plans for their
employees. A Section 401(k) plan, a type of profit-sharing plan, additionally
permits the eligible, participating employees to make pre-tax salary reduction
contributions to the plan (up to certain limitations).
SIMPLE RETIREMENT PLANS: Employers with no more than 100 employees who do not
maintain another retirement plan may establish a Savings Incentive Match Plan
for Employees ("SIMPLE") either as separate IRAs or as part of a Code Section
401(k) plan. SIMPLEs are not subject to the complicated nondiscrimination rules
that generally apply to qualified retirement plans.
53
<PAGE>
GT Global may from time to time in its sales materials and advertising discuss
the risks inherent in investing. The major types of investment risk are market
risk, industry risk, credit risk, interest rate risk, liquidity risk and
inflation risk. Risk represents the possibility that you may lose some or all of
your investment over a period of time. A basic tenet of investing is the greater
the potential reward, the greater the risk.
From time to time, the Fund and GT Global will quote data regarding industries,
companies, individual countries, regions, world stock exchanges, and economic
and demographic statistics from sources GT Global deems reliable, including the
economic and financial data of such financial organizations as:
1) Stock market capitalization: Morgan Stanley Capital International World
Indices, IFC and Datastream.
2) Stock market trading volume: Morgan Stanley Capital International Industry
Indices and IFC.
3) The number of listed companies: IFC, GT Guide to World Equity Markets,
Salomon Brothers, Inc., and S.G. Warburg.
4) Wage rates: U.S. Department of Labor Statistics and Morgan Stanley Capital
International World.
5) International industry performance: Morgan Stanley Capital International
World Indices, Wilshire Associates and Salomon Brothers, Inc.
6) Stock market performance: Morgan Stanley Capital International World Indices,
IFC and Datastream.
7) The Consumer Price Index and inflation rate: The World Bank, Datastream and
IFC.
8) Gross Domestic Product ("GDP"): Datastream and The World Bank.
9) GDP growth rate: IFC, The World Bank and Datastream.
10) Population: The World Bank, Datastream and United Nations.
11) Average annual growth rate (%) of population: The World Bank, Datastream and
United Nations.
12) Age distribution within populations: OECD and United Nations.
13) Total exports and imports by year: IFC, The World Bank and Datastream.
14) Top three companies by country, industry or market: IFC, GT Guide to World
Equity Markets, Salomon Brothers Inc., and S.G. Warburg.
15) Foreign direct investments to developing countries: The World Bank and
Datastream.
54
<PAGE>
16) Supply, consumption, demand and growth in demand of certain products,
services and industries, including, but not limited to electricity, water,
transportation, construction materials, natural resources, technology, other
basic infrastructure, financial services, health care services and supplies,
consumer products and services and telecommunications equipment and services
(sources of such information may include, but would not be limited to, The World
Bank, OECD, IMF, Bloomberg and Datastream).
17) Standard deviation and performance returns for U.S. and non-U.S. equity and
bond markets: Morgan Stanley Capital International.
18) Countries restructuring their debt, including those under the Brady Plan:
the Manager.
19) Political and economic structure of countries: Economist Intelligence Unit.
20) Government and corporate bonds -- credit ratings, yield to maturity and
performance returns: Salomon Brothers, Inc.
21) Dividend yields for U.S. and non-U.S. companies: Bloomberg.
From time to time, GT Global may include in its advertisement and sales
material, information about privatization which is an economic process involving
the sale of state-owned companies to the private sector.
In advertising and sales materials, GT Global may make reference to or discuss
its products, services and accomplishments. Among these accomplishments are that
in 1983 the Manager provided assistance to the government of Hong Kong in
linking its currency to the U.S. dollar, and that in 1987 Japan's Ministry of
Finance licensed LGT Asset Management Ltd. as one of the first foreign
discretionary investment managers for Japanese investors. Such accomplishments,
however, should not be viewed as an endorsement of the Manager by the government
of Hong Kong, Japan's Ministry of Finance or any other government or government
agency. Nor do any such accomplishments of the Manager provide any assurance
that the GT Global Mutual Funds' investment objectives will be achieved.
GT GLOBAL ADVANTAGE
As part of Liechtenstein Global Trust, GT Global continues a 75-year tradition
of service to individuals and institutions. Today we bring investors a
combination of experience, worldwide resources, a global perspective, investment
talent and a time tested investment discipline. With investment professionals in
nine offices worldwide, we witness world events and economic developments
firsthand.
The key to achieving consistent results is following a disciplined investment
process. Our approach to asset allocation takes advantage of GT Global's
worldwide presence and global perspective. Our "macroeconomic" worldview
determines our overall strategy of regional, country and sector allocations. Our
bottom up process of security selection combines fundamental research with
quantitative analysis through our proprietary models.
Built in checks and balances strengthen the process, enhancing professional
experience and judgment with an objective assessment of risk. Ultimately, each
security we select has passed a ranking system that helps our portfolio teams
determine when to buy and when to sell.
55
<PAGE>
DESCRIPTION OF DEBT RATINGS
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Moody's employs the designations "Prime-1" and "Prime-2" to indicate commercial
paper having the highest capacity for timely repayment. Issuers rated Prime-1
(or supporting institutions) have a superior ability for repayment of senior
short-term debt obligations. Prime-1 repayment ability will often be evidenced
by many of the following characteristics: leading market positions in
well-established industries; high rates of return on funds employed;
conservative capitalization structure with moderate reliance on debt and ample
asset protection; broad margins in earnings coverage of fixed financial charges
and high internal cash generation; and well-established access to a range of
financial markets and assured sources of alternate liquidity. Issuers rated
Prime-2 (or supporting institutions) have a strong ability for repayment of
senior short-term debt obligations. This normally will be evidenced by many of
the characteristics cited above but to a lesser degree. Earnings trends and
coverage ratios, while sound may be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
S&P rates commercial paper in four categories ranging from "A-1" for the highest
quality obligations to "D" for the lowest. A-1 -- This highest category
indicates that the degree of safety regarding timely payment is strong. Those
issues determined to possess extremely strong safety characteristics will be
denoted with a plus sign (+) designation. A-2 -- Capacity for timely payment on
issues with this designation is satisfactory. However, the relative degree of
safety is not as high as for issues designated "A-1." A-3 -- Issues carrying
this designation have adequate capacity for timely payment. They are, however,
more vulnerable to the adverse effects of changes in circumstances than
obligations carrying the higher designations. B -- Issues rated "B" are regarded
as having only speculative capacity for timely payment. C -- This rating is
assigned to short-term debt obligations with a doubtful capacity for payment. D
- -- Debt rated "D" is in payment default. The "D" rating category is used when
interest payments or principal payments are not made on the date due, even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period.
DESCRIPTION OF BOND RATINGS
Moody's rates the long-term debt securities issued by various entities from
"Aaa" to "C." Investment Grade Ratings are the first four categories: Aaa --
Best quality. These securities carry the smallest degree of investment risk and
are generally referred to as "gilt edged." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such
issues. Aa -- High quality by all standards. Together with the Aaa group they
comprise what are generally known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risk appear
somewhat larger than the Aaa securities. A -- Upper-medium-grade obligations.
Factors giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment sometime in
the future. Baa -- Medium-grade obligations (i.e., they are neither highly
protected nor poorly secured). Interest payments and principal security appear
adequate for the present but certain protective elements may be lacking or may
be characteristically unreliable over any great length of time. Such bonds lack
56
<PAGE>
outstanding investment characteristics and in fact have speculative
characteristics as well. Ba -- Have speculative elements and their future cannot
be considered as well-assured. Often the protection of interest and principal
payments may be very moderate, and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position characterizes bonds in
this class. B -- Generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Caa -- Poor standing. Such issues may be in default or there may be present
elements of danger with respect to principal or interest. Ca -- Speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C -- Lowest rated class of bonds. Issues so rated can be regarded as having
extremely poor prospects of ever attaining any real investment standing.
ABSENCE OF RATING: Where no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to the quality of the
issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or
companies that are not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue
or issuer.
4. The issue was privately placed, in which case the rating is
not published in Moody's publications.
Suspension or withdrawal may occur if new and material circumstances arise, the
effects of which preclude satisfactory analysis; if there is no longer available
reasonable up-to-date data to permit a judgment to be formed; if a bond is
called for redemption; or for other reasons.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa to B in its corporate bond rating system. The modifier 1
indicates that the company ranks in the higher end of its generic rating
category; the modifier 2 indicates a mid-range ranking; and the modifier 3
indicates that the issue ranks in the lower end of its generic rating category.
S&P rates the securities debt of various entities in categories ranging from
"AAA" to "D" according to quality. Investment grade ratings are the first four
categories: AAA -- Highest rating. Capacity to pay interest and repay principal
is extremely strong. AA -- Very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in a small degree. A --
Has a strong capacity to pay interest and repay principal although it is
somewhat more susceptible to the adverse effects of changes in circumstances and
economic conditions than debt in higher rated categories. BBB -- Regarded as
having adequate capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rated
categories. BB, B, CCC, CC, C -- Debt rated "BB," "B," "CCC," "CC," and "C" is
57
<PAGE>
regarded, on balance, as predominantly speculative with respect to capacity to
pay interest and repay principal in accordance with the terms of the obligation.
"BB" indicates the lowest degree of speculation and "C" the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions. BB -- Has less near-term vulnerability to
default than other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or economic conditions
which could lead to inadequate capacity to meet timely interest and principal
payments. The "BB" rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied "BBB-" rating. B -- Has a greater
vulnerability to default but currently has the capacity to meet interest
payments and principal repayments. Adverse business, financial, or economic
conditions will likely impair capacity or willingness to pay interest and repay
principal. The "B" rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied "BB" or "BB-" rating. CCC -- Has a
currently identifiable vulnerability to default, and is dependent upon favorable
business, financial, and economic conditions to meet timely payment of interest
and repayment of principal. In the event of adverse business, financial, or
economic conditions, it is not likely to have the capacity to pay interest and
repay principal. The "CCC" rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied "B" or "B-" rating.
CC -- Typically applied to debt subordinated to senior debt that is assigned an
actual or implied "CCC" rating. C -- Typically applied to debt subordinated to
senior debt that is assigned an actual or implied "CCC-" debt rating. The "C"
rating may be used to cover a situation where a bankruptcy petition has been
filed, but debt service payments are continued. C1 -- Reserved for income bonds
on which no interest is being paid. D -- In payment default. The "D" category is
used when interest payments or principal payments are not made on the date due
even if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period. This rating will also be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
PLUS (+) OR MINUS (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
NR: Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
58
<PAGE>
PART C. OTHER INFORMATION
-------------------------
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements - To be filed.
(b) Exhibits:
(1) Trust Instrument -Filed herewith.
(2) By-Laws - Filed herewith.
(3) Voting trust agreement - None.
(4) Instruments defining the rights of holders of Registrant's shares of
beneficial interest.1
(5) Management Agreement - To be filed.
(6) (a) Distribution Contract with respect to Class A Shares - To be filed.
(b) Distribution Contract with respect to Class B Shares - To be filed.
(c) Distribution Contract with respect to Advisor Class Shares - To be
filed.
(7) Bonus, profit sharing or pension plans - None.
(8) Custodian Agreement - To be filed.
(9) Transfer Agency Agreement - To be filed.
(10) Opinion of Counsel - To be filed.
(11) Other opinions, appraisals, rulings and consents:
Accountants' consent - To be filed.
(12) Financial Statements omitted from Part b - None.
(13) Letter of investment intent - To be filed.
(14) Model Retirement Plan.2
(15) Rule 12b-1 Plans
(a) Plan of Distribution pursuant to Rule 12b-1 with respect to Class A
Shares - To be filed.
(b) Plan of Distribution pursuant to Rule 12b-1 with respect to Class B
Shares - To be filed.
(16) Schedule for Computation of Performance Quotations - None.
(17) Financial Data Schedule - Not Applicable.
(18) Plan Pursuant to Rule 18f-3 - To be filed.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None.
_____________________
1 Incorporated by reference from Articles III, VIII, IX and X of Registrant's
Trust Instrument and from Articles II, VII, and X of Registrant's By-Laws.
2 Incorporated by reference from Post-Effective Amendment No. 40 to the
Registration Statement of G.T. Global Growth Series (File No. 2-57526) filed
with the Securities and Exchange Commission April 29, 1997.
C-1
<PAGE>
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
Number of Record
Holders As of
Title of Class June 25, 1997
- -------------- ----------------
Share of Beneficial Interest in:
GT Global New Dimension Fund Class A 0
GT Global New Dimension Fund Class B 0
GT Global New Dimension Fund Advisor 0
Class
ITEM 27. INDEMNIFICATION
Article X of the Registrant's Articles of Incorporation provides for
indemnification of certain persons acting on behalf of the Trust.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended ("1933 Act"), may be permitted to Trustees, officers,
and controlling persons by the Registrant's Articles of Incorporation, By-Laws,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission ("Commission") such indemnification is
against public policy as expressed in the 1933 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 the court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issues.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
See the material under the heading "Management" included in Part A
(Prospectus) of this Registration Statement and the material appearing under the
headings "Trustees and Executive Officers" and "Management" included in Part B
(Statement of Additional Information) of this Registration Statement.
Information as to the Directors and Officers of the Adviser is included in Form
ADV (File No. 801-10254), filed with the Commission, which is incorporated
herein by reference thereto.
ITEM 29. PRINCIPAL UNDERWRITERS
a) GT Global, Inc. is also the principal underwriter for the following
other investment companies: G.T. Global Growth Series (which includes the
following funds: GT Global America Value Fund, GT Global America Small Cap
Growth Fund, GT Global America Mid Cap Growth Fund, GT Global Europe Growth
Fund, GT Global International Growth Fund, GT Global Japan Growth Fund, GT
Global New Pacific Growth Fund, and GT Global Worldwide Growth Fund); G.T.
Investment Funds, Inc. (which includes twelve funds currently in operation: GT
Global Strategic Income Fund, GT Global Government Income Fund, GT Global High
Income Fund, GT Global Growth & Income Fund, GT Global Latin America Growth
Fund, GT Global Telecommunications Fund, GT Global Health Care Fund, GT Global
Financial Services Fund, GT Global Infrastructure Fund, GT Global Consumer
Products and Services Fund, GT Global Natural Resources Fund and GT Global
Emerging Markets Fund); GT Investment Portfolios, Inc. (which includes one fund:
C-2
<PAGE>
GT Global Dollar Fund); GT Global Variable Investment Series (which includes
five funds in operation: GT Global Variable New Pacific Fund, GT Global Variable
Europe Fund, GT Global Variable America Fund, GT Global Variable International
Fund, GT Global Money Market Fund); GT Global Variable Investment Trust (which
includes seven funds in operation: GT Global Variable Latin America Fund, GT
Global Variable Telecommunications Fund, GT Global Variable Growth & Income
Fund, GT Global Variable Global Government Income Fund and GT Global Variable
U.S. Government Income Fund); and GT Global Floating Rate Fund, Inc.
b) Directors and Officers of GT Global, Inc.
Unless otherwise indicated, the business address of each person listed is
is 50 California Street, San Francisco, California, CA 94111.
Positions and Offices Positions and Offices
Name With Underwriter With Registrant
- ---- --------------------- ----------------------
William J. Guilfoyle President and Director None
James R. Tufts Senior Vice President- Vice President, Treasurer and
Finance and Chief Financial Officer
Administration and
Director
Raymond R. Cunningham Senior Vice President- None
-National Sales Manager
and Director
Richard Healey Senior Vice President- None
Retail Marketing
Daniel R. Waltcher Secretary President, Trustee and
Principal Executive Officer
Phillip Gillespie Assistant Secretary Secretary
Daniel T. Phillips Vice President - None
Retirement Product
Marketing
C-3
<PAGE>
Positions and Offices Positions and Offices
Name With Underwriter With Registrant
- ---- --------------------- ---------------------
David P. Hess Assistant Secretary None
Philip D. Edelstein Senior Vice None
9 Huntly Circle Palm President-Regional
Beach Gardens, FL 33418 Sales Manager
Stephen A. Maginn Senior Vice None
519 S. Juanita Redondo President-Regional
Beach, CA 90277 Sales Manager
Peter J. Wolfert Senior Vice President- None
Information Technology
Christine M. Pallatto Senior Vice None
President-Human
Resources
Margo A. Tammen Vice President-Finance None
& Administration
Gary M. Castro Assistant Treasurer & None
Controller
Dennis W. Reichert Assistant Treasurer & None
Budget Director
Jon Burke Vice President None
31 Darlene Drive
Southboro, MA 01772
Phil Christopher Vice President None
3621 59th Avenue, SW
Seattle, WA 98116
Anthony DiBacco Vice President None
30585 Via Lindosa Way
Laguna Niguel, CA 92677
Stephen Duffy Vice President None
1120 Gables Drive
Atlanta GA, 30319
Ned E. Hammond Vice President None
5901 McFarland Ct.
Plano, TX 75093
Campbell Judge Vice President None
4312 Linden Hills
Blvd., #202
Minneapolis, MN 55410
Richard Kashnowski Vice President None
1368 South Ridge Drive
Mandeville, LA 70448
C-4
<PAGE>
Positions and Offices Positions and Offices
Name With Underwriter With Registrant
- ---- --------------------- ---------------------
Robin Kraebel Vice President None
49 Bergin Avenue
Waldwick, NJ 07463
Allen M. Kuhn Vice President None
7220 Garfield Street
New Orleans, LA 70118
Jeffrey S. Kulik Vice President None
6540 Autumn Wind Circle
Clarksville, MD 21029
Steven C. Manns Vice President None
3025 Caswell Drive
Troy, MI 48084
Wayne F. Meyer Vice President None
2617 Sun Meadow Drive
Chesterfield, MO 63005
Dean Phillips Vice President None
3406 Bishop Park Drive, #428
Winter Park, FL 32792
Anthony Rogers Vice President None
100 SouthBank Drive
Cary, NC 27511
Philip Schertz Vice President None
25 Ivy Place
Wayne, NJ 07470
Peter Sykes Vice President None
1655 E. Sherman Ave.
Salt Lake City, UT 84105
Lance Vetter Vice President None
10915 La Salinas Circle
Boca Raton, FL 33428
Tommy D. Wells Vice President None
25 Crane Drive
San Anselmo, CA 94960
Todd H. Westby Vice President None
3405 Goshen Road
Newtown Square, PA 19073
Eric T. Zeigler Vice President None
3100 The Strand
Manhattan Beach, CA 90266
C-5
<PAGE>
c) None.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Accounts, books, and other records required by Rules 31a-1 and 31a-2 under
the Investment Company Act of 1940, as amended, are maintained and held in the
offices of the Registrant and its Investment Manager, Chancellor LGT Asset
Management, Inc., 50 California Street, 27th Floor, San Francisco, California
94111.
Records covering stockholder accounts and portfolio transactions are also
maintained and kept by Registrant's Transfer Agent, GT Global Investor Services,
Inc., 2121 N. California Boulevard, Suite 450, Walnut Creek, California 94596,
and by the Registrant's Custodian, State Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts 02110.
ITEM 31. MANAGEMENT SERVICES
None.
ITEM 32. UNDERTAKINGS
Registrant hereby undertakes to file a Post-Effective Amendment to this
Registration Statement, containing financial statements that need not be
certified, within four to six months from the effective date of this
Registration Statement.
Registrant hereby undertakes to furnish each person to whom a prospectus
is delivered with a copy of the Registrant's latest annual report to
shareholders upon request and without charge.
C-6
<PAGE>
GT GLOBAL ASSET ALLOCATION TRUST
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of San Francisco, and the
State of California, on the 27th day of June, 1997.
GT GLOBAL ASSET ALLOCATION TRUST
By: /S/ DANIEL R. WALTCHER
---------------------------
Daniel R. Waltcher
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement of GT Global Asset Allocation Trust has been signed below
by the following person in the capacities indicated on the 27th day of June,
1997.
/S/ DANIEL R. WALTCHER President and Trustee
- ----------------------- (Principal Executive Officer)
Daniel R. Waltcher
/S/ JAMES R. TUFTS Vice President, Treasurer and
- ------------------------ Principal Financial Officer
James R. Tufts
/S/ KENNETH W. CHANCEY Vice President and
- ------------------------ Principal Accounting Officer
Kenneth W. Chancey
<PAGE>
EXHIBIT INDEX
-------------
(a) Financial Statements - To be filed.
(b) Exhibits:
(1) Trust Instrument -Filed herewith.
(2) By-Laws - Filed herewith.
(3) Voting trust agreement - None.
(4) Instruments defining the rights of holders of Registrant's shares of
beneficial interest.1
(5) Management Agreement - To be filed.
(6) (a) Distribution Contract with respect to Class A Shares - To be filed.
(b) Distribution Contract with respect to Class B Shares - To be filed.
(c) Distribution Contract with respect to Advisor Class Shares - To be
filed.
(7) Bonus, profit sharing or pension plans - None.
(8) Custodian Agreement - To be filed.
(9) Transfer Agency Agreement - To be filed.
(10) Opinion of Counsel - To be filed.
(11) Other opinions, appraisals, rulings and consents:
Accountants' consent - To be filed.
(12) Financial Statements omitted from Part b - None.
(13) Letter of investment intent - To be filed.
(14) Model Retirement Plan.2
(15) Rule 12b-1 Plans
(a) Plan of Distribution pursuant to Rule 12b-1 with respect to Class A
Shares - To be filed.
(b) Plan of Distribution pursuant to Rule 12b-1 with respect to Class B
Shares - To be filed.
(16) Schedule for Computation of Performance Quotations - None.
(17) Financial Data Schedule - Not Applicable.
(18) Plan Pursuant to Rule 18f-3 - To be filed.
GT GLOBAL ASSET ALLOCATION TRUST
A Massachusetts Business Trust
DECLARATION OF TRUST
August 26, 1996
<PAGE>
GT GLOBAL ASSET ALLOCATION TRUST
--------------------------------
DECLARATION OF TRUST
--------------------
DECLARATION OF TRUST, dated as of the 26th day of August, 1996, by David J.
Thelander and Matthew M. O'Toole, the Trustees hereunder:
WHEREAS, the Trustees desire to establish a trust fund for the
investment and reinvestment of funds contributed thereto;
NOW, THEREFORE, the Trustees declare that all money and property
contributed to the trust fund hereunder shall be held and managed in trust under
this Declaration of Trust as herein set forth below.
ARTICLE I
---------
NAME, PRINCIPAL PLACE OF BUSINESS AND DEFINITIONS
-------------------------------------------------
NAME AND PRINCIPAL PLACE OF BUSINESS
- ------------------------------------
Section 1. This Trust shall be known as "GT Global Asset Allocation
Trust." The principal place of business of the Trust is 50 California Street,
27th Floor, San Francisco, California 94111. The Trust may establish and
maintain such other offices and places of business as the Trustees may determine
from time to time. The resident agent for the Trust in Massachusetts shall be CT
Corporation System, whose address is 2 Oliver Street, Boston, Massachusetts, or
such other person as the Trustees may designate from time to time.
DEFINITIONS
- -----------
Section 2. Wherever used herein, unless otherwise required by the
context or specifically provided:
(a) The Terms "Commission," "Interested Person," "Majority of the
Outstanding Voting Securities" (as referred to in Section 2(a)(42) of the 1940
Act) and "Principal Underwriter" shall have the meanings given them in the 1940
Act, as amended from time to time;
(b) The "Trust" refers to GT Global Asset Allocation Trust and
reference to the Trust, when applicable to one or more Series of the Trust,
shall refer to any such Series;
(c) "Net Asset Value" means the net asset value of each Series of the
Trust determined in the manner provided in Article IX, Section 3;
1
<PAGE>
(d) "Shareholder" means a record owner of Shares of the Trust;
(e) The "Trustees" means the persons who have signed this Declaration
of Trust 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
of Article IV hereof, and reference herein to a Trustee or the Trustees shall
refer to such person or persons in his capacity or their capacities as trustees
hereunder.
(f) "Shares" means the equal proportionate transferable units of
interest into which the beneficial interest of each Series or Class thereof
shall be divided from time to time and includes fractions of shares as well as
whole shares (all of the transferable units of a Series or of a single Class may
be referred to as "Shares" as the context may require);
(g) The "1940 Act" refers to the Investment Company Act of 1940, as
amended from time to time;
(h) "Series" refers to series of Shares of the Trust established in
accordance with the provisions of Article III;
(i) "Class" refers to the class of Shares of a Series of the Trust
established in accordance with the Provisions of Article III.
(j) "By-Laws" means the By-Laws of the Trust adopted by the Trustees,
as amended from time to time.
ARTICLE II
----------
PURPOSE OF TRUST
----------------
The purpose of this Trust is to provide investors a continuous source
of managed investment in securities.
ARTICLE III
-----------
BENEFICIAL INTEREST
-------------------
SHARES OF BENEFICIAL INTEREST
- -----------------------------
Section 1. The beneficial interest in the Trust shall be divided into
such transferable Shares of one or more separate and distinct Series or Classes
thereof as the Trustees shall from time to time create and establish. The number
of Shares is unlimited and each Share shall have a par value of $0.001 per Share
and upon issuance in accordance with the terms hereof shall be fully paid and
nonassessable. The Trustees shall have full power and authority, in their sole
2
<PAGE>
discretion and without obtaining any prior authorization or vote of the
Shareholders of the Trust, to create and establish (and to change in any manner)
Shares with such preferences, terms of conversion, voting powers, rights and
privileges as the Trustees may from time to time determine, to divide or combine
the Shares into a greater or lesser number, to classify or reclassify any
unissued Shares into one or more Series or Classes of Shares, to abolish any one
or more Series or Classes of Shares, and to take such other action with respect
to the Shares as the Trustees may deem desirable. The Trustees, in their
discretion without a vote of the Shareholders, may divide the Shares of any
Series into Classes. In such event, each Class of a Series shall represent
interests in the assets of that Series and have identical voting, dividend,
liquidation and other rights and the same terms and conditions, except that
expenses allocated to a Class of a Series may be borne solely by such Class as
shall be determined by the Trustees and a Class of a Series may have exclusive
voting rights with respect to matters affecting only that Class.
ESTABLISHMENT OF SERIES OR CLASS
- --------------------------------
Section 2. The Trust shall consist of one or more Series. Each Series
shall be established by the adoption of a resolution of the Trustees. The
Trustees may designate the relative rights and preferences of the Shares of each
Series. The Trustees may divide the Shares of any Series into Classes by the
adoption of a resolution. The Trustees may designate the relative rights and
preferences of each Class of Shares. At any time that there are no Shares
outstanding of any particular Series previously established and designated, the
Trustees may by a majority vote abolish that Series and the establishment and
designation thereof. At any time that there are no shares outstanding of any
particular Class of a Series, the Trustees may by a majority vote abolish that
Class and the establishment and designation thereof. The Trustees by a majority
vote may change the name of any Series or Class.
OWNERSHIP OF SHARES
- -------------------
Section 3. The ownership of Shares shall be recorded on the books of
the Trust. The Trustees may make such rules as they consider appropriate for the
transfer of Shares and similar matters. The record books of the Trust shall be
conclusive as to who are the holders of Shares and as to the number of Shares
held from time to time by each Shareholder.
INVESTMENT IN THE TRUST
- -----------------------
Section 4. The Trustees shall accept investments in the Trust from such
persons and on such terms as they may from time to time authorize. Such
investments may be in the form of cash or securities in which the appropriate
3
<PAGE>
Series is authorized to invest, valued as provided in Article IX, Section 3.
After the date of the initial contribution of capital, the number of Shares to
represent the initial contribution may in the Trustees' discretion be considered
as outstanding and the amount received by the Trustees on account of the
contribution shall be treated as an asset of the Trust or a Series thereof, as
appropriate. Subsequent investments in the Trust shall be credited to each
Shareholder's account in the form of full and fractional Shares based on the Net
Asset Value per Share next determined after the investment is received;
provided, however, that the Trustees may, in their sole discretion, impose a
sales charge upon investments in the Trust or Series or any Classes of Shares
thereof. The Trustees shall have the right to refuse to accept investments in
the Trust or any Series at any time without any cause or reason therefor
whatsoever.
ASSETS AND LIABILITIES OF SERIES
- --------------------------------
Section 5. All consideration received by the Trust for the issue or
sale of Shares of a particular Series, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall be
referred to as "assets belonging to" that Series. In addition, any assets,
income, earnings, profits, and proceeds thereof, funds, or payments which are
not readily identifiable as belonging to any particular Series shall be
allocated by the Trustees between and among one or more of the Series in such
manner as they, in their sole discretion, deem fair and equitable. Each such
allocation shall be conclusive and binding upon the Shareholders of all Series
for all purposes, and shall be referred to as assets belonging to that Series.
The assets belonging to a particular Series shall be so recorded upon the books
of the Trust, and shall be held by the Trustees in trust for the benefit of the
holders of Shares of that Series. The assets belonging to each particular Series
shall be charged with the liabilities of that Series and all expenses, costs,
charges and reserves attributable to that Series except that liabilities and
expenses allocated solely to a particular Class shall be borne by that Class.
Any general liabilities, expenses, costs, charges or reserves of the Trust or
Series which are not readily identifiable as belonging to any particular Series
or Class shall be allocated and charged by the Trustees between or among any one
or more of the Series or Classes in such manner as the Trustees in their sole
discretion deem fair and equitable. Each such allocation shall be conclusive and
binding upon the Shareholders of all Series or Classes for all purposes. Any
creditor of any Series may look only to the assets of that Series to satisfy
such creditor's debt.
4
<PAGE>
NO PREEMPTIVE RIGHTS
- --------------------
Section 6. Shareholders shall have no preemptive or other right to
subscribe to any additional Shares or other securities issued by the Trust or
the Trustees.
STATUS OF SHARES AND LIMITATION OF PERSONAL LIABILITY
- -----------------------------------------------------
Section 7. Shares shall be deemed to be personal property giving only
the rights provided in this Declaration of Trust. Every Shareholder by virtue or
having become a Shareholder shall be held expressly to have assented and agreed
to the terms of this Declaration of Trust and to have become a party hereto. The
death of a Shareholder during the continuance of the Trust shall not operate to
terminate the Trust nor entitle the representative of any deceased Shareholder
to an accounting or to take any action in court or elsewhere against the Trust
or the Trustees, but only to the rights of said decedent under this Trust.
Ownership of Shares shall not entitle the Shareholder to any title in or to the
whole or any part of the Trust property or right to call for a partition or
division of the same or for an accounting, nor shall the ownership of Shares
constitute the Shareholders partners. Neither the Trust nor the Trustees shall
have any 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 for any Shares or otherwise.
ARTICLE IV
----------
THE TRUSTEES
------------
MANAGEMENT OF THE TRUST
- -----------------------
Section 1. The business and affairs of the Trust shall be managed by
the Trustees, and they shall have all powers necessary and desirable to carry
out that responsibility. A Trustee shall not be required to be a Shareholder of
the Trust.
ELECTION OF TRUSTEES AND APPOINTMENT OF INITIAL TRUSTEES
- --------------------------------------------------------
Section 2. On a date fixed by the Trustees, the Shareholders shall
elect the Trustees. Until such election, the Trustees shall be the initial
Trustees and such other persons as may be hereafter appointed pursuant to
Section 4 of this Article IV. The initial Trustees shall be David J. Thelander
and Matthew M. O'Toole.
5
<PAGE>
TERM OF OFFICE OF TRUSTEES
- --------------------------
Section 3. The Trustees shall hold office during the lifetime of this
Trust, and until its termination as hereinafter provided; except (a) that any
Trustee may resign his trust by written instrument signed by him and delivered
to the other Trustees or to any officer of the Trust, which shall take effect
upon such delivery or upon such later date as is specified therein; (b) that any
Trustee may be removed with or without cause at any time by written instrument,
signed by at least two-thirds of the number of Trustees prior to such removal,
specifying the date when such removal shall become effective; (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
other Trustees, specifying the date of his retirement; and (d) that any Trustee
may be removed at any Special Meeting of the Trust by a vote of at least
two-thirds of the outstanding Shares.
RESIGNATION AND APPOINTMENT OF TRUSTEES
- ---------------------------------------
Section 4. In case of the declination, death, resignation, retirement,
removal, incapacity, or inability of any of the Trustees, or in case a vacancy
shall exist by reason of an increase in number or for any other reason, the
remaining Trustees shall fill such vacancy by appointment of such other person
as they in their discretion shall see fit consistent with the limitations under
the 1940 Act. Such appointment shall be evidenced by a written instrument signed
by a majority of the Trustees in office or by a recording in the records of the
Trust, whereupon the appointment shall take effect. An appointment of a Trustee
may be made by the Trustees then in office 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. As soon as any Trustee so appointed shall have
accepted this trust, the trust estate shall vest in the new Trustee or Trustees,
together with the continuing Trustees, without any further act or conveyance,
and he shall be deemed a Trustee hereunder.
TEMPORARY ABSENCE OF TRUSTEE
- ----------------------------
Section 5. Any Trustee may, by power of attorney, delegate his power
for a period not exceeding six months at any one time to any other Trustee or
Trustees, provided that in no case shall less than two Trustees personally
exercise the other powers hereunder except as herein otherwise expressly
provided.
6
<PAGE>
NUMBER OF TRUSTEES
- ------------------
Section 6. The number of Trustees shall initially be two (2) and
thereafter shall be such number as shall be fixed from time to time by a written
instrument signed by a majority of the Trustees (or by an officer of the Trust
pursuant to a vote of the majority of such Trustees); provided, however, that
the number of Trustees serving hereunder at any time shall in no event be less
than one (1) nor more than fifteen (15).
Whenever a vacancy in the Board of Trustees shall occur, until such
vacancy is filled, or while any Trustee is absent from his state of domicile
(unless said Trustee has made arrangements to be informed about, and to
participate in, the affairs of the Trust during such absence), or is physically
or mentally incapacitated by reason of disease or otherwise, the other Trustees
shall have all the powers hereunder and the certificate of the other Trustees of
such vacancy, absence or incapacity, shall be conclusive.
EFFECT OF DEATH, RESIGNATION, ETC. OF A TRUSTEE
- -----------------------------------------------
Section 7. The death, declination, resignation, retirement, removal,
incapacity, or inability of the Trustee, or any one of them, shall not operate
to annul the Trust or to revoke any existing agency created pursuant to the
terms of this Declaration of Trust.
OWNERSHIP OF ASSETS OF THE TRUST
- --------------------------------
Section 8. The assets or the Trust shall be held separate and apart
from any assets now or hereafter held in any capacity other than as Trustee
hereunder by the Trustees or any successor Trustees. All of the assets of the
Trust shall at all times be considered as vested in the Trustees.
ARTICLE V
---------
POWERS OF THE TRUSTEES
----------------------
POWERS
- ------
Section 1. The Trustees in all instances shall act as principals, and
are and shall be free from the control of the Shareholders. The Trustees shall
have full power and authority to do any and all acts and to make and execute any
and all contracts and instruments that they may consider necessary or
appropriate in connection with the management of the Trust. The Trustees shall
not in any way be bound or limited by present or future laws or customs in
regard to trust investments, but shall have full authority and power to make any
and all investments which they, in their uncontrolled discretion, shall deem
7
<PAGE>
proper to accomplish the purposes of this Trust. Subject to any applicable
limitation in this Declaration of Trust or the By-Laws of the Trust, the
Trustees shall have power and authority, without limitation:
(a) To invest and reinvest cash and other property, and to hold cash
or other property uninvested, without in any event being bound or limited by any
present or future law or custom in regard to investments by trustees, and to
sell, exchange, lend, pledge, mortgage, hypothecate, write options on and lease
any or all of the assets of the Trust; to purchase and sell (or write) options
on securities, currencies, indices, futures contracts and other financial
instruments and enter into closing transactions in connection therewith; to
enter into all types of commodities contracts, including without limitation the
purchase and sale of futures contracts and forward contracts on securities,
indices, currencies, and other financial instruments; to engage in forward
commitment, "when issued" and delayed delivery transactions; to enter into
repurchase agreements and reverse repurchase agreements; and to employ all kinds
of hedging techniques and investment management strategies.
(b) To adopt By-Laws not inconsistent with this Declaration of Trust
providing for the conduct of the business of the Trust and to amend and repeal
them to the extent that they do not reserve the right to the Shareholders.
(c) To elect and remove such officers and appoint and terminate such
agents as they consider appropriate.
(d) To employ as custodian of any assets of the Trust subject to any
conditions set forth in this Declaration of Trust or in the By-Laws, if any, a
bank, trust company, or other entity permitted by the Commission to serve as
such.
(e) To retain a transfer agent and Shareholder servicing agent, or
both.
(f) To provide for the distribution of Shares either through a
principal underwriter in the manner hereinafter provided for or by the Trust
itself, or both.
(g) To set record dates in the manner hereinafter provided for.
(h) To delegate such authority as they consider desirable to any
officers of the Trust and to any agent, independent contractor, custodian or
underwriter.
(i) To sell or exchange any or all of the assets of the Trust, subject
to the provisions of Article XI, Section 4(b) hereof.
8
<PAGE>
(j) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and deliver
powers of attorney to such person or persons as the Trustees shall deem proper,
granting to such person or persons such power and discretion with relation to
securities or property as the Trustees shall deem proper.
(k) To exercise powers and rights of subscription or otherwise which
in any manner arise out of ownership of securities.
(l) To hold any security or property in a form not indicating any
trust, whether in bearer, unregistered or other negotiable form; or either in
its own name or in the name of a custodian or a nominee or nominees, subject in
either case to proper safeguards according to the usual practice of
Massachusetts trust companies or investment companies.
(m) To establish separate and distinct Series with separately defined
investment objectives and policies and distinct investment purposes in
accordance with the provisions of Article III and to establish separate Classes
thereof.
(n) To allocate assets, liabilities and expenses of the Trust to a
particular Series and liabilities and expenses to a particular Class thereof or
to apportion the same between or among two or more Series or Classes, provided
that any liabilities or expenses incurred by a particular Series or Class shall
be payable solely out of the assets belonging to that Series or Class as
provided for in Article III.
(o) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern, any security of which is
held in the Trust; to consent to any contract, lease, mortgage, purchase, or
sale of property by such corporation or concern, and to pay calls or
subscriptions with respect to any security held in the Trust.
(p) To compromise, arbitrate, or otherwise adjust claims in favor of
or against the Trust or any matter in controversy including, but not limited to,
claims for taxes.
(q) To make distributions of income and of capital gains to
Shareholders in the manner hereinafter provided for.
(r) To borrow money.
(s) To establish, from time to time, a minimum total investment for
Shareholders, and to require the redemption of the Shares of any Shareholders
whose investment is less than such minimum upon giving notice to such
Shareholder.
9
<PAGE>
No one dealing with the Trustees shall be under any obligation to make
any inquiry concerning the authority of the Trustees, or to see to the
application of any payments made or property transferred to the Trustees or upon
their order.
TRUSTEES AND OFFICERS AS SHAREHOLDERS
- -------------------------------------
Section 2. Any Trustee, officer, other agent or independent contractor
of the Trust may acquire, own and dispose of Shares to the same extent as if he
were not a Trustee, officer, agent or independent contractor; and the Trustees
may issue and sell or cause to be issued and sold Shares to and buy such Shares
from any such person or any firm or company in which he is interested, subjects
only to the general limitations herein contained as to the sale and purchase of
such Shares; and all subject to any restrictions which may be contained in the
By-Laws.
ACTION BY THE TRUSTEES
- ----------------------
Section 3. The Trustees shall act by majority vote at a meeting in
person duly called, by unanimous written consent without a meeting or by
telephonic meeting provided a quorum of Trustees participate in any such
telephonic meeting, unless the 1940 Act requires that a particular action be
taken only at a meeting in person of the Trustees. At any meeting of the
Trustees, one-third of the Trustees shall constitute a quorum. Meetings of the
Trustees may be called orally or in writing by the Chairman of the Trustees or
by any two other Trustees. Notice of the time, date and place of all meetings of
the Trustees shall be given by the party calling the meeting to each Trustee by
telephone or telegram sent to his home or business address at least twenty-four
hours in advance of the meeting or by written notice mailed to his home or
business address at least seventy-two hours in advance of the meeting. Notice
need not be given to any Trustee who attends the meeting without objecting to
the lack of notice or who executes a written waiver of notice with respect to
the meeting either before or after such meeting. Subject to the requirements of
the 1940 Act, the Trustees by majority vote may delegate to any one of their
number their authority to approve particular matters or take particular actions
on behalf of the Trust.
CHAIRMAN OF THE BOARD OF TRUSTEES
- ---------------------------------
Section 4. The Trustees may appoint one of their number to be Chairman
of the Board of Trustees. The Chairman shall preside at all meetings of the
Trustees, shall be responsible for the execution of policies established by the
Trustees and the administration of the Trust, and may be the chief executive,
financial and/or accounting officer of the Trust.
10
<PAGE>
ARTICLE VI
----------
EXPENSES OF THE TRUST
---------------------
TRUSTEE REIMBURSEMENT
- ---------------------
Section 1. Subject to the provisions of Article III, Section 5, the
Trustees shall be reimbursed from the Trust estate or the assets belonging to
the appropriate Series for their expenses and disbursements, including, without
limitation, fees and expenses of Trustees, interest expense, taxes, fees and
commissions of every kind, expenses of pricing Trust portfolio securities,
expenses of issue, repurchase and redemption of Shares, expenses of distributing
its Shares and providing services to Shareholders, expenses of registering and
qualifying the Trust and its Shares under Federal and State laws and
regulations, charges of investment advisers, administrators, custodians,
transfer agents, and registrars, expenses of preparing and setting in type
prospectuses and statements of additional information, expenses of printing and
distributing prospectuses and statements of additional information sent to
existing Shareholders, auditing and legal expenses, reports to Shareholders,
expenses of meetings of Shareholders and proxy solicitations therefor, insurance
expense, association membership dues and for such non-recurring items as may
arise, including litigation to which the Trust is a party (except those losses
and expenses the indemnification of which is not permitted under Article X
hereof), and for all losses and liabilities by them incurred in administering
the Trust; and for the payment of such expenses, disbursements, losses and
liabilities the Trustees shall have a lien on the assets belonging to the
appropriate Series prior to any rights or interests of the Shareholders thereto.
This section shall not preclude the Trust from directly paying any of the
aforementioned fees and expenses.
ARTICLE VII
-----------
INVESTMENT ADVISER, PRINCIPAL UNDERWRITER AND TRANSFER AGENT
------------------------------------------------------------
INVESTMENT ADVISER
- ------------------
Section 1. Subject to a vote of a Majority of the Outstanding Voting
Securities, the Trustees may from time to time enter into an investment advisory
and management contract(s) on behalf of the Trust or any Series thereof whereby
the other party(ies) to such contract(s) shall undertake to furnish the Trust
such management, investment advisory, statistical and research facilities and
services and such other facilities and services, if any, and all upon such terms
and conditions, as the Trustees may in their discretion determine.
Notwithstanding any provisions of this Declaration of Trust, the Trustees may
11
<PAGE>
authorize the investment adviser(s) (subject to such general or specific
instruments as the Trustees may from time to time adopt) to effect purchases,
sales or exchanges of portfolio securities and other investment instruments of
the Trust or may authorize any officer, agent, or Trustee to effect such
purchases, sales or exchanges pursuant to recommendations of the investment
adviser (and all without further action by the Trustees).
The Trustees may, subject to applicable requirements of the 1940 Act,
including those relating to Shareholder approval, authorize the investment
adviser to employ one or more sub-advisers from time to time to perform such of
the acts and services of the investment adviser, and upon such terms and
conditions, as may be agreed upon between the investment adviser and
sub-adviser.
PRINCIPAL UNDERWRITER
- ---------------------
Section 2. The Trustees may from time to time enter into one or more
contract(s) on behalf of the Trust or any Series or Class, providing for the
sale of the Shares whereby the Trust may either agree to sell the Shares to the
other party to the contract or appoint such other party its sales agent for such
Shares. In either case, the contract shall be on such terms and conditions as
may be prescribed in the By-Laws, if any, and such further terms and conditions
as the Trustees may in their discretion determine not inconsistent with the
provisions of this Article VII, or of the By-Laws, if any; and such contract
also may provide for the repurchase or sale of Shares by such other party as
principal or as agent of the Trust. The Trustees may in their discretion adopt a
plan or plans of distribution and enter into any related agreements whereby the
Trust finances directly or indirectly any activity that is primarily intended to
result in sales of Shares.
TRANSFER AGENT
- --------------
Section 3. The Trustees, on behalf of the Trust or any Series or
Class, may from time to time enter into a transfer agency and Shareholder
service contract whereby the other party shall undertake to furnish the Trust or
any Series or Class with transfer agency and shareholder services. The contract
shall be on such terms and conditions as the Trustees may in their discretion
determine not inconsistent with the provisions of this Declaration of Trust or
of the By-Laws, if any. Such services may be provided by one or more entities,
including one or more agents of such other party.
PARTIES TO CONTRACT
- -------------------
Section 4. Any contract of the character described in Sections 1, 2
and 3 of this Article VII or that relates to the provision of custodian services
to the Trust may be entered into with any corporation, firm, partnerships, trust
or association, although one more of the Trustees or officers of the Trust may
12
<PAGE>
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 relationship, nor shall any person holding such
relationship be liable merely by reason of such relationship for any loss or
expense to the Trust 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 reasonable and fair and not inconsistent with the
provisions of this Article VII or the By-Laws, if any. The same person
(including a firm, corporation, partnership, trust, or association) may be the
other party to contracts entered into pursuant to Sections 1, 2 and 3 above or
with respect to the provision of custodian services to the Trust, and any
individual may be financially interested in or otherwise affiliated with persons
who are parties to any or all of the contracts mentioned in this Section 4.
ARTICLE VIII
------------
SHAREHOLDERS VOTING POWERS AND MEETINGS
---------------------------------------
VOTING POWERS
- -------------
Section 1. The Shareholders shall have power to vote (i) for the
election of Trustees as provided in Article IV, Section 2, (ii) for the removal
of Trustees as provided in Article IV, Section 3(d), (iii) with respect to any
investment advisory and management contract(s) as provided in Article VII,
Section 1, (iv) with respect to any termination or reorganization of the Trust
as provided in Article XI, Section 4, (v) with respect to the amendment of this
Declaration of Trust to the extent and as provided in Article XI, Section 7,
(vi) to the same extent as the shareholders of a Massachusetts business
corporation, as to whether or not a court action, proceeding or claim should be
brought or maintained derivatively or as a class action on behalf of the Trust
or the Shareholders, provided, however, that a Shareholder of a particular
Series shall not be entitled to bring any derivative or class action on behalf
of any other Series of the Trust, and provided further that, within a Series, a
Shareholder of a particular Class shall not be entitled to bring any derivative
or class action on behalf of any other Class except with respect to matters
sharing a common fact pattern with said Shareholders own Class; and (vii) with
respect to such additional matters relating to the Trust as may be required or
authorized by law, by this Declaration of Trust, or the By-Laws of the Trust, if
any, or any registration of the Trust with the Commission or any State, or as
the Trustees may consider desirable. On any matter submitted to a vote of the
Shareholders, all Shares shall be voted by individual Series or Classes, except
(i) when required by the 1940 Act, Shares shall be voted in the aggregate and
not by individual Series or Classes; and (ii) when the Trustees have determined
13
<PAGE>
that the matter affects only the interests of one or more Series or Classes,
then only the Shareholders of such Series or Class shall be entitled to vote
thereon. 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. There shall be no cumulative voting in the
election of Trustees. Shares may be voted in person or by proxy. Until Shares
are issued, the Trustees may exercise all rights of Shareholders and may take
any action required or permitted by law, this Declaration of Trust or any
By-Laws of the Trust to be taken by Shareholders.
MEETINGS
- --------
Section 2. The first Shareholders meeting shall be held as specified
is Section 2 of Article IV at the principal office of the Trust or such other
place as the Trustees may designate. Special meetings of the Shareholders or any
Series or Class thereof may be called by the Trustees and shall be called by the
Trustees upon the written request of Shareholders owning at least one-tenth of
the outstanding Shares entitled to vote. Special meetings of Shareholders shall
be held, notice of such meetings shall be delivered and waiver of notice shall
occur according to the provisions of the Trust's By-Laws. Any action that may be
taken at a meeting of Shareholders may be taken without a meeting according to
the procedures set forth in the By-Laws.
QUORUM AND REQUIRED VOTE
- ------------------------
Section 3. A majority of the Shares entitled to vote in person or by
proxy shall be a quorum for the transaction of business at a Shareholders
meeting, except that where any provision of law or of this Declaration of Trust
permits or requires that holders of any Series or Class thereof shall vote as a
Series or Class, then a majority of the aggregate number of Shares of that
Series or Class thereof entitled to vote shall be necessary to constitute a
quorum for the transaction of business by that Series or Class. Any lesser
number shall be sufficient for adjournments. Any adjourned session or sessions
may be held, within one hundred twenty (120) days after the date set for the
original meeting, without the necessity of further notice. Except when a larger
vote is required by any provision of this Declaration of Trust or the By-Laws, a
Majority of the Outstanding Voting Securities voted in person or by proxy shall
decide any questions, provided that where any provision of law or of this
Declaration of Trust permits or requires that the holders of any Series or Class
shall vote as a Series or Class, then a Majority of the Outstanding Voting
Securities of that Series or Class voted on the matter shall decide that matter
insofar as that Series or Class is concerned, and further provided that a
plurality of the Shares voted in person or by proxy shall elect a Trustee.
14
<PAGE>
ARTICLE IX
----------
DISTRIBUTIONS AND REDEMPTIONS
-----------------------------
DISTRIBUTIONS
- -------------
Section 1.
(a) The Trustees may from time to time declare and pay dividends and
other distributions. The amount of such dividends and the payment of them shall
be wholly in the discretion of the Trustees.
(b) The Trustees shall have power, to the fullest extent permitted by
the laws of the Commonwealth of Massachusetts, at any time to declare and cause
to be paid dividends on Shares of a particular Series, from the assets belonging
to that Series, which dividends and other distributions, at the election of the
Trustees, may be paid daily or otherwise pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the Trustees may
determine, and may be payable in Shares, in cash or otherwise, at the election
of each Shareholder of that Series or Class. All dividends and distributions on
Shares of a particular Series shall be distributed pro rata to the holders of
that Series in proportion to the number of Shares of that Series held by such
holders at the date and time of record established for the payment of such
dividends or distributions, except that such dividends and distributions shall
appropriately reflect expenses allocated to a particular Class of such Series.
(c) Anything in this instrument to the contrary notwithstanding, the
Trustees may at any time declare and distribute a "stock dividend" pro rata
among the Shareholders of a particular Series or of a Class thereof as of the
record date fixed as provided in Section 3 of Article XI hereof.
REDEMPTIONS
- -----------
Section 2. Each Shareholder of a Series shall have the right at such
times as may be permitted by the Trustees to require the Series to redeem all or
any part of his Shares at a redemption price per Share equal to the Net Asset
Value per Share at such time as the Trustees shall have prescribed by resolution
less such charges as are determined by the Trustees and described in the Trust's
Registration Statement under the Securities Act of 1933 or any prospectus or
statement of additional information contained therein, as supplemented. In the
absence of such resolution, the redemption price per Share shall be the Net
Asset Value next determined after receipt by the Series of a request for
redemption in proper form less such charges as are determined by the Trustees
15
<PAGE>
and described in the Trust's Registration Statement under the Securities Act of
1933 or any prospectus or statement of additional information contained therein,
as supplemented.
The Trustees may specify conditions, prices, and places of redemption,
and may specify binding requirements for the proper form or forms of requests
for redemption. Payment of the redemption price may be wholly or partly in
securities or other assets at the value of such securities or assets used in
such determination of Net Asset Value, or may be in cash. Upon redemption,
Shares may be reissued from time to time. The Trustees may require Shareholders
to redeem Shares for any reason under terms set by the Trustees, including the
failure of a Shareholder to supply a personal identification number if required
to do so, or to have the minimum investment required, or to pay when due for the
purchase of Shares issued to him. To the extent permitted by law, the Trustees
may retain the proceeds of any redemption of Shares required by them for payment
of amounts due and owing by a Shareholder to the Trust or any Series or Class.
DETERMINATION OF NET ASSET VALUE AND VALUATION OF PORTFOLIO ASSETS
- ------------------------------------------------------------------
Section 3. The term "Net Asset Value" of any Series or Class shall
mean that amount by which the assets of that Series or Class exceed its
liabilities, all as determined by or under the direction of the Trustees. Net
Asset Value per Share shall be determined separately for each Series or Class of
Shares, as applicable, and shall be determined on such days and at such times as
the Trustees may determine. The determination shall be made with respect to
securities for which market quotations are readily available at the market value
of such securities; and with respect to other securities and assets, at the fair
value as determined in good faith by the Trustees, provided, however, that the
Trustees, without Shareholder approval, may alter the method of appraising
portfolio securities insofar as permitted under the 1940 Act and the rules,
regulations and interpretations thereof promulgated or issued by the Commission
or insofar as permitted by any order of the Commission applicable to the Series.
The Trustees may delegate any of their powers and duties under this Section 3
with respect to appraisal of assets and liabilities. At any time the Trustees
may cause the Net Asset Value per Share last determined to be determined again
in a similar manner and may fix the time when such redetermined values shall
become effective.
SUSPENSION OF THE RIGHT OF REDEMPTION
- -------------------------------------
Section 4. Notwithstanding Section 2 hereof, the Trustees may declare
a suspension of the right of redemption or postpone the date of payment as
permitted under the 1940 Act. Such suspension shall take effect as such time as
the Trustees shall specify but not later than the close of business on the
business day next following the declaration of suspension, and thereafter there
16
<PAGE>
shall be no right of redemption or payment until the Trustees shall declare the
suspension at an end. In the case of a suspension of the right of redemption, a
Shareholder may either withdraw his request for redemption or receive payment
based on the Net Asset Value per Share existing after the termination of the
suspension.
ARTICLE X
---------
LIMITATION OF LIABILITY AND INDEMNIFICATION
-------------------------------------------
LIMITATION OF LIABILITY
- -----------------------
Section 1. All persons extending credit to, contracting with or having
any claim against the Trust or a particular Series shall look only to the assets
of the Trust or such Series, as the case may be, for payment under such credit,
contract or claim; and neither the Shareholders nor the Trustees, nor any of the
Trust's officers, employees or agents, whether past, present or future, nor any
other Series shall be personally liable therefor.
Every note, bond, contract, instrument, certificate or undertaking and
every other act or thing whatsoever executed or done by or on behalf of the
Trust, any Series, or the Trustees or any of them in connection with the Trust
shall be conclusively deemed to have been executed or done only in or with
respect to their or his capacity as Trustees or Trustee and neither such
Trustees or Trustee nor the Shareholders shall be personally liable thereon.
Every note, bond, contract, instrument, certificate or undertaking made or
issued by the Trustees or by any officers or officer shall give notice that the
same was executed or made by them on behalf of the Trust or by them as Trustees
or Trustee or as officers or officer and not individually and that the
obligations of such instrument are not binding upon any of them or the
Shareholders individually but are binding only upon the assets and property of
the Trust or the particular Series in question, as the case may be, but the
omission thereof shall not operate to bind any Trustees or Trustee or officers
or officer or Shareholders or Shareholder individually.
Section 2. Provided they have exercised reasonable care and have acted
under the reasonable belief that their actions are in the best interest of the
Trust, the Trustees and officers of the Trust shall not be responsible for or
liable in any event for neglect or wrongdoing of them or any officer, agent,
employee, investment adviser or independent contractor of the Trust, but nothing
contained in this Declaration of Trust shall protect any Trustee or officer
against any liability to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office.
17
<PAGE>
INDEMNIFICATION
- ---------------
Section 3.
(a) Subject to the exceptions and limitations contained in Section
3(b) below:
(i) every person who is, or has been a Trustee or officer of the
Trust (hereinafter referred to as "Covered Person") shall be indemnified by the
appropriate Series to the fullest extent permitted by law against liability and
against all expenses reasonably incurred or paid by him in connection with any
claim, action, suit or proceeding in which he becomes involved as a party or
otherwise by virtue of his being or having been a Trustee or officer and against
amounts paid or incurred by him in the settlement or final resolution thereof;
(ii) 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 while in office or thereafter, and the
words "liability" and "expenses" shall include, without limitation, attorneys'
fees, costs, judgments, amounts paid in settlement, fines, penalties and other
liabilities.
(b) No indemnification shall be provided hereunder to a Covered
Person:
(i) who shall have been adjudicated by a court or body before
which the proceeding was brought (A) to be liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office or (B)
not to have acted in good faith in the reasonable belief that his action was in
the best interest of the Trust; or
(ii) in the event of a settlement, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard or the duties
involved in the conduct of his office,
(A) by the court or other body approving the settlement;
(B) by at least a majority of those Trustees who are neither
interested persons of the Trust nor are parties to the matter
based upon a review of readily available facts (as opposed to a
full trial-type inquiry); or
18
<PAGE>
(C) by written opinion of independent legal counsel based
upon a review of readily available facts (as opposed to a full
trial-type inquiry);
provided, however, that any Shareholder may, by appropriate legal proceedings,
challenge any such determination by the Trustees, or by independent counsel.
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not be
exclusive of or affect any other rights to which any Covered Person may now or
hereafter be entitled, shall continue as to a person who has ceased to be such
Trustee or officer and shall inure to the benefit of the heirs, executors and
administrators of such a person. Nothing contained herein shall affect any
rights to indemnification to which Trust personnel, other than Trustees and
officers, and other persons may be entitled to by contract or otherwise under
law.
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character described in
paragraph (a) of this Section 3 may be paid by the applicable Series from time
to time prior to final disposition thereof upon receipt of an undertaking by or
on behalf of such Covered Person that such amount will be paid over by him to
the applicable Series if it is ultimately determined that he is not entitled to
indemnification under this Section 3; provided, however, that either (a) such
Covered Person shall have provided appropriate security for such undertaking,
(b) the Trust is insured against losses arising out of any such advance payments
or (c) either a majority of the Trustees who are neither interested persons of
the Trust nor parties to the matter, or independent legal counsel in a written
opinion, shall have determined, based upon a review of readily available facts
(as opposed to a trial type inquiry or full investigation), that there is reason
to believe that such Covered Person will not be disqualified from
indemnification under this Section 3.
SHAREHOLDERS
- ------------
Section 4. In case any Shareholder or former Shareholder of any Series
of the Trust 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 assets belonging to the applicable Series to be held
harmless from and indemnified against all loss and expense arising from such
19
<PAGE>
liability. The Series shall, upon request by the Shareholder, assume the defense
of any claim made against the Shareholder for any act or obligation of the
Series and satisfy any judgment thereon.
ARTICLE XI
----------
MISCELLANEOUS
-------------
TRUST NOT A PARTNERSHIP
- -----------------------
Section 1. It is hereby expressly declared that a trust and not a
partnership is created hereby. No Trustee hereunder shall have any power to bind
personally either the Trust's officers or any Shareholder.
TRUSTEE'S GOOD FAITH ACTION, EXPERT ADVICE. NO BOND OR SURETY
- -------------------------------------------------------------
Section 2. The exercise by the Trustees of their powers and discretion
hereunder in good faith and with reasonable care under the circumstances then
prevailing, shall be binding upon everyone interested. Subject to the provisions
of Article X, the Trustees shall not be liable for errors of judgment or
mistakes of fact or law. The Trustees may take advice of counsel or other
experts with respect to the meaning and operation of this Declaration of Trust,
and subject to the provisions of Article X, shall be under no liability for any
act or omission in accordance with such advice or for failing to follow such
advice. The Trustees shall not be required to give any bond as such, nor any
surety if a bond is obtained.
ESTABLISHMENT OF RECORD DATES
- -----------------------------
Section 3. The Trustees may close the stock transfer books of the
Trust for a period not exceeding sixty (60) days preceding the date of any
meeting of Shareholders, or the date for the payment of any dividends, or the
date for the allotment of rights, or the date when any change or conversion or
exchange of Shares shall go into effect; or in lieu of closing the stock
transfer books as aforesaid, the Trustees may fix in advance a date, not
exceeding ninety (90) days preceding the date of any meeting of Shareholders, or
the date for payment of any dividend, or the date for the allotment of rights,
or the date when any change or conversion or exchange of Shares shall go into
effect, as a record date for the determination of the Shareholders entitled to
notice of, and to vote at, any such meeting, or to receive payment of such
dividend, or to receive such allotment or rights, or to exercise such rights in
respect of any such change, conversion or exchange of Shares, and in such case
such Shareholders and only such Shareholders as shall be Shareholders of record
on the date so fixed shall be entitled to such notice of, and to vote at, such
meeting, or to receive payment of such dividend, or to receive such allotment of
20
<PAGE>
rights, or to exercise such rights, as the case may be, notwithstanding any
transfer of any Shares on the books of the Trust after any such record date
fixed or aforesaid.
TERMINATION OF TRUST
- --------------------
Section 4.
(a) Subject to the provisions of sub-section (b) of this Section 4,
the Trust shall continue without limitation of time.
(b) Subject to a vote of a Majority of the Outstanding Voting
Securities of each Series affected by the matter or, if applicable, to a vote of
a Majority of the Outstanding Voting Securities of the Trust, the Trustees may
(i) sell, convey, merge and transfer all or substantially all of
the assets of the Trust or any affected Series to another Series or to any
trust, partnership, association or corporation organized under the laws of any
state which is an investment company as defined in the 1940 Act, for adequate
consideration which may include the assumption of all outstanding obligations,
taxes and other liabilities, accrued or contingent, of the Trust or any affected
Series, and which may include shares of beneficial interest or stock of such
Series, trust, partnership, association or corporation; or
(ii) at any time sell and convert into money all or substantially
all of the assets of the Trust or any affected Series.
Upon making provision for the payment of all known liabilities of the
Trust or any affected Series in either (i) or (ii), by such assumption or
otherwise, the Trustees shall distribute the remaining proceeds or assets (as
the case may be) ratably among the holders of the Shares of the Trust or any
affected Series then outstanding; however, the payment to any particular Class
within such Series may be reduced by any fees, expenses or charges allocated to
that Class. Nothing in this Declaration of Trust shall preclude Trustees from
distributing such remaining proceeds or assets so that holders of the Shares of
a particular Class of the Trust or any affected Series receive as their ratable
distribution shares solely of an analogous class, as determined by the Trustees,
of such Series, trust, partnership, association or corporation.
The Trustees may take any of the actions specified in clauses (i) and
(ii) above without obtaining a vote of a Majority of the Outstanding Voting
Securities of any Series or the Trust if a majority of the Trustees makes a
determination that the continuation of a Series or the Trust is not in the best
interests of such Series, the Trust or their respective Shareholders as a result
21
<PAGE>
of factors or events adversely affecting the ability of such Series or the Trust
to conduct its business and operations in an economically viable manner. Such
factors and events may include the inability of a Series or the Trust to
maintain its assets at an appropriate size, changes in laws or regulations
governing the Series or Trust or affecting assets of the type in which such
Series or the Trust invests or economic developments or trends having a
significant adverse impact on the business or operations of such Series or the
Trust.
(c) Upon completion of the distribution of the remaining proceeds or
the remaining assets as provided in sub-section (b), the Trust or any affected
Series shall terminate and the Trustees shall be discharged of any and all
further liabilities and duties hereunder with respect thereto and the right,
title and interest of all parties therein shall be canceled and discharged.
FILING OF COPIES, REFERENCES, HEADINGS
- --------------------------------------
Section 5. The original or a copy of this instrument and of each
amendment hereto shall be kept at the office of the Trust where it may be
inspected by any shareholder. A copy of this instrument and of each amendment
hereto shall be filed with the Secretary of the Commonwealth of Massachusetts
and the Boston City Clerk, as well as any other governmental office where such
filing may from time to time be required. Anyone dealing with the Trust may rely
on a certificate by an officer or Trustee of the Trust as to whether or not any
such amendments to this Declaration of Trust have been made and as to any
matters in connection with the Trust hereunder, and with the same effect as if
it were the original, may rely on a copy certified by an officer or Trustee of
the Trust to be a copy of this instrument or of any such amendments. In this
instrument or in any such amendments, references to this instrument, and all
expressions like "herein," "hereof" and "hereunder," shall be deemed to refer to
this instrument as amended from time to time. The masculine gender shall include
the feminine and neuter genders. Headings are placed herein for convenience of
reference only, and in case of any conflict, the text of this instrument, rather
than the headings, shall control. This instrument may be executed in any number
of counterparts each of which shall be deemed an original.
APPLICABLE LAW
- --------------
Section 6. The Trust set forth in this instrument is created under and
is to be governed by and construed and administered according to the laws of the
Commonwealth of Massachusetts. The Trust shall be of the type commonly called a
Massachusetts business trust, and, without limiting the provisions hereof, the
Trust may exercise all powers which are ordinarily exercised by such a trust.
22
<PAGE>
AMENDMENTS
- ----------
Section 7. All rights granted to the Shareholders under this
Declaration of Trust are granted subject to the reservation of the right to
amend this Declaration of Trust as herein provided, except that no amendment
shall repeal the limitations on personal liability of any Shareholder or Trustee
or repeal the prohibition of assessment upon the Shareholders without the
express consent of each Shareholder or Trustee involved. Subject to the
foregoing, the provisions of this Declaration of Trust (whether or not related
to the rights of Shareholders) may be amended at any time, so long as such
amendment does not adversely affect the rights of any Shareholder with respect
to which such amendment is or purports to be applicable and so long as such
amendment is not in contravention of applicable law, including the 1940 Act, by
an instrument in writing signed by a majority of the then Trustees (or by an
officer of the Trust pursuant to the vote of a majority of such Trustees).
Except as provided in the first sentence of this Section 7, any amendment to
this Declaration of Trust that adversely affects the rights of Shareholders may
be adopted at any time by an instrument signed in writing by a majority of the
then Trustees (or by an officer of the Trust pursuant to the vote of a majority
of such Trustees) when authorized to do so by a vote of a Majority of the
Outstanding Voting Securities; provided, however, that an amendment that shall
affect the Shareholders of one or more Series (or of one or more Classes), but
not the Shareholders of all outstanding Series (or Classes), shall be authorized
by a vote of a Majority of the Outstanding Voting Securities of each Series (or
Class, as the case may be) affected, and no vote of a Series (or Class) not
affected shall be required. Subject to the foregoing, any such amendment shall
be effective as provided in the instrument containing the terms of such
amendment or, if there is no provision therein with respect to effectiveness,
upon the execution of such instrument and of a certificate (which may be a part
of such instrument) executed by a Trustee or officer to the effect that such
amendment has been duly adopted. Copies of the amendment to this Declaration of
Trust shall be filed as specified in Section 5 of this Article XI. A restated
Declaration of Trust, integrating into a single instrument all of the provisions
of the Declaration of Trust which are then in effect and operative, may be
executed from time to time by a majority of the Trustees and shall be effective
upon filing as specified in such Section 5.
FISCAL YEAR
- -----------
Section 8. The fiscal year of the Trust shall be determined by the
Trustees, provided, however, that the Trustees may change the fiscal year of the
Trust without Shareholder approval.
23
<PAGE>
IN WITNESS WHEREOF, the undersigned, being the initial Trustee of the
Trust, have executed this instrument as of the day and year first above written.
(SEAL) /s/ David J. Thelander
- ------ ----------------------
David J. Thelander, as
Trustee and not individually
Address:
50 California Street, 27th Floor
San Francisco, CA 94111
IN WITNESS WHEREOF, the undersigned, being the initial Trustee of the
Trust, have executed this instrument as of the day and year first above written.
(SEAL) /s/ Matthew M. O'Toole
----------------------
Matthew M. O'Toole, as
Trustee and not individually
Address:
50 California Street, 27th Floor
San Francisco, CA 94111
STATE OF CALIFORNIA
County of San Francisco, ss
On 8/23/96 before me, Johanne F. Parley, personally appeared David J.
Thelander & Matthew M. O'Toole, personally known to me proved to me on the basis
of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to
the within instrument ad acknowledged to me that he/she/they executed the same
in his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s), or the entity upon behalf of which
the person(s) acted, executed the instrument.
(SEAL) WITNESS my hand and official seal,
Notary Public
/s/ Johanne F. Parley
---------------------
Signature of Notary
My commission expires: August 20, 1997
24
GT GLOBAL ASSET ALLOCATION TRUST
A Massachusetts Business Trust
BY-LAWS
August 26, 1996
<PAGE>
BY-LAWS OF GT GLOBAL ASSET ALLOCATION TRUST
ARTICLE I
---------
DECLARATION OF TRUST,
---------------------
LOCATION OF OFFICES AND SEAL
----------------------------
Section 1.01. Declaration of Trust: These By-Laws shall be subject to
the Declaration of Trust, as from time to time in effect (the "Declaration of
Trust"), of GT Global Asset Allocation Trust, the Massachusetts business trust
established by the Declaration of Trust (the "Trust").
Section 1.02. Seal: The seal of the Trust shall be circular in form
and shall bear the name of the Trust. The form of the seal shall be subject to
alteration by the Trustees and the seal may be used by causing it or a facsimile
to be impressed or affixed or printed or otherwise reproduced. Any officer or
Trustee of the Trust shall have authority to affix the seal of the Trust to any
document, instrument or other paper executed and delivered by or on behalf of
the Trust; however, unless otherwise required by the Trustees, the seal shall
not be necessary to be placed on and its absence shall not impair the validity
of any document, instrument, or other paper executed by or on behalf of the
Trust. If the Trust is required to place its seal to a document, it is
sufficient to meet the requirement of any law, rule, or regulation relating to
such a seal to place the word "Seal" adjacent to the signature of the person
authorized to sign the document on behalf of the Trust.
ARTICLE II
----------
SHAREHOLDERS
------------
Section 2.01. Shareholder Meetings: Meetings of the shareholders may
be called at any time by the Trustees or, if the Trustees shall fail to call any
meeting for a period of 30 days after written request of Shareholders owning at
least one-tenth of the outstanding shares entitled to vote, then such
Shareholders may call such meeting. Each call of a meeting shall state the
place, date, hour and purposes of the meeting.
Section 2.02. Place of Meetings: All meetings of the Shareholders
shall be held at the principal office of the Trust, except that the Trustees may
designate a different place of meeting within the United States.
1
<PAGE>
Section 2.03. Notice of Meeting: The Secretary or an Assistant
Secretary or such other officer as may be designated by the Trustees shall cause
notice of the place, date and hour, and purpose or purposes for which the
meeting is called, to be mailed, not less than fifteen days before the date of
the meeting, to each Shareholder entitled to vote at such meeting, at his
address as it appears on the records of the Trust at the time of such mailing.
Notice of any Shareholders' meeting need not be given to any Shareholder if a
written waiver of notice, executed before or after such meeting, is filed with
the records of such meeting, or to any Shareholder who shall attend such meeting
in person or by proxy. Notice of adjournment of a Shareholders' meeting to
another time or place need not be given, if such time and place are announced at
the meeting.
Section 2.04. Ballots: The vote upon any question shall be by ballot
whenever requested by any person entitled to vote, but, unless such a request is
made, voting may be conducted in any way approved by the meeting.
Section 2.05. Voting; Proxies: Shareholders entitled to vote may vote
either in person or by proxy, provided that an instrument authorizing such proxy
to act is executed by the Shareholder in writing and dated not more than eleven
months before the meeting, unless the instrument specifically provides for a
longer period. Proxies shall be delivered to the Secretary of the Trust or other
person responsible for recording the proceedings before being voted. A proxy
with respect to shares held in the name of two or more persons shall be valid if
executed by one of them unless at or prior to exercise of such proxy the Trust
receives a specific written notice to the contrary from any one of them. Unless
otherwise specifically limited by their terms, proxies shall entitle the holder
thereof to vote at any adjournment of a meeting. A proxy purporting to be
exercised by or on behalf of a Shareholder shall be deemed valid unless
challenged at or prior to its exercise and the burden of proving invalidity
shall rest on the challenger. At all meetings of the Shareholders, unless the
voting is conducted by inspectors, all questions relating to the qualifications
of voters, the validity of proxies, and the acceptance or rejection of votes
shall be decided by the Chairman of the meeting.
Section 2.06. Action Without a Meeting: Any action to be taken by
Shareholders may be taken without a meeting if all Shareholders entitled to vote
on the matter consent to the action in writing and the written consents are
filed with the records of meetings of Shareholders of the Trust. Such consent
shall be treated for all purposes as a vote at a meeting.
2
<PAGE>
ARTICLE III
-----------
TRUSTEES
--------
Section 3.01. Regular Meetings: Regular meetings of the Trustees may
be held without further call or notice at such places and at such times as the
Trustees may from time to time determine, provided that notice of the first
regular meeting following any such determination shall be given to absent
Trustees.
Section 3.02. Special Meetings: Special meetings of the Trustees may
be held at any time and at any place designated in the call of the meeting, when
called by the Chairman of the Trustees or by two or more Trustees, provided that
notice thereof shall be given to each Trustee as set forth in the Declaration of
Trust.
Section 3.03. Committees: The Trustees, by vote of a majority of the
Trustees then in office, may elect from their number an executive committee or
other committees and may delegate thereto some or all of their powers except
those which by law, by the Declaration of Trust, or by these By-Laws may not be
delegated. Except as the Trustees may otherwise determine, any such committee
may make rules for the conduct of its business, but unless otherwise provided by
the Trustees or in such rules, its business shall be conducted so far as
possible in the same manner as is provided by these By-Laws for the Trustees
themselves. All members of such committees shall hold such offices at the
pleasure of the Trustees. The Trustees may abolish any such committee at any
time. Any committee to which the Trustees delegate any of their powers or duties
shall keep records of its meetings and shall report its actions to the Trustees.
The Trustees shall have power to rescind any action of any committee, but no
such rescission shall have retroactive effect. Any such committee may act by
meeting in person, by unanimous written consent, or by telephonic meeting
provided a quorum of members participates in any such telephonic meeting.
Section 3.04. Other Committees: The Trustees may appoint other
committees, each consisting of one or more persons, who need not be Trustees.
Each such committee shall have such powers perform such duties and abide by such
procedures as may be determined from time to time by the Trustees, but shall not
exercise any power which may lawfully be exercised only by the Trustees or a
committee of Trustees.
Section 3.05. Compensation: Each Trustee and each committee member may
receive such compensation for his services and reimbursement for his expenses as
may be fixed from time to time by resolution of the Trustees.
3
<PAGE>
ARTICLE IV
----------
OFFICERS
--------
Section 4.01. General: The officers of the Trust shall be a President,
a Treasurer, a Secretary and such other officers, if any, as the Trustees from
time to time may in their discretion elect or appoint. The Trust also may have
such agents, if any, as the Trustees from time to time may in their discretion
appoint. Any officer may be but need not be a Trustee or shareholder. Any two or
more offices may be held by the same person.
Section 4.02. Election and Term of Office: The President, the
Treasurer and the Secretary shall be elected annually by the Trustees at their
first meeting in each calendar year or at such later meeting in such year as the
Trustees shall determine ("Annual Meeting"). Other officers or agents, if any,
may be elected or appointed by the Trustees at said meeting or at any other
time. The President, Treasurer and Secretary shall hold office until the next
Annual Meeting and until their respective successors are chosen and qualified,
or in each case until he dies, resigns, is removed or become disqualified. Each
other officer shall hold office and each agent shall retain his authority at the
pleasure of the Trustees.
Section 4.03. Powers: Subject to the other provisions of these
By-Laws, each officer shall have, in addition to the duties and powers herein
and in the Declaration of Trust set forth, such duties and powers as are
commonly incident to his office as if the Trust were organized as a
Massachusetts business corporation and such other duties and powers as the
Trustees may from time to time designate.
Section 4.04. Chairman of the Board: The Chairman of the Board of
Trustees, if one is so appointed, shall be chosen from among the Trustees and
may hold office only so long as he continues to be a Trustee. Unless the
Trustees otherwise provide, the Chairman, if any is so appointed, shall preside
at all meetings of the Shareholders and of the Trustees at which he is present;
may be ex officio a member of all committees established by the Trustees; and
-- -------
shall have such other duties and powers as specified herein and as may be
assigned to him by the Trustees.
Section 4.05. President: The President shall be the chief executive
officer of the Trust and, subject to the supervision of the Trustees, shall have
general charge of the business, affairs and property of the Trust and general
supervision over its officers, employees and agents. He shall exercise such
other powers and perform such other duties as from time to time may be assigned
to him by the Trustees.
4
<PAGE>
Section 4.06. Vice Presidents: The Trustees may from time to time
designate and elect one or more Vice Presidents who shall have such powers and
perform such duties as from time to time may be assigned to them by the Trustees
or the President. If there be more than one Vice President, the Board of
Trustees may determine which one or more of the Vice Presidents shall perform
any of such duties or exercise any of such functions, or if such determination
is not made by the Board of Trustees, the President may make such determination.
Section 4.07. Treasurer and Assistant Treasurers: The Treasurer shall
be the principal financial and accounting officer of the Trust and shall have
general charge of the finances and books of account of the Trust. Except as
otherwise provided by the Trustees, he shall have general supervision of the
funds and property of the Trust and of the performance by the custodian of its
duties with respect thereto. He shall render to the Trustees, whenever directed
by the Trustees, an account of the financial condition of the Trust and of all
his transactions as Treasurer; and as soon as possible after the close of each
financial year he shall make and submit to the Trustees a like report for such
financial year. He shall perform all the acts incidental to the office of
Treasurer, subject to the control of the Trustees.
The Assistant Treasurer, or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board of Trustees or the
President shall, in the absence of the Treasurer or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
Treasurer and shall perform other duties and have such other powers as the Board
of Trustees may from time to time prescribe.
Section 4.08. Secretary and Assistant Secretaries: The Secretary shall
attend to the giving and serving of all notices of the Trust and shall record
all proceedings of the meetings of the Shareholders and Trustees in books to be
kept for that purpose. He shall keep in safe custody the seal of the Trust, and
shall have charge of the records of the Trust, all of which shall at all
reasonable times be open to inspection by the Trustees. He shall perform such
other duties as appertain to his office or as may be required by the Trustees.
The Assistant Secretary, or if there be more than one, the Assistant
Secretaries in the order determined by the Board of Trustees or the President
shall, in the absence of the Secretary or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the Secretary and
shall perform such other duties and have such other powers as the Trustees may
from time to time prescribe.
5
<PAGE>
Section 4.09. Subordinate Officers: The Trustees from time to time may
appoint such other officers or agents as they may deem advisable, each of whom
shall have such title, hold office for such period, have such authority and
perform such duties as the Trustees may determine. The Trustees from time to
time may delegate to one or more officers or agents the power to appoint any
such subordinate officers or agents and to prescribe their respective rights,
terms of office, authorities and duties.
Section 4.10. Remuneration: The salaries or other compensation of the
officers of the Trust shall be fixed from time to time by resolution of the
Trustees, except that the Trustees may by resolution delegate to any person or
group of persons the power to fix the salaries or other compensation of any
subordinate officers or agents appointed in accordance with the provisions of
Section 4.09 hereof.
Section 4.11. Surety Bonds: The Trustees may require any officer or
agent of the Trust to execute a bond (including, without limitation, any bond
required by the Investment Company Act of 1940, as amended, ("1940 Act") and the
rules and regulations of the Securities and Exchange Commission ("Commission"))
to the Trust in such sum and with such surety or sureties as the Trustees may
determine, conditioned upon the faithful performance of his duties to the Trust
including responsibility for negligence and for the accounting of any of the
Trust's property, funds or securities that may come into his hands.
Section 4.12. Resignation: Any officer may resign his office at any
time by delivering a written resignation to the Trustees, the President, the
Secretary, or any Assistant Secretary. Unless otherwise specified therein, such
resignation shall take effect upon delivery.
Section 4.13. Removal: Any officer may be removed from office whenever
in the judgment of the Trustees the best interest of the Trust will be served
thereby, by the vote of a majority of the Trustees given at a regular meeting or
any special meeting of the Trustees called for such purpose. In addition, any
officer or agent appointed in accordance with the provision of Section 4.09
hereof may be removed, either with or without cause, by any officer upon whom
such power of removal shall have been conferred by the Trustees.
Section 4.14. Vacancies and Newly Created Offices: If any vacancy shall
occur in any office by reason of death, resignation, removal, disqualification
or other cause, or if any new office shall be created, such vacancies or newly
created offices may be filled by the Trustees at any regular or special meeting
of the Trustees or, in the case of any office created pursuant to Section 4.09
hereof, by any officer upon whom such power shall have been conferred by the
Trustees.
6
<PAGE>
ARTICLE V
---------
CUSTODIAN
---------
Section 5.01. Employment of Custodian: The Trustees shall at all times
employ one or more banks or trust companies organized under the laws of the U.S.
or one of the states thereof provided that each such bank or trust company has
capital, surplus and undivided profits of at least two million dollars
($2,000,000) as custodian with authority as the Trust's agent, but subject to
such restrictions, limitations and other requirements, if any, as may be
contained in these By-Laws:
(1) to hold the securities owned by the Trust and deliver the same
upon written order, or oral order if confirmed in writing, or
order delivered by such electromechanical or electronic devices
as are agreed to by the Trust and the custodian, if such
procedures have been authorized in writing by the Trust;
(2) to receive and give receipt for any moneys due to the Trust and
deposit the same in its own banking department or elsewhere as
the Trustees may direct; and
(3) to disburse such moneys upon orders or vouchers;
and the Trust also may employ such custodian as its agent:
(1) to keep the books and accounts of the Trust and furnish clerical
and accounting services; and
(2) to compute, if authorized to do so by the Trustees, the Net Asset
Value of any Series or Class (which terms are defined in the
Declaration of Trust) in accordance with the provisions of the
Declaration of Trust;
all upon such basis of compensation as may be agreed upon in writing between the
Trust and the custodian. If so directed by a vote of a majority of the
outstanding shares of the Trust entitled to vote, the custodian shall deliver
and pay over all property of the Trust held by it as specified in such vote.
The Trustees also may authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian, and upon such terms and conditions, as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees, provided that in
every case such sub-custodian shall be a bank or trust company organized under
the laws of the United States or one of the states thereof and having capital,
7
<PAGE>
surplus and undivided profits of at least two million dollars ($2,000,000) or
such other person as may be permitted by the Commission, or otherwise in
accordance with the 1940 Act.
Section 5.02. Use of Central Securities Handling System: Subject to
such rules, regulations and orders as the Commission may adopt, the Trustees may
direct the custodian to deposit any or all of the securities owned by the Trust
(1) in a system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, pursuant to which system
all securities of any particular class or series of any issuer deposited within
the system are treated as fungible and may be transferred or pledged by
bookkeeping entry without physical delivery of such securities, provided that
all such deposits shall be subject to withdrawal only upon the order of the
Trust; or (2) with such other person as may be permitted by the Commission, or
otherwise in accordance with the 1940 Act.
ARTICLE VI
----------
EXECUTION OF PAPERS
-------------------
Section 6.01. General: Except as the Trustees may generally or in
particular cases authorize the execution thereof in some other manner, all
deeds, leases, transfers, contracts, bonds, notes, checks, drafts, and other
obligations made, accepted, or endorsed by the Trust shall be executed by the
President, any Vice President, or the Treasurer, or by whomever else shall be
designated for that purpose by the Trustees, and need not bear the seal of the
Trust.
ARTICLE VII
-----------
SHARES OF BENEFICIAL INTEREST
-----------------------------
Section 7.01. Share Certificates: No certificates certifying the
ownership of Shares shall be issued except as the Trustees may otherwise
authorize. In the event that the Trustees authorize the issuance of Share
certificates, subject to the provisions of Section 7.03, each Shareholder shall
be entitled to a certificate stating the number of shares owned by him, in such
form as shall be prescribed from time to time by the Trustees. Such certificate
shall be signed by the President or a vice President and by the Treasurer, or
the Assistant Treasurer, or the Secretary or the Assistant Secretary. Such
8
<PAGE>
signatures may be facsimiles if the certificate is signed by a transfer or
shareholder services agent or by a registrar, other than a Trustee, officer or
employee of the Trust. In case any officer who has signed or whose facsimile
signature has been placed on such certificate shall have ceased to be such
officer before such certificate is issued, it may be issued by the Trust with
the same effect as if he were such officer at the time of its issue.
In lieu of issuing certificates for shares, the Trustees, the transfer
agent or shareholder services agent may either issue receipts therefor or may
keep accounts upon the books of the Trust for the record holders of such shares,
who shall in either case be deemed, for all purposes hereunder, to be the
holders of certificates for such shares as if they had accepted such
certificates and shall be held to have expressly assented and agreed to the
terms hereof.
Section 7.02. Loss of Certificates: In the case of the alleged loss or
destruction or the mutilation of a Share certificate, a duplicate certificate
may be issued in place thereof, upon such terms as the Trustees may prescribe.
Section 7.03. Discontinuance of Issuance of Certificates: The Trustees
may at any time discontinue the issuance of Share certificates and may, by
written notice to each Shareholder, require the surrender of Share certificates
to the Trust for cancellation. Such surrender and cancellation shall not affect
the ownership of Shares in the Trust.
Section 7.04. Equitable Interest Not Recognized: The Trust shall be
entitled to treat the holder of record of any Share or Shares of the Trust as
the holder in fact thereof, and shall not be bound to recognize any equitable or
other claim of interest in such Share or Shares on the part of any other person
except as may be otherwise expressly provided by law.
Section 7.05. Transfer of Shares: The Shares of the Trust shall be
transferable only by transfer recorded on the books of the Trust, in person or
by attorney.
ARTICLE VIII
------------
ACCOUNTANT
----------
Section 8.01. ----------
ACCOUNTANT: (a) The Trust shall employ an independent public accountant
or firm of independent public accountants as its accountant to examine the
accounts of the Trust and to sign and certify the financial statements of the
Trust.
9
<PAGE>
(b) Any vacancy occurring due to the death or resignation of the
accountant may be filled by a majority vote of the Trustees who are not
interested persons of the Trust.
ARTICLE IX
----------
INSURANCE
---------
Section 9.01. Insurance of Officers, Trustees, and Employees: The
Trust may purchase and maintain insurance on behalf of any person who is or was
a Trustee, officer or employee of the Trust, or is or was serving at the request
of the Trust as a Trustee, officer or employee of a corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity or arising out of his status as
such, whether or not the Trust would have the power to indemnify him against
such liability.
The Trust may not acquire or obtain a contract for insurance that
protects or purports to protect any Trustee or officer of the Trust against any
liability to the Trust or its Shareholders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his office.
ARTICLE X
---------
AMENDMENTS; REPORTS; MISCELLANEOUS
----------------------------------
Section 10.1. Amendments: These By-Laws may be amended or repealed, in
whole or in part, by a majority of the Trustees then in office at any meeting of
the Trustees, or by one or more writings signed by such majority.
Section 10.2. Reports: The Trustees shall at least semiannually submit
to the Shareholders a written report of the transactions of the Trust, including
financial statements that shall at least annually be certified by independent
public accountants.
Section 10.3. Gender: As used in these By-Laws, the masculine gender
shall include the feminine and neuter genders.
Section 10.3. Headings: Headings are placed in these By-Laws for
convenience of reference only and in case of any conflict, the text of these
By-Laws rather than the headings shall control.
10
<PAGE>
Section 10.4. Inspection of Books: The Trustees shall from time to
time determine whether and to what extent, and at what times and places, and
under what conditions and regulations the accounts and books of the Trust or any
of them shall be open to the inspection of the Shareholders, and no Shareholder
shall have any right to inspect any account or book or document of the Trust
except as conferred by law or otherwise by the Trustees.
11
