<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 30, 1996
FILE NOS. 33-19338
811-05426
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 46
/X/
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 47
/X/
------------------------
G.T. INVESTMENT FUNDS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
50 CALIFORNIA STREET, 27TH FLOOR,
SAN FRANCISCO, CALIFORNIA 94111
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(415) 392-6181
------------------------
<TABLE>
<S> <C>
DAVID J. THELANDER, ESQ. ARTHUR J. BROWN, ESQ.
VICE PRESIDENT & ASSISTANT DANIEL T. STEINER, ESQ.
GENERAL COUNSEL KIRKPATRICK & LOCKHART LLP
CHANCELLOR LGT ASSET 1800 MASSACHUSETTS AVENUE, N.W.,
MANAGEMENT, INC. 2ND FLOOR
50 CALIFORNIA STREET, 27TH FLOOR WASHINGTON, D.C. 20036
SAN FRANCISCO, CALIFORNIA 94111 (202) 778-9000
(NAME AND ADDRESS OF AGENT FOR SERVICE)
</TABLE>
------------------------
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE:
/ / IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (B) OF RULE 485
/ / ON PURSUANT TO PARAGRAPH (B) OF RULE 485
/X/ 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(1) OF RULE 485
/ / ON PURSUANT TO PARAGRAPH (A)(1) OF RULE 485
/ / 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (A)(2) OF RULE 485
/ / ON PURSUANT TO PARAGRAPH (A)(2) OF RULE 485
/ / THIS POST-EFFECTIVE AMENDMENT DESIGNATES A NEW EFFECTIVE DATE FOR A
PREVIOUSLY FILED POST-EFFECTIVE AMENDMENT.
PURSUANT TO RULE 24F-2 UNDER THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED,
REGISTRANT HAS PREVIOUSLY ELECTED TO REGISTER AN INDEFINITE NUMBER OF ITS SHARES
OF COMMON STOCK. A RULE 24F-2 NOTICE FOR REGISTRANT'S FISCAL YEAR ENDED OCTOBER
31, 1996, WAS FILED ON DECEMBER 27, 1996.
CERTAIN SERIES OF THE G.T. INVESTMENT FUNDS, INC. ARE "FEEDER FUNDS" IN A
"MASTER/FEEDER" FUND ARRANGEMENT. THIS POST-EFFECTIVE AMENDMENT NO. 46 INCLUDES
A MANUALLY EXECUTED SIGNATURE PAGE FOR TWO MASTER TRUSTS, GLOBAL INVESTMENT
PORTFOLIO AND GLOBAL HIGH INCOME PORTFOLIO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THIS IS PAGE ONE OF PAGES
EXHIBIT INDEX LOCATED AT PAGE
<PAGE>
G.T. INVESTMENT FUNDS, INC.
CROSS-REFERENCE SHEET
BETWEEN ITEMS ENUMERATED IN FORM N-1A AND THIS AMENDMENT
PROSPECTUS
<TABLE>
<CAPTION>
ITEM NO. OF
PART A OF FORM N-1A CAPTIONS IN PROSPECTUS
- --------------------------------- ------------------------------------------------------------------
<S> <C>
1. Cover Page................... Cover Page
2. Synopsis..................... Prospectus Summary
3. Condensed Financial
Information.................. Financial Highlights
4. General Description of
Registrant................... Investment Objective and Policies; Risk Factors; Management; Other
Information
5. Management of the
Fund......................... Management
5A. Management's Discussion of
Fund Performance............. Not applicable
6. Capital Stock and Other
Securities................... Dividends, Other Distributions and Federal Income Taxation; Other
Information
7. Purchase of Securities Being
Offered...................... Alternative Purchase Plan; How to 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
<CAPTION>
PROSPECTUS -- ADVISOR CLASS
ITEM NO. OF
PART A OF FORM N-1A CAPTIONS IN PROSPECTUS
- --------------------------------- ------------------------------------------------------------------
<S> <C>
1. Cover Page................... Cover Page
2. Synopsis..................... Prospectus Summary
3. Condensed Financial
Information.................. Financial Highlights
4. General Description of
Registrant................... Investment Objective and Policies; Risk Factors; Management; Other
Information
5. Management of the Fund....... Management
5A. Management's Discussion of
Fund Performance............. Not applicable
6. Capital Stock and Other
Securities................... Dividends, Other Distributions and Federal Income Taxation; Other
Information
7. Purchase of Securities Being
Offered...................... How to Invest; How to Make Exchanges; 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
</TABLE>
<PAGE>
G.T. INVESTMENT FUNDS, INC.
CROSS-REFERENCE SHEET
BETWEEN ITEMS ENUMERATED IN FORM N-1A AND THIS AMENDMENT
STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
ITEM NO. OF
PART B OF FORM N-1A CAPTIONS IN STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------- ------------------------------------------------------------------
<S> <C>
10. Cover Page................... Cover Page
11. Table of Contents............ Table of Contents
12. General Information and
History...................... Cover Page; Additional Information
13. Investment Objectives and
Policies..................... Investment Objective and Policies;
Investment Limitations; Options, Futures and Currency Strategies;
Risk Factors; Execution of Portfolio Transactions
14. Management of the
Fund......................... Directors and Executive Officers; Management
15. Control Persons and Principal
Holders of Securities........ Directors and Executive Officers; Management
16. Investment Advisory and Other
Services..................... Management; Additional Information
17. Brokerage Allocation and
Other Practices.............. Execution of Portfolio Transactions
18. Capital Stock and Other
Securities................... Not applicable
19. Purchase, Redemption and
Pricing of Securities Being
Offered...................... Valuation of Fund Shares; Information Relating to
Sales and Redemptions
20. Tax Status................... Taxes
21. Underwriters................. Management
22. Calculation of Performance
Data......................... Investment Results
23. Financial Statements......... Financial Statements
</TABLE>
<PAGE>
G.T. INVESTMENT FUNDS, INC.
CROSS-REFERENCE SHEET
BETWEEN ITEMS ENUMERATED IN FORM N-1A AND THIS AMENDMENT
(CONTINUED)
STATEMENT OF ADDITIONAL INFORMATION -- ADVISOR CLASS
<TABLE>
<CAPTION>
ITEM NO. OF
PART B OF FORM N-1A CAPTIONS IN STATEMENT OF ADDITIONAL INFORMATION
- --------------------------------- ------------------------------------------------------------------
<S> <C>
10. Cover Page................... Cover Page
11. Table of Contents............ Table of Contents
12. General Information and
History...................... Cover Page; Additional Information
13. Investment Objectives and
Policies..................... Investment Objective and Policies;
Investment Limitations; Options, Futures and Currency Strategies;
Risk Factors; Execution of Portfolio Transactions
14. Management of the
Fund......................... Directors and Executive Officers; Management
15. Control Persons and Principal
Holders of Securities........ Directors and Executive Officers; Management
16. Investment Advisory and Other
Services..................... Management; Additional Information
17. Brokerage Allocation and
Other Practices.............. Execution of Portfolio Transactions
18. Capital Stock and Other
Securities................... Not applicable
19. Purchase, Redemption and
Pricing of Securities Being
Offered...................... Valuation of Fund Shares; Information Relating to
Sales and Redemptions
20. Tax Status................... Taxes
21. Underwriters................. Management
22. Calculation of Performance
Data......................... Investment Results
23. Financial Statements......... Financial Statements
</TABLE>
<PAGE>
G.T. INVESTMENT FUNDS, INC.
CONTENTS OF POST-EFFECTIVE AMENDMENT
THIS POST-EFFECTIVE AMENDMENT TO THE REGISTRATION STATEMENT OF G.T. INVESTMENT
FUNDS, INC. CONTAINS THE FOLLOWING DOCUMENTS:
<TABLE>
<S> <C> <C>
Facing Sheet
Cross-Reference Sheet
Contents of Post-Effective Amendment
Part A -- Prospectus
-- GT Global Theme Funds
-- GT Global Income Funds
-- GT Global Growth & Income Fund
-- GT Global Latin America Growth Fund
GT Global Emerging Markets Fund
-- Prospectus -- Advisor Class
-- GT Global Theme Funds
-- GT Global Income Funds
-- GT Global Growth & Income Fund
-- GT Global Latin America Growth Fund
GT Global Emerging Markets Fund
Part B -- Statement of Additional Information
-- GT Global Theme Funds
-- GT Global Income Funds
-- GT Global Growth & Income Fund
-- GT Global Latin America Growth Fund
-- GT Global Emerging Markets Fund
-- Statement of Additional Information -- Advisor Class
-- GT Global Theme Funds
-- GT Global Income Funds
-- GT Global Growth & Income Fund
-- GT Global Latin America Growth Fund
-- GT Global Emerging Markets Fund
Part C -- Other Information
Signature Pages -- G.T. Investment Funds, Inc.
-- Global Investment Portfolio
-- Global High Income Portfolio
Exhibits
<FN>
- ------------------------
*The currently effective prospectuses and statements of additional information
for each of the following series of the Registrant are not affected by this
Amendment: GT Global Currency Fund and GT Global Small Companies Fund.
</TABLE>
<PAGE>
GT GLOBAL THEME FUNDS
PROSPECTUS -- MARCH 1, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
GT GLOBAL FINANCIAL SERVICES FUND GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
GT GLOBAL INFRASTRUCTURE FUND GT GLOBAL HEALTH CARE FUND
GT GLOBAL NATURAL RESOURCES FUND GT GLOBAL TELECOMMUNICATIONS FUND
</TABLE>
GT GLOBAL FINANCIAL SERVICES FUND ("FINANCIAL SERVICES FUND") seeks long-term
capital growth by investing all of its investable assets in the Global Financial
Services Portfolio ("Financial Services Portfolio"), that, in turn, invests
primarily in equity securities throughout the world that operate in the
financial services industries.
GT GLOBAL INFRASTRUCTURE FUND ("INFRASTRUCTURE FUND") seeks long-term growth of
capital by investing all of its investable assets in the Global Infrastructure
Portfolio ("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.
GT GLOBAL NATURAL RESOURCES FUND ("NATURAL RESOURCES FUND") seeks long-term
growth of capital by investing all of its investable assets in the Global
Natural Resources Portfolio ("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.
GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND ("CONSUMER PRODUCTS AND SERVICES
FUND") seeks long-term growth of capital by investing all of its investable
assets in the Global Consumer Products and Services Portfolio ("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.
GT GLOBAL HEALTH CARE FUND ("HEALTH CARE FUND") seeks long-term capital
appreciation by investing primarily in equity securities of health care
companies throughout the world.
GT GLOBAL TELECOMMUNICATIONS FUND ("TELECOMMUNICATIONS FUND") seeks long-term
growth of capital by investing primarily in equity securities of companies
throughout the world engaged in the development, manufacture or sale of
telecommunications services or equipment.
Each Portfolio's investment objective is identical to that of its corresponding
Fund. There can be no assurance that any Fund or Portfolio will achieve its
investment objective. The investment experience of the Financial Services Fund,
the Infrastructure Fund, the Natural Resources Fund and the Consumer Products
and Services Fund will correspond directly with the investment experience of
their corresponding Portfolio.
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 Funds and the Portfolios are managed and/or administered 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 March 1, 1997, has been filed with
the Securities and Exchange Commission 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 Funds at 50 California Street,
27th Floor, San Francisco 94111, or by calling (800) 824-1580.
FOR FURTHER INFORMATION, CALL (800) 824-1580 OR CONTACT YOUR FINANCIAL ADVISOR.
[LOGO]
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus Page 1
<PAGE>
GT GLOBAL THEME FUNDS
TABLE OF CONTENTS
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Page
---------
<S> <C>
Prospectus Summary........................................................................ 3
Financial Highlights...................................................................... 8
Alternative Purchase Plan................................................................. 16
Investment Objectives and Policies........................................................ 17
Risk Factors.............................................................................. 24
How to Invest............................................................................. 30
How to Make Exchanges..................................................................... 37
How to Redeem Shares...................................................................... 38
Shareholder Account Manual................................................................ 40
Calculation of Net Asset Value............................................................ 41
Dividends, Other Distributions and Federal Income Taxation................................ 41
Management................................................................................ 43
Other Information......................................................................... 48
</TABLE>
Prospectus Page 2
<PAGE>
GT GLOBAL THEME FUNDS
PROSPECTUS SUMMARY
- ------------------------------------------------------------
The following summary is qualified in its entirety by the more detailed
information appearing in the body of this Prospectus.
<TABLE>
<S> <C> <C>
The Funds and the Portfolios: Financial Services Fund, Infrastructure Fund, Natural Resources
Fund, Consumer Products and Services Funds, Health Care Fund and
Telecommunications Fund (each a "Fund," and collectively, the
"Funds") is each a diversified series of G.T. Investment Funds,
Inc. (the "Company"), a Maryland corporation. Each Portfolio is a
diversified series of Global Investment Portfolio, a New York
common law trust. The Portfolios, the Health Care Fund and the
Telecommunications Fund are referred to herein as the "Theme
Portfolios."
Investment Objectives: Financial Services Fund, Infrastructure Fund, Natural Resources
Fund and Consumer Products and Services Fund seek long-term
capital growth. The Health Care Fund seeks long-term capital
appreciation. The Telecommunications Fund seeks long-term growth
of capital.
Principal Investments: Financial Services Fund invests 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 industry.
Infrastructure Fund invests 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.
Natural Resources Fund invests 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.
Consumer Products and Services Fund invests 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.
Health Care Fund invests primarily in equity securities of health
care companies throughout the world.
Telecommunications Fund invests primarily in equity securities of
companies throughout the world engaged in the development,
manufacture or sale of telecommunications services or equipment.
Principal Risk Factors: There is no assurance that any Fund or Portfolio will achieve its
investment objective. Each Fund's net asset value will fluctuate,
reflecting fluctuations in the market value of its securities
holdings. Each Theme Portfolio's policy of concentrating its
investments in companies in its particular industries may cause a
Fund's net asset value to fluctuate more than if it invested in a
greater number of industries.
</TABLE>
Prospectus Page 3
<PAGE>
GT GLOBAL THEME FUNDS
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investments in foreign securities involve risks relating to
political and economic developments abroad and the differences
between the regulations to which U.S. and foreign issuers are
subject. Individual foreign economies also may differ favorably or
unfavorably from the U.S. economy. Changes in foreign currency
exchange rates will affect a Fund's net asset value, earnings and
gains and losses realized on sales of securities. Securities of
foreign companies may be less liquid and their prices more
volatile than those of securities of comparable U.S. companies.
Each Theme Portfolio may engage in certain foreign currency,
options and futures transactions to attempt to hedge against the
overall level of investment and currency risk associated with its
present or planned investments. Such transactions involve certain
risks and transaction costs.
The Financial Services Portfolio, Health Care Fund and
Telecommunications Fund may each invest up to 5%, and the
Infrastructure Portfolio, Natural Resources Portfolio and Consumer
Products and Services Portfolio may each invest up to 20% of its
total assets in below investment grade debt securities.
Investments of this type are subject to a greater risk of loss of
principal and interest.
See "Investment Objectives and Policies" and "Risk Factors."
Investment Manager: Chancellor LGT Asset Management, Inc. (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 --------------, 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 each Fund's Class A shares.
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 each Fund's Class B shares.
Shares Available Through: Shares of each Fund's common stock are available through
broker/dealers who have entered into agreements to sell shares
with the Funds' 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. See "How
to Invest" and "Shareholder Account Manual."
</TABLE>
Prospectus Page 4
<PAGE>
GT GLOBAL THEME FUNDS
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Exchange Privileges: Shares of a class of a Fund may be exchanged without a sales
charge for shares of the corresponding class 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 either through broker/dealers or the Funds'
transfer agent, GT Global Investor Services, Inc. ("Transfer
Agent"). See "How to Redeem Shares" and "Shareholder Account
Manual."
Dividends and Other
Distributions: Dividends paid annually from net investment income and realized
net short-term capital gains; other distributions paid annually
from net capital gain and net gains from foreign currency
transactions, if any.
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 are quoted daily in the financial
section of most newspapers.
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
</TABLE>
Prospectus Page 5
<PAGE>
GT GLOBAL THEME FUNDS
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
SUMMARY OF INVESTOR COSTS. The expenses and maximum transaction costs associated
with investing in the Class A and Class B shares of the Funds are reflected in
the following tables(1):
<TABLE>
<CAPTION>
GT GLOBAL
GT GLOBAL GT GLOBAL FINANCIAL
HEALTH CARE TELECOMMUNICATIONS SERVICES
FUND FUND FUND
----------------- ----------------- -----------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
------- ------- ------- ------- ------- -------
SHAREHOLDER TRANSACTION COSTS (2):
<S> <C> <C> <C> <C> <C> <C>
Maximum sales charge on purchases of shares
(% of offering price)................................. 4.75% None 4.75% None 4.75% None
Sales charges on reinvested distributions to
shareholders.......................................... None None None None None None
Maximum deferred sales charge (as a % of net asset value
at time of purchase or sale, whichever is less)....... None 5.00% None 5.00% None 5.00%
Redemption charges...................................... None None None None None None
Exchange fees:
-- On first four exchanges each year................ None None None None None None
-- On each additional exchange...................... $7.50 $7.50 $7.50 $7.50 $7.50 $7.50
ANNUAL FUND OPERATING EXPENSES (3):
(AS A % OF AVERAGE NET ASSETS)
Investment management and administration fees........... 0.98% 0.98% 0.93% 0.93% 0.98% 0.98%
12b-1 distribution and service fees..................... 0.50% 1.00% 0.50% 1.00% 0.50% 1.00%
Other expenses (after reimbursements)................... % % % % % %
------- ------- ------- ------- ------- -------
Total Fund Operating Expenses........................... % % % % % %
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
GT GLOBAL
GT GLOBAL GT GLOBAL CONSUMER PRODUCTS
INFRASTRUCTURE NATURAL RESOURCES AND
FUND FUND SERVICES FUND
----------------- ----------------- -----------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
------- ------- ------- ------- ------- -------
SHAREHOLDER TRANSACTION COSTS (2):
<S> <C> <C> <C> <C> <C> <C>
Maximum sales charge on purchases of shares
(% of offering price).................... 4.75% None 4.75% None 4.75% None
Sales charges on reinvested distributions to
shareholders............................. None None None None None None
Maximum deferred sales charge (as a % of net
asset value at time of purchase or sale,
whichever is less)....................... None 5.00% None 5.00% None 5.00%
Redemption charges.......................... None None None None None None
Exchange fees:
-- On first four exchanges each year.... None None None None None None
-- On each additional exchange.......... $7.50 $7.50 $7.50 $7.50 $7.50 $7.50
ANNUAL FUND OPERATING EXPENSES (3):
(AS A % OF AVERAGE NET ASSETS)
Investment management and administration
fees..................................... 0.98% 0.98% 0.98% 0.98% 0.98% 0.98%
12b-1 distribution and service fees......... 0.50% 1.00% 0.50% 1.00% 0.50% 1.00%
Other expenses (after reimbursements).......
------- ------- ------- ------- ------- -------
Total Fund Operating Expenses...............
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
</TABLE>
Prospectus Page 6
<PAGE>
GT GLOBAL THEME FUNDS
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
HYPOTHETICAL EXAMPLE OF EFFECT OF EXPENSES:
An investor would have directly or indirectly paid the following expenses at the
end of the periods shown on a $1,000 investment in the Funds, assuming a 5%
annual return:
<TABLE>
<CAPTION>
GT GLOBAL GT GLOBAL GT GLOBAL
HEALTH CARE TELECOMMUNICATIONS FINANCIAL SERVICES
FUND FUND FUND
---------------------------- ---------------------------- ----------------------------
ONE THREE FIVE TEN ONE THREE FIVE TEN ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS YEAR YEARS YEARS YEARS YEAR YEARS YEARS YEARS
---- ----- ----- ----- ---- ----- ----- ----- ---- ----- ----- -----
Class A Shares (4).................... $ $ $ $ $ $ $ $ $ $ $ $
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class B Shares
Assuming a complete redemption at
end of period (5).................. $ $ $ $ $ $ $ $ $ $ $ $
Assuming no redemption.............. $ $ $ $ $ $ $ $ $ $ $ $
</TABLE>
<TABLE>
<CAPTION>
GT GLOBAL GT GLOBAL GT GLOBAL
INFRASTRUCTURE NATURAL RESOURCES CONSUMER PRODUCTS AND
FUND FUND SERVICES FUND
---------------------------- ---------------------------- ----------------------------
ONE THREE FIVE TEN ONE THREE FIVE TEN ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS YEAR YEARS YEARS YEARS YEAR YEARS YEARS YEARS
---- ----- ----- ----- ---- ----- ----- ----- ---- ----- ----- -----
Class A Shares (4)................... $ $ $ $ $ $ $ $ $ $ $ $
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Class B Shares
Assuming a complete redemption at
end of period (5)................. $ $ $ $ $ $ $ $ $ $ $ $
Assuming no redemption............. $ $ $ $ $ $ $ $ $ $ $ $
<FN>
- ------------------
(1) THESE TABLES ARE INTENDED TO ASSIST INVESTORS IN UNDERSTANDING THE VARIOUS
COSTS AND EXPENSES ASSOCIATED WITH INVESTING IN THE FUNDS. 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. THE
"HYPOTHETICAL EXAMPLE" IS NOT A REPRESENTATION OF PAST OR FUTURE EXPENSES.
THE FUNDS' AND THE PORTFOLIOS' ACTUAL EXPENSES MAY BE MORE OR LESS THAN
THOSE SHOWN. The tables and the assumption in the Hypothetical Example of a
5% annual return are required by regulation of the Securities and Exchange
Commission applicable to all mutual funds. The 5% annual return is not a
prediction of and does not represent the Funds' or the Portfolios'
projected or actual performance.
(2) 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 generally
declines by 1% annually thereafter, reaching zero after six years. See "How
to Invest."
(3) Expenses are based on the Funds' fiscal year ended October 31, 1996. "Other
Expenses" include custody, transfer agency, legal, audit and other
operating expenses. See "Management" herein and the Statement of Additional
Information for more information. With respect to Class A shares, without
reimbursements, "Other expenses" and "Total Fund Operating Expenses" would
have been (1) ----% and ----%, respectively, for the Financial Services
Fund and its Portfolio; (2) ----% and ----%, respectively, for the
Infrastructure Fund and its Portfolio; (3) ----% and ----%, respectively,
for the Natural Resources Fund and its Portfolio; and (4) ----% and ----%,
respectively, for the Consumer Products and Services Fund and its
Portfolio. With respect to Class B shares, without reimbursements, "Other
expenses" and "Total Fund Operating Expenses" would have been (1) ----% and
----%, respectively, for the Financial Services Fund and its Portfolio; (2)
----% and ----%, respectively, for the Infrastructure Fund and its
Portfolio; (3) ----% and ----%, respectively, for the Natural Resources
Fund and its Portfolio; and (4) ----% and ----%, respectively, for the
Consumer Products and Services Fund and its Portfolio. The Funds also offer
Advisor Class shares to certain categories of investors. See "Alternative
Purchase Plan." Advisor Class shares are not subject to 12b-1 distribution
and service fees.
The Board of Directors of the Company believes that the aggregate per share
expenses of the Financial Services Fund, Infrastructure Fund, Natural
Resources Fund and Consumer Products and Services Fund and each of their
corresponding Portfolios will be approximately equal to the expenses such
Fund would incur if its assets were invested directly in the type of
securities being held by its corresponding Portfolio.
(4) Assumes payment of maximum sales charge by the investor.
(5) Assumes deduction of the applicable contingent deferred sales charge.
</TABLE>
Prospectus Page 7
<PAGE>
GT GLOBAL THEME FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The tables below provide condensed financial information concerning income and
capital changes for one share of each class of shares of each Fund offered
through this Prospectus for the periods shown. This information is supplemented
by the financial statements and accompanying notes appearing in the Statement of
Additional Information. The financial statements and notes for the fiscal year
ended October 31, 1996, have been audited by Coopers & Lybrand, L.L.P.,
independent accountants, whose report thereon is also included in the Statement
of Additional Information.
GT GLOBAL HEALTH CARE FUND
<TABLE>
<CAPTION>
CLASS A+
--------------------------------------------------------------------------------------------------
AUGUST 7, 1989
(COMMENCEMENT
YEAR ENDED OCTOBER 31, OF OPERATIONS)
-------------------------------------------------------------------------------- TO OCTOBER 31,
1996 1995 1994* 1993* 1992 1991 1990 1989
-------- -------- -------- -------- -------- -------- -------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value, beginning of
period....................... $ 19.60 $ 17.86 $ 17.44 $ 19.29 $ 12.83 $ 11.83 $ 11.43
-------- -------- -------- -------- -------- -------- -------- --------------
Income from investment
operations:
Net investment income
(loss)..................... (0.15) (0.22) (0.15) (0.18) 0.03 0.06 0.01
Net realized and unrealized
gain (loss) on
investments................ 3.73 2.02 0.57 (1.53) 6.78 0.97 0.39
-------- -------- -------- -------- -------- -------- -------- --------------
Net increase (decrease) from
investment operations...... 3.58 1.80 0.42 (1.71) 6.81 1.03 0.40
-------- -------- -------- -------- -------- -------- -------- --------------
Distributions:
Net investment income....... (0.00) (0.00) (0.00) (0.00) (0.07) (0.03) (0.00)
Net realized gain on
investments................ (1.34) (0.00) (0.00) (0.14) (0.28) (0.00) (0.00)
In excess of net realized
gain on investments........ (0.00) (0.06) (0.00) (0.00) (0.00) (0.00) (0.00)
-------- -------- -------- -------- -------- -------- -------- --------------
Total distributions....... (1.34) (0.06) (0.00) (0.14) (0.35) (0.03) (0.00)
-------- -------- -------- -------- -------- -------- -------- --------------
Net asset value, end of
period....................... $ 21.84 $ 19.60 $ 17.86 $ 17.44 $ 19.29 $ 12.83 $ 11.83
-------- -------- -------- -------- -------- -------- -------- --------------
Total investment return (c)... 19.79% 10.11% 2.4% (8.9)% 54.2% 8.7% 3.5%(a)
Ratios and supplemental data:
Net assets, end of period (in
000's)....................... $426,380 $438,940 $461,113 $655,867 $552,897 $145,544 $ 49,903
Ratio of net investment income
(loss) to average net
assets....................... (0.72)% (1.23)% (0.90)% (0.97)% 0.19% 0.66% 3.2%(b)
Ratio of expenses to average
net assets:
With expense reduction...... 1.85% 1.98% 2.00% 2.05% 2.01% 2.39% 2.5%(b)
Without expense reduction... 1.91% --%(d) --%(d) --%(d) --%(d) --%(d) --%(d)
Portfolio turnover rate +++... 99% 64% 61% 30% 23% 34% 183%(b)
</TABLE>
- ------------------
+ All capital shares issued and outstanding as of March 31, 1993, were
reclassified as Class A shares.
++ Commencing April 1, 1993, the Fund began offering Class B shares.
+++ Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
* These selected per share data were calculated based upon weighted average
shares outstanding during the period.
(a) Not annualized.
(b) Annualized.
(c) Total investment return does not include sales charges.
(d) Calculation of "Ratios of expenses to average net assets" was made without
considering the effect of expense reduction, if any.
Prospectus Page 8
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL HEALTH CARE FUND
(CONTINUED)
<TABLE>
<CAPTION>
CLASS B++
-----------------------------------------------------
APRIL 1,
YEAR ENDED OCTOBER 31, 1993
--------------------------------------- TO OCTOBER
1996 1995* 1994* 31, 1993*
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period................................ $ 19.46 $ 17.80 $ 15.59
----------- ----------- ----------- -----------
Income from investment operations:
Net investment income (loss)...................................... (0.25) (0.32) (0.14)
Net realized and unrealized gain (loss) on investments............ 3.69 2.02 2.35
----------- ----------- ----------- -----------
Net increase (decrease) from investment operations................ 3.44 1.70 2.21
----------- ----------- ----------- -----------
Distributions:
Net investment income............................................. (0.00) (0.00) (0.00)
Net realized gain on investments.................................. (1.34) (0.00) (0.00)
In excess of net realized gain on investments..................... (0.00) (0.04) (0.00)
----------- ----------- ----------- -----------
Total distributions............................................. (1.34) (0.04) (0.00)
----------- ----------- ----------- -----------
Net asset value, end of period...................................... $ 21.56 $ 19.46 $ 17.80
----------- ----------- ----------- -----------
Total investment return (c)......................................... 19.17% 9.55% 14.2%(a)
Ratios and supplemental data:
Net assets, end of period (in 000's)................................ $ 70,740 $ 39,100 $ 8,604
Ratio of net investment income (loss) to average net assets......... (1.22)% (1.73)% (1.40)%(b)
Ratio of expenses to average net assets:
With expense reduction............................................ 2.35% 2.48% 2.54%(b)
Without expense reduction......................................... 2.41% --% --%(d)
Portfolio turnover rate +++......................................... 99% 64% 61%
</TABLE>
- ------------------
+ All capital shares issued and outstanding as of March 31, 1993, were
reclassified as Class A shares.
++ Commencing April 1, 1993, the Fund began offering Class B shares.
+++ Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
* These selected per share data were calculated based upon weighted average
shares outstanding during the period.
(a) Not annualized.
(b) Annualized.
(c) Total investment return does not include sales charges.
(d) Calculation of "Ratios of expenses to average net assets" was made without
considering the effect of expense reduction, if any.
Prospectus Page 9
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
-------------------------- --------------------------
DECEMBER 30, DECEMBER 30,
1994 1994
(COMMENCEMENT (COMMENCEMENT
OF OF
OPERATIONS) OPERATIONS)
YEAR ENDED TO OCTOBER YEAR ENDED TO OCTOBER
OCTOBER 31, 31, OCTOBER 31, 31,
1996 1995* 1996 1995*
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period................ $ 11.43 $ 11.43
----------- ------------- ----------- -------------
Income from investment operations:
Net investment income (loss)...................... 0.02** (0.04)**
Net realized and unrealized gain on investments... 3.14 3.14
----------- ------------- ----------- -------------
Net increase from investment operations........... 3.16 3.10
----------- ------------- ----------- -------------
Net asset value, end of period...................... $ 14.59 $ 14.53
----------- ------------- ----------- -------------
----------- ------------- ----------- -------------
Total investment return (c)......................... 27.65%(b) 27.12%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's)................ $ 4,082 $ 2,959
Ratio of net investment income (loss) to average net
assets:
With expense reductions and reimbursement by the
Manager.......................................... 0.20%(a) (0.30)%(a)
Without expense reductions and reimbursement by
the Manager...................................... (11.11)%(a) (11.61)%(a)
Ratio of expenses to average net assets:
With expense reductions and reimbursement by the
Manager.......................................... 2.32%(a) 2.82%(a)
Without expense reductions and reimbursement by
the Manager...................................... 13.63%(a) 14.13%(a)
Portfolio turnover rate (d).........................
</TABLE>
- ------------------
(a) Annualized.
(b) Not annualized.
(c) Total investment return does not include sales charges.
(d) GT Global Consumer Products and Services Fund invests only in the GT Global
Consumer Products and Services Portfolio and does not engage in securities
transactions. Accordingly, the portfolio turnover rates presented are for
the GT Global Consumer Products and Services Portfolio.
* These selected per share data were calculated based upon weighted average
shares outstanding during the period.
** Before reimbursement by the Manager, net investment income per share would
have been reduced by $1.12 and $1.04 for Class A and Class B, respectively.
Prospectus Page 10
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL TELECOMMUNICATIONS FUND
<TABLE>
<CAPTION>
CLASS A+
--------------------------------------------------------------
JANUARY 27,
1992
(COMMENCE-
MENT OF
YEAR ENDED OCTOBER 31, OPERATIONS) TO
---------------------------------------------- OCTOBER 31,
1996 1995 1994 (C) 1993 1992
---------- ---------- ---------- ---------- --------------
Per Share Operating Performance:
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period.............. $ 17.80 $ 16.92 $ 11.16 $ 11.43
---------- ---------- ---------- ---------- --------------
Income from investment operations:
Net investment income (loss).................... (0.09) (0.01) 0.08 0.14*
Net realized and unrealized gain (loss) on
investments.................................... (0.43) 1.17 5.83 (0.41)
---------- ---------- ---------- ---------- --------------
Net increase (decrease) from investment
operations..................................... (0.52) 1.16 5.91 (0.27)
---------- ---------- ---------- ---------- --------------
Distributions:
Net investment income........................... 0.00 (0.01) (0.15) (0.00)
Net realized gain on investments................ (0.86) (0.27) (0.00) (0.00)
---------- ---------- ---------- ---------- --------------
Total distributions........................... (0.86) (0.28) (0.15) (0.00)
---------- ---------- ---------- ---------- --------------
Net asset value, end of period.................... $ 16.42 $ 17.80 $ 16.92 $ 11.16
---------- ---------- ---------- ---------- --------------
---------- ---------- ---------- ---------- --------------
Total investment return (d)....................... (2.88)% 7.02% 53.6% (2.4)%(a)
Ratios and supplemental data:
Net assets, end of period (in 000's).............. $1,353,722 $1,644,402 $1,223,340 $442,862
Ratio of net investment income (loss) to average
net assets....................................... (0.49)% (0.02)% 0.8% 2.1%*(b)
Ratio of expenses to average net assets:
With expense reductions......................... 1.77% 1.8% 2.0% 2.3%*(b)
Without expense reductions...................... 1.83% --%(e) --%(e) --%(e)
Portfolio turnover rate+++........................ 62% 57% 41% 4%(b)
</TABLE>
- ------------------
+ All capital shares issued and outstanding as of March 31, 1993, were
reclassified as Class A shares.
++ Commencing April 1, 1993, the Fund began offering Class B shares.
+++ Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
* Includes reimbursement by the Manager of Fund operating expenses of less
than $0.01. Without such reimbursement, the annualized expense ratio would
have been 2.30% and the annualized ratio of net investment income to average
net assets would have been 2.04%.
(a) Not annualized.
(b) Annualized.
(c) These per share operating performance data were calculated based upon
weighted average shares outstanding during the year.
(d) Total investment return does not include sales charges.
(e) Calculation of "Ratio of expenses to average net assets" was made without
considering the effect of expense reductions, if any.
Prospectus Page 11
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL TELECOMMUNICATIONS FUND
(CONTINUED)
<TABLE>
<CAPTION>
CLASS B++
-----------------------------------------------
APRIL 1,
YEAR ENDED OCTOBER 31, 1993 TO
---------------------------------- OCTOBER 31,
1996 1995 1994 (C) 1993
---------- ---------- ---------- -----------
Per Share Operating Performance:
<S> <C> <C> <C> <C>
Net asset value, beginning of period.............. $ 17.66 $ 16.87 $ 12.68
---------- ---------- ---------- -----------
Income from investment operations:
Net investment income (loss).................... (0.17) (0.10) 0.01
Net realized and unrealized gain (loss) on
investments.................................... (0.43) 1.17 4.18
---------- ---------- ---------- -----------
Net increase (decrease) from investment
operations..................................... (0.60) 1.07 4.19
---------- ---------- ---------- -----------
Distributions:
Net investment income........................... 0.00 (0.01) (0.00)
Net realized gain on investments................ (0.86) (0.27) (0.00)
---------- ---------- ---------- -----------
Total distributions........................... (0.86) (0.28) (0.00)
---------- ---------- ---------- -----------
Net asset value, end of period.................... $ 16.20 $ 17.66 $ 16.87
---------- ---------- ---------- -----------
---------- ---------- ---------- -----------
Total investment return (d)....................... (3.37)% 6.50% 33.0%(a)
Ratios and supplemental data:
Net assets, end of period (in 000's).............. $1,111,520 $1,184,081 $455,335
Ratio of net investment income (loss) to average
net assets....................................... (0.99)% (0.52)% 0.3%(b)
Ratio of expenses to average net assets:
With expense reductions......................... 2.27% 2.3% 2.5%(b)
Without expense reductions...................... 2.33% --%(e) --%(e)
Portfolio turnover rate+++........................ 62% 57% 41%
</TABLE>
- ------------------
+ All capital shares issued and outstanding as of March 31, 1993, were
reclassified as Class A shares.
++ Commencing April 1, 1993, the Fund began offering Class B shares.
+++ Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
* Includes reimbursement by the Manager of Fund operating expenses of less
than $0.01. Without such reimbursement, the annualized expense ratio would
have been 2.30% and the annualized ratio of net investment income to average
net assets would have been 2.04%.
(a) Not annualized.
(b) Annualized.
(c) These per share operating performance data were calculated based upon
weighted average shares outstanding during the year.
(d) Total investment return does not include sales charges.
(e) Calculation of "Ratio of expenses to average net assets" was made without
considering the effect of expense reductions, if any.
Prospectus Page 12
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL FINANCIAL SERVICES FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
------------------------------------ ------------------------------------
MAY 31, 1994 MAY 31, 1994
(COMMENCEMENT (COMMENCEMENT
YEAR ENDED OCTOBER OF OPERATIONS) YEAR ENDED OCTOBER OF OPERATIONS)
31, TO 31, TO
------------------- OCTOBER 31, ------------------- OCTOBER 31,
1996 1995(D) 1994 1996 1995(D) 1994
-------- -------- -------------- -------- -------- --------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value, beginning of
period....................... $ 11.62 $ 11.43 $ 11.60 $ 11.43
-------- -------- -------------- -------- -------- --------------
Income from investment
operations:
Net investment income
(loss)+.................... 0.17 0.02 0.11 0.00
Net realized and unrealized
gain (loss) on
investments................ 0.13 0.17 0.12 0.17
-------- -------- -------------- -------- -------- --------------
Net increase (decrease) from
investment operations........ 0.30 0.19 0.23 0.17
-------- -------- -------------- -------- -------- --------------
Distributions to shareholders:
From net investment
income..................... 0.00 0.00 0.00 0.00
-------- -------- -------------- -------- -------- --------------
Total distributions....... 0.00 0.00 0.00 0.00
Net asset value, end of
period....................... $ 11.92 $ 11.62 $ 11.83 $ 11.60
-------- -------- -------------- -------- -------- --------------
-------- -------- -------------- -------- -------- --------------
Total investment return (c)... 2.58% 1.66%(b) 1.98% 1.49%(b)
Ratios and supplemental data:
Net assets, end of period (in
000's)....................... $ 5,687 $ 3,175 $ 4,548 $ 2,235
Ratio of net investment income
(loss) to average net assets:
With expense reductions and
reimbursement from the
Manager.................... 1.46% 0.66%(a) 0.96% 0.16%(a)
Without expense reductions
and reimbursement from the
Manager.................... (5.34)% (7.26)%(a) (5.84)% (7.76)%(a)
Ratio of expenses to average
net assets:
With expense reductions and
reimbursement from the
Manager.................... 2.34% 2.40%(a) 2.84% 2.90%(a)
Without expense reductions
and reimbursement from the
Manager.................... 9.14% 10.32%(a) 9.64% 10.82%(a)
Portfolio turnover rate (e)...
</TABLE>
- ------------------
* The per share amount does not correspond with the net realized and
unrealized gain for the period due to the timing of the sales of Fund shares
and the amount of per share realized and unrealized gains and losses at such
time.
+ Before reimbursement by the Manager, the net investment income per share for
Class A and Class B of the Financial Services Fund would have been reduced
by $0.59 and $0.59, respectively, for the period ended October 31, 1995, and
$0.23 and $0.23, respectively, from May 31, 1994, to October 31, 1994.
Before reimbursement by the Manager, the net investment income per share for
Class A and Class B of the Infrastructure Fund would have been reduced by
$0.03 and $0.03, respectively, for the period ended October 31, 1995, and
$0.02 and $0.02, respectively, from May 31, 1994, to October 31, 1994.
Before reimbursement by the Manager, the net investment income per share for
Class A and Class B of the Natural Resources Fund would have been reduced by
$0.14 and $0.13, respectively, for the period ended October 31, 1995, and
$0.04 and $0.04, respectively, from May 31, 1994, to October 31, 1994.
(a) Annualized.
(b) Not annualized.
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon weighted average
shares outstanding during the period.
(e) GT Global Financial Services Fund invests only in GT Global Financial
Services Portfolio and does not engage in securities transactions.
Accordingly, the portfolio turnover rates presented are for the GT Global
Financial Services Portfolio.
Prospectus Page 13
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL INFRASTRUCTURE FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
------------------------------------ ------------------------------------
MAY 31, 1994 MAY 31, 1994
(COMMENCEMENT (COMMENCEMENT
YEAR ENDED OCTOBER OF OPERATIONS) YEAR ENDED OCTOBER OF OPERATIONS)
31, TO 31, TO
------------------- OCTOBER 31, ------------------- OCTOBER 31,
1996 1995 1994 1996 1995 1994
-------- -------- -------------- -------- -------- --------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value, beginning of
period....................... $ 12.47 $ 11.43 $ 12.45 $ 11.43
-------- -------- -------------- -------- -------- --------------
Income from investment
operations:
Net investment income
(loss)+.................... (0.03) 0.01 (0.09) (0.01)
Net realized and unrealized
gain (loss) on
investments................ (0.33) 1.03 (0.33) 1.03
-------- -------- -------------- -------- -------- --------------
Net increase (decrease) from
investment operations........ (0.36) 1.04 (0.42) 1.02
-------- -------- -------------- -------- -------- --------------
Distributions to shareholders:
From net investment
income..................... 0.00 0.00 0.00 0.00
-------- -------- -------------- -------- -------- --------------
Total distributions....... 0.00 0.00 0.00 0.00
Net asset value, end of
period....................... $ 12.11 $ 12.47 $ 12.03 $ 12.45
-------- -------- -------------- -------- -------- --------------
-------- -------- -------------- -------- -------- --------------
Total investment return (c)... (2.89)% 9.10%(b) (3.37)% 8.92%(b)
Ratios and supplemental data:
Net assets, end of period (in
000's)....................... $ 36,241 $ 23,615 $ 50,181 $ 30,954
Ratio of net investment income
(loss) to average net assets:
With expense reductions and
reimbursement from the
Manager.................... (0.32)% 0.41%(a) (0.82)% (0.09)%(a)
Without expense reductions
and reimbursement from the
Manager.................... (0.58)% (0.47%)(a) (1.08)% (0.97)%(a)
Ratio of expenses to average
net assets:
With expense reductions and
reimbursement from the
Manager.................... 2.36% 2.40%(a) 2.86% 2.90%(a)
Without expense reductions
and reimbursement from the
Manager.................... 2.62% 3.28%(a) 3.12% 3.78%(a)
Portfolio turnover rate (e)...
</TABLE>
- ------------------
* The per share amount does not correspond with the net realized and
unrealized gain for the period due to the timing of the sales of Fund shares
and the amount of per share realized and unrealized gains and losses at such
time.
+ Before reimbursement by the Manager, the net investment income per share for
Class A and Class B of the Financial Services Fund would have been reduced
by $0.59 and $0.59, respectively, for the period ended October 31, 1995, and
$0.23 and $0.23, respectively, from May 31, 1994, to October 31, 1994.
Before reimbursement by the Manager, the net investment income per share for
Class A and Class B of the Infrastructure Fund would have been reduced by
$0.03 and $0.03, respectively, for the period ended October 31, 1995, and
$0.02 and $0.02, respectively, from May 31, 1994, to October 31, 1994.
Before reimbursement by the Manager, the net investment income per share for
Class A and Class B of the Natural Resources Fund would have been reduced by
$0.14 and $0.13, respectively, for the period ended October 31, 1995, and
$0.04 and $0.04, respectively, from May 31, 1994, to October 31, 1994.
(a) Annualized.
(b) Not annualized.
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon weighted average
shares outstanding during the period.
(e) GT Global Infrastructure Fund invests only in GT Global Infrastructure
Portfolio and does not engage in securities transactions. Accordingly, the
portfolio turnover rates presented are for the GT Global Infrastructure
Portfolio.
Prospectus Page 14
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL NATURAL RESOURCES FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
-------------------------------------- --------------------------------------
MAY 31, MAY 31,
1994 1994
(COMMENCEMENT (COMMENCEMENT
OF OF
OPERATIONS) OPERATIONS)
TO TO
YEAR ENDED OCTOBER 31, OCTOBER YEAR ENDED OCTOBER 31, OCTOBER
------------------------- 31, ------------------------- 31,
1996 1995 1994 1996 1995 1994
----------- ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ 12.41 $ 11.43 $ 12.38 $ 11.43
----------- ----------- ---------- ----------- ----------- ----------
Income from investment operations:
Net investment income (loss)+......... 0.04 0.06 (0.02) 0.03
Net realized and unrealized gain
(loss) on investments................ (0.98) 0.92 (0.98) 0.92
----------- ----------- ---------- ----------- ----------- ----------
Net increase (decrease) from investment
operations............................. (0.94) 0.98 (1.00) 0.95
----------- ----------- ---------- ----------- ----------- ----------
Distributions to shareholders:
From net investment income............ (0.03) 0.00 (0.02) 0.00
----------- ----------- ---------- ----------- ----------- ----------
Total distributions................. (0.03) 0.00 (0.02) 0.00
Net asset value, end of period.......... $ 11.44 $ 12.41 $ 11.36 $ 12.38
----------- ----------- ---------- ----------- ----------- ----------
----------- ----------- ---------- ----------- ----------- ----------
Total investment return (c)............. 7.58% 8.57%(b) (8.05)% 8.31%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 12,598 $ 14,797 $ 13,978 $ 13,404
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement from the Manager....... 0.41% 2.63%(a) (0.09)% 2.13%(a)
Without expense reductions and
reimbursement from the Manager....... (0.69)% 0.65%(a) (1.19)% 0.15%(a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement from the Manager....... 2.37% 2.40%(a) 2.87% 2.90%(a)
Without expense reductions and
reimbursement from the Manager....... 3.47% 4.38%(a) 3.97% 4.88%(a)
Portfolio turnover rate (e).............
</TABLE>
- ------------------
* The per share amount does not correspond with the net realized and
unrealized gain for the period due to the timing of the sales of Fund shares
and the amount of per share realized and unrealized gains and losses at such
time.
+ Before reimbursement by the Manager, the net investment income per share for
Class A and Class B of the Financial Services Fund would have been reduced
by $0.59 and $0.59, respectively, for the period ended October 31, 1995, and
$0.23 and $0.23, respectively, from May 31, 1994, to October 31, 1994.
Before reimbursement by the Manager, the net investment income per share for
Class A and Class B of the Infrastructure Fund would have been reduced by
$0.03 and $0.03, respectively, for the period ended October 31, 1995, and
$0.02 and $0.02, respectively, from May 31, 1994, to October 31, 1994.
Before reimbursement by the Manager, the net investment income per share for
Class A and Class B of the Natural Resources Fund would have been reduced by
$0.14 and $0.13, respectively, for the period ended October 31, 1995, and
$0.04 and $0.04, respectively, from May 31, 1994, to October 31, 1994.
(a) Annualized.
(b) Not annualized.
(c) Total investment return does not include sales charges.
(d) These selected per share data were calculated based upon weighted average
shares outstanding during the period.
(e) GT Global Natural Resources Fund invests only in GT Global Natural Resources
Portfolio and does not engage in securities transactions. Accordingly, the
portfolio turnover rates presented are for the GT Global Natural Resources
Portfolio.
Prospectus Page 15
<PAGE>
GT GLOBAL THEME FUNDS
ALTERNATIVE PURCHASE PLAN
- --------------------------------------------------------------------------------
DIFFERENCES BETWEEN THE CLASSES. The primary distinction between the two classes
of each 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 each 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 each 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 each 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 each 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 that 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% 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 each 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 a
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% annual
service and distribution fees on the Class B shares of a 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 a 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 a 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
Funds' future returns cannot be predicted, however, there can be no assurance
that such a positive return will be achieved.
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 a 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 a
Fund is waived for certain eligible purchasers and these purchasers'
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GT GLOBAL THEME FUNDS
entire purchase price would be immediately invested in that 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 a 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 Funds.
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 each 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 a
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 comprising or affiliated with Liechtenstein Global Trust; and (e) any
of the companies comprising or affiliated with Liechtenstein Global Trust.
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES
AND POLICIES
- --------------------------------------------------------------------------------
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.
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.
GLOBAL FINANCIAL SERVICES INDUSTRIES INVESTMENT. Examples of financial services
companies include commercial banks and savings institutions and loan
associations and their holding companies; consumer and industrial finance
companies; diversified financial services companies; investment banks; insurance
brokerages; securities brokerage and investment advisory companies; real estate-
related companies; leasing companies; and a variety of firms in all segments of
the insurance field such as multi-line, property and casualty and life insurance
and insurance holding companies.
The Manager believes an accelerating rate of global economic interdependence
will lead to significant growth in the demand for financial services. In
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GT GLOBAL THEME FUNDS
addition, in the Manager's view, as the industries evolve, opportunities will
emerge for those companies positioned for the future. Thus, 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.
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.
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.
GLOBAL INFRASTRUCTURE INDUSTRIES INVESTMENT. Examples of infrastructure
companies include those engaged in designing, developing or providing the
following products and services: electricity production; oil, gas, and coal
exploration, development, production and distribution; water supply, including
water treatment facilities; nuclear power and other alternative energy sources;
transportation, including the construction or operation of transportation
systems; steel, concrete, or similar types of products; communications equipment
and services (including equipment and services for both data and voice
transmission); mobile communications and cellular radio/paging; emerging
technologies combining telephone, television and/or computer systems; and other
products and services, which, in the Manager's judgment, constitute services
significant to the development of a country's infrastructure.
The Manager believes that a country's infrastructure is one key to the long-term
success of that country's economy. The Manager believes that adequate energy,
transportation, water, and communications systems are essential elements for
long-term economic growth. The Manager believes that many developing nations,
especially in Asia and Latin America, plan to make significant expenditures to
the development of their infrastructure in the coming years, which is expected
to facilitate increased levels of services and manufactured goods.
In the developed countries of North America, Europe, Japan and the south
Pacific, the Manager expects that the replacement and upgrade of transportation
and communications systems should stimulate growth in the infrastructure
industries of those countries. In addition, in the Manager's view, deregulation
of telecommunications and electric and gas utilities in many countries is
promoting significant changes in these 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. In addition, the long-term growth rates of
certain foreign countries' economies may be substantially higher than the
long-term growth rate of the U.S. economy. An integral aspect of certain foreign
countries' economies may be the development or improvement of their
infrastructure.
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.
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
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GT GLOBAL THEME FUNDS
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
natural resource industries.
GLOBAL NATURAL RESOURCE INDUSTRIES INVESTMENT. Examples of natural resource
companies include those which own, explore or develop: energy sources (such as
oil, gas and coal); ferrous and non-ferrous metals (such as iron, aluminum,
copper, nickel, zinc and lead), strategic metals (such as uranium and titanium)
and precious metals (such as gold, silver and platinum); chemicals; forest
products (such as timber, coated and uncoated tree sheet, pulp and newsprint);
other basic commodities (such as foodstuffs); refined products (such as
chemicals and steel) and service companies that sell to these producers and
refiners; and other products and services, which, in the Manager's opinion are
significant to the ownership and development of natural resources and other
basic commodities.
The Manager believes that the liberalization of formerly socialist economies
will bring about dramatic changes in both the supply and demand for natural
resources. In addition, rapid industrialization in developing countries of Asia
and Latin America is generating new demands for industrial materials that are
affecting world commodities markets. The Manager believes these changes are
likely to create investment opportunities that benefit from new sources of
supply and/or from changes in commodities prices.
The Manager also believes that investments in natural resource industries offer
an opportunity to protect wealth against the capital-eroding effects of
inflation. During periods of accelerating inflation or currency uncertainty,
worldwide investment demand for natural resources, particularly precious metals,
tends to increase, and during periods of disinflation or currency stability, it
tends to decrease. The Manager believes that rising commodity prices and
increasing worldwide industrial production may favorably affect share prices of
natural resource companies, and investments in such companies can offer
excellent opportunities to offset the effects of inflation.
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.
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.
GLOBAL CONSUMER PRODUCTS AND SERVICES INDUSTRIES INVESTMENT. Examples of
consumer products and services companies include those that manufacture, market,
retail, or distribute: (i) durable goods, such as homes, household goods,
automobiles, boats, furniture and appliances, and computers; (ii) non-durable
goods, such as food and beverages and apparel; (iii) media, entertainment,
broadcasting, publishing and sports-related goods and services, such as
television and radio broadcast, motion pictures, wireless communications, gaming
casinos, theme parks, restaurants and lodging; and (iv) goods and services to
companies in the foregoing industries such as advertisers, textile companies and
distribution and shipping companies.
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
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GT GLOBAL THEME FUNDS
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. Emerging economies, such as those in China, Southeast
Asia, Eastern Europe and Latin America, offer opportunities for the growth and
expansion of consumer markets. These regions currently comprise a growing source
of inexpensive consumer products for export and a growing source of demand for
consumer products and services as the disposable incomes of their populations
increase. In the Manager's view, these changes are likely to create investment
opportunities in companies, both local and multinational, that are able to
employ innovative manufacturing, marketing, retailing and distribution methods
to open new markets and/or expand existing markets.
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.
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.
GLOBAL HEALTH CARE INDUSTRIES INVESTMENT. Examples of health care companies
include those that are substantially engaged in the design, manufacture or sale
of products or services used for or in connection with health care or medicine.
Such firms may include pharmaceutical companies; firms that design, manufacture,
sell or supply medical, dental and optical products, hardware or services;
companies involved in biotechnology, medical diagnostic, and biochemical
research and development; and companies involved in the ownership and/or
operation of health care facilities.
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.
The Manager believes that the global health care industries offer attractive
long-term supply/demand dynamics. While the U.S., Western Europe, and Japan
presently account for over 90% of health care expenditures, this should change
dramatically in the coming decade if the populations of developing countries
devote an increasing percentage of income to health care. Additionally, the
Manager believes demographics on aging point to a significant increase in demand
from the industrialized nations, as the elderly account for a growing proportion
of worldwide health care spending. Finally, in the Manager's view, technology
will continue to expand the range of products and services offered, with new
drugs, medical devices and surgical procedures addressing medical conditions
previously considered untreatable.
In addition to these underlying trends, the United States is presently
experiencing a period of rapid and profound change in its own health care
system, marked by the rise of managed care, the formation of health care
delivery networks, and widespread consolidation across all segments of the
industry. The Manager believes that this transition offers investment
opportunities in those companies acting as consolidators or otherwise gaining
market share at the expense of less efficient competitors.
TELECOMMUNICATIONS FUND
The Telecommunications Fund's investment objective is long-term growth of
capital. The
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GT GLOBAL THEME FUNDS
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.
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.
GLOBAL TELECOMMUNICATIONS INDUSTRIES INVESTMENT. The telecommunications industry
is composed of a variety of sectors, ranging from companies concentrating on
established technologies to those primarily engaged in emerging or developing
technologies. The characteristics of companies focusing on the same technology
will vary among countries depending upon the extent to which the technology is
established in the particular country. The Manager will allocate the
Telecommunications Fund's investments among these sectors depending upon its
assessment of their relative long-term growth potentials.
Examples of telecommunications companies include those engaged in designing,
developing or providing the following products and services: communications
equipment and services (including equipment and services for both data and voice
transmission); electronic components and equipment; broadcasting (including
television and radio, satellite, microwave and cable television and
narrowcasting); computer equipment, mobile communications and cellular
radio/paging; electronic mail; local and wide area networking and linkage of
word and data processing systems; publishing and information systems; videotext
and teletext; and emerging technologies combining telephone, television and/or
computer systems.
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.
SELECTION OF INVESTMENTS AND ASSET ALLOCATION. Each Theme Portfolio expects
that, from time to time, a significant portion of its assets may be invested in
the securities of domestic issuers. Each industry represented in the Theme
Portfolios, however, is a global industry with significant, growing markets
outside of the United States. A sizeable proportion of the companies which
comprise such industries are headquartered outside of the United States.
For these reasons, the Manager believes that a portfolio composed only of
securities of U.S. issuers does not provide the greatest potential for return
from a Theme Portfolio investment. The Manager uses its financial expertise in
markets located throughout the world and the substantial global resources of
Liechtenstein Global Trust in attempting to identify those countries and
companies then providing the greatest potential for long-term capital
appreciation. In this fashion, the Manager seeks to enable shareholders to
capitalize on the substantial investment opportunities and the potential for
long-term growth of capital presented by the global industries represented in
the Theme Portfolios.
The Manager allocates each Theme Portfolio's assets among securities of
countries and in currency denominations where opportunities for meeting each
Theme Portfolio's investment objective are expected to be the most attractive.
Each Theme Portfolio may invest substantially in securities denominated in one
or more currencies. Under normal conditions, each Theme Portfolio invests in the
securities of issuers located in at least three countries, including the United
States; investments in securities of issuers in any one country, other than the
United States, will represent no more than 40% of the Financial Services
Portfolio's and the Telecommunication Fund's total assets, and no more than 50%
of the Infrastructure Portfolio's, the Natural Resources Portfolio's, the
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GT GLOBAL THEME FUNDS
Health Care Fund's and the Consumer Products and Services Portfolio's total
assets.
In analyzing specific companies for possible investment, the Manager ordinarily
looks for several of the following characteristics: above-average per share
earnings growth; high return on invested capital; a healthy balance sheet; sound
financial and accounting policies and overall financial strength; strong
competitive advantages; effective research and product development and
marketing; development of new technologies; efficient service; pricing
flexibility; strong management; and general operating characteristics that will
enable the companies to compete successfully in their respective markets.
In assessing companies for the Natural Resources Portfolio, the Manager will
also 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.
TEMPORARY DEFENSIVE STRATEGIES. In the interest of preserving shareholders'
capital, 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 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, most or all of each Theme
Portfolio's investments may be made in the United States and denominated in U.S.
dollars. To the extent any 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 Fund shares or to
meet its ordinary daily cash needs, each 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.
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 Theme Portfolios in privatizations in
appropriate circumstances. In certain foreign countries, the ability of foreign
entities such as the Theme Portfolios to participate in privatizations may be
limited by local law, or the terms on which the Theme Portfolios 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.
INVESTMENTS IN OTHER INVESTMENT COMPANIES. Each Theme Portfolio may invest up to
10% of its total assets in other investment companies. As a shareholder in an
investment company, that Theme Portfolio would bear its ratable share of that
investment company's expenses, including its advisory and administration fees.
At the same time, the Theme Portfolio would continue to pay its own management
fees and other expenses.
BORROWING, REVERSE REPURCHASE AGREEMENTS AND ROLL TRANSACTIONS. A Theme
Portfolio may borrow from banks or may borrow through reverse repurchase
agreements and "roll" transactions in connection with meeting requests for the
redemptions of a Theme Portfolio's shares.
A Theme Portfolio also may borrow up to 5% of its total assets for temporary or
emergency purposes other than to meet redemptions. A Theme Portfolio may borrow
up to 33 1/3% of its total assets. However, no additional investments will be
made if a Theme Portfolio's borrowings exceed 5% of its total assets. Any
borrowing by a Theme Portfolio may cause greater fluctuation in the value of its
shares than would be the case if a Theme Portfolio did not borrow.
A reverse repurchase agreement is a borrowing transaction in which a 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. A "roll"
borrowing transaction involves a Theme Portfolio's sale of securities together
with its commitment (for which that Theme Portfolio may receive a fee) to
purchase similar, but not identical, securities at a future date.
SECURITIES LENDING. Each Theme Portfolio may lend its portfolio securities to
broker/dealers or to other institutional investors. Securities lending allows
the Theme Portfolios to retain ownership of
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GT GLOBAL THEME FUNDS
the securities loaned and, at the same time, earn additional income that may be
used to offset a Theme Portfolio's custody fees. Each Theme Portfolio limits its
loans of portfolio securities to an aggregate of 30% of the value of its total
assets, measured at the time any such loan is made. While a loan is outstanding,
the borrower must maintain with the Theme Portfolio's custodian collateral
consisting of cash, U.S. government securities or certain irrevocable letters of
credit equal to at least the value of the borrowed securities, plus any accrued
interest. 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.
WHEN-ISSUED OR FORWARD COMMITMENT SECURITIES. The Theme Portfolios may purchase
debt securities on a "when-issued" basis and may purchase or sell such
securities on a "forward commitment" basis in order to hedge against anticipated
changes in interest rates and prices. The price, which is generally expressed in
yield terms, is fixed at the time the commitment is made, but delivery and
payment for the securities take place at a later date. When-issued securities
and forward commitments may be sold prior to the settlement date, but a Theme
Portfolio will purchase or sell when-issued securities or enter into forward
commitments only with the intention of actually receiving or delivering the
securities, as the case may be. No income accrues on securities which have been
purchased pursuant to a forward commitment or on a when-issued basis prior to
delivery to the Theme Portfolio. If the Theme Portfolio disposes of the right to
acquire a when-issued security prior to its acquisition or disposes of its right
to deliver or receive against a forward commitment, it may incur a gain or loss.
At the time a Theme Portfolio enters into a transaction on a when-issued or
forward commitment basis, a segregated account consisting of cash or liquid
securities equal to the value of the when-issued or forward commitment
securities will be established and maintained with its custodian and will be
marked to market daily. There is a risk that the securities may not be delivered
and that the Theme Portfolio may incur a loss.
OPTIONS, FUTURES AND FORWARD CURRENCY TRANSACTIONS. Each Theme Portfolio may use
forward currency contracts, futures contracts, options on securities, options on
indices, options on currencies and options on futures contracts to attempt to
hedge against the overall level of investment and currency risk normally
associated with the portfolio. These instruments are often referred to as
"derivatives," which may be defined as financial instruments whose performance
is derived, at least in part, from the performance of another asset (such as a
security, currency or an index of securities). Each Theme Portfolio may enter
into such instruments up to the full value of its portfolio assets. See "Risk
Factors -- Options, Futures and Forward Currency Transactions" herein and
"Options, Futures and Forward Currency Strategies" in the Statement of
Additional Information.
To attempt to hedge against adverse movements in exchange rates between
currencies, each Theme Portfolio may enter into forward currency contracts for
the purchase or sale of a specified currency at a specified future date. Such
contracts may involve the purchase or sale of a foreign currency against the
U.S. dollar or may involve two foreign currencies. The Theme Portfolios may
enter into forward currency contracts either with respect to specific
transactions or with respect to that Theme Portfolio's portfolio positions. Each
Theme Portfolio also may purchase and sell put and call options on currencies,
futures contracts on currencies and options on such futures contracts to hedge
against movements in exchange rates.
In addition, a Theme Portfolio may purchase and sell put and call options on
equity and debt securities to hedge against the risk of fluctuations in the
prices of securities held by that Theme Portfolio or that the Manager intends to
include in the Theme Portfolio's portfolio. The Theme Portfolio also may
purchase and sell put and call options on stock indexes to hedge against overall
fluctuations in the securities markets generally or in a specific market sector.
Further, a Theme Portfolio may sell stock index futures contracts and may
purchase put options or write call options on such futures contracts to protect
against a general stock market decline or a decline in a specific market sector
that could affect adversely a Theme Portfolio's holdings. A Theme Portfolio also
may purchase stock index futures contracts and purchase call options or write
put options on such contracts to hedge against a general stock market or market
sector advance and thereby attempt to lessen the cost of future securities
acquisitions. A Theme Portfolio may use interest rate futures contracts and
options thereon to hedge the debt portion of its portfolio against changes in
the general level of interest rates.
Prospectus Page 23
<PAGE>
GT GLOBAL THEME FUNDS
RISK FACTORS
- --------------------------------------------------------------------------------
GENERAL. There is no assurance that any Fund or Portfolio will achieve its
investment objective. The Funds' net asset values will fluctuate reflecting
fluctuations in the market value of the Theme Portfolios' portfolio positions.
Equity securities, particularly common stocks, generally represent the most
junior position in an issuer's capital structure, and entitle holders to an
interest in the assets of an issuer, if any, remaining after all more senior
claims have been satisfied. In addition, the value of debt securities held by a
Theme Portfolio generally will fluctuate with changes in the perceived
creditworthiness of the issuers of such securities and interest rates.
Because of the focus of each Theme Portfolio on its 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 Fund will be especially susceptible to factors affecting the
industries in which it focuses. Accordingly, no Fund should be considered as a
complete investment program.
FINANCIAL SERVICES FUND AND FINANCIAL SERVICES PORTFOLIO. Financial services
industries may be subject to greater governmental regulation than many other
industries and changes in governmental policies and the need for regulatory
approvals may have a material effect on the services of this industry.
Governmental regulation may limit both the financial commitments banks can make,
including the amounts and types of loans, and the interest rates and fees they
can charge. In addition, government regulation in certain foreign countries may
impose interest rate controls, credit controls and price controls.
Companies in the financial services sector are subject to rapid business
changes, significant competition, value fluctuations due to the concentration of
loans in particular industries significantly affected by economic conditions
(such as real estate or energy) and volatile performance dependent upon the
availability and cost of capital and prevailing interest rates. In addition,
general economic conditions significantly affect these companies. Credit and
other losses resulting from the financial difficulty of borrowers or other third
parties potentially may have an adverse effect on companies in these industries.
Foreign banks, particularly those of Japan, have reported financial difficulties
attributed to increased competition, regulatory changes, and general economic
difficulties.
The financial services area in the United States currently is changing
relatively rapidly as existing distinctions between various financial service
segments become less clear. For instance, recent business combinations have
included insurance, finance, and securities brokerage under single ownership.
Some primarily retail corporations have expanded into securities and insurance
fields. Investment banking, securities brokerage and investment advisory
companies are subject to government regulation and risk due to securities
trading and underwriting activities.
Many of the investment considerations discussed in connection with banks,
savings institutions and loan associations, and finance companies also apply to
insurance companies. The performance of insurance company investments will be
subject to risk from several factors. The earnings of insurance companies will
be affected by interest rates, pricing (including severe pricing competition,
from time to time), claims activity, marketing competition and general economic
conditions. Particular insurance lines also will be influenced by specific
matters. Property and casualty insurer profits may be affected by certain
weather catastrophes and other disasters. Life and health insurer profits may be
affected by mortality and morbidity rates. Individual companies may be exposed
to material risks, including reserve inadequacy, problems in investment
portfolios (due to real estate or "junk" bond holdings, for example), and the
inability to collect from reinsurance carriers. Insurance companies are subject
to extensive governmental regulation, including the imposition of maximum rate
levels, which may not be adequate for some lines of business. Proposed or
potential anti-trust or tax law changes also may affect adversely insurance
companies' policy sales, tax obligations and profitability.
Prospectus Page 24
<PAGE>
GT GLOBAL THEME FUNDS
INFRASTRUCTURE FUND AND INFRASTRUCTURE PORTFOLIO.
Infrastructure industries may be subject to greater political, environmental and
other governmental regulation than many other industries. The nature of such
regulation continues to evolve in both the United States and foreign countries,
and changes in governmental policy and the need for regulatory approvals may
have a material effect on the products and services of this industry. Electric,
gas, water and most telecommunications companies in the United States, for
example, are subject to both federal and state regulation affecting permitted
rates of return and the kinds of services that may be offered. Governmental
regulation may also hamper the development of new technologies.
In addition, many infrastructure companies have historically been subject to the
risks attendant to increases in fuel and other operating costs, high interest
costs on borrowed funds, costs associated with compliance with environmental and
other safety regulations and changes in the regulatory climate. Further,
competition is intense for many infrastructure companies. As a result, many of
these companies may be adversely affected in the future and such companies may
be subject to increased share price volatility. In addition, many companies have
diversified into oil and gas exploration and development, and therefore returns
may be more sensitive to energy prices. Other infrastructure companies, such as
water supply companies, are in a highly fragmented industry due to local
ownership. Generally these companies are mature and are experiencing little or
no growth. Changes in prevailing interest rates may also affect the
Infrastructure Fund's share values because prices of equity and debt securities
of infrastructure companies often tend to increase when interest rates decline
and decrease when interest rates rise.
NATURAL RESOURCES FUND AND NATURAL RESOURCES PORTFOLIO. Natural resource
industries may be subject to greater political, environmental and other
governmental regulation than many other industries. The nature of such
regulation continues to evolve in both the United States and foreign countries,
and changes in governmental policies and the need for regulatory approvals may
have a material effect on the products and services of natural resource
companies. For example, the exploration, development and distribution of coal,
oil and gas in the United States are subject to significant federal and state
regulation, which may affect rates of return on such investments and the kinds
of services that may be offered. Governmental regulation may also hamper the
development of new technologies.
In addition, many natural resource companies historically have been subject to
significant costs associated with compliance with environmental and other safety
regulations and changes in the regulatory climate.
Further, competition is intense for many natural resource companies. As a
result, many of these companies may be adversely affected in the future and the
value of the securities issued by such companies may be subject to increased
share price volatility.
The value of the Natural Resources Portfolio's securities will fluctuate in
response to stock market developments, as well as market conditions for the
particular natural resources with which the issuer is involved. The price of the
commodity will fluctuate due to changes in worldwide levels of inventory, and
changes, perceived or actual, in production and consumption. The values of
natural resources may fluctuate directly with respect to various stages of the
inflationary cycle and perceived inflationary trends and are subject to numerous
factors, including national and international politics. The Natural Resources
Portfolio's investments in precious metals are subject to many risks, including
substantial price fluctuations over short periods of time. Further, the Natural
Resources Portfolio's investments in companies are expected to be subject to
irregular fluctuations in earnings, because these companies are affected by
changes in the availability of money, the level of interest rates, and other
factors.
CONSUMER PRODUCTS AND SERVICES FUND AND CONSUMER PRODUCTS AND SERVICES
PORTFOLIO. The performance of consumer products and services companies, relates
closely to the actual or perceived performance of the overall economy, interest
rates and consumer confidence. In addition, changes in demographics and consumer
tastes may also affect the demand for, and success of, particular consumer
products and services. Many consumer products and services companies have
unpredictable earnings, due in part to changes in consumer tastes and intense
competition. As a result, such companies may be subject to increased share price
volatility. The consumer products and services industries may also be subject to
greater government regulation, including trade regulation, than many other
industries. Changes in governmental policy and the need for regulatory approvals
may
Prospectus Page 25
<PAGE>
GT GLOBAL THEME FUNDS
have a material effect on the products and services of the consumer products and
services industries. Such governmental regulations may also hamper the
development of new business opportunities.
HEALTH CARE FUND. Health care industries generally are subject to substantial
government regulation and approval of its products and services. Changes in
governmental policy or regulation could have a material effect on the demand for
products and services offered by health care companies and therefore could
affect the performance of the Health Care Fund. In addition, the products and
services offered by such companies may be subject to rapid obsolescence caused
by technological and scientific advances.
TELECOMMUNICATIONS FUND. Telecommunications industries may be subject to greater
governmental regulation than many other industries and changes in governmental
policy and the need for regulatory approvals may have a material effect on the
products and services of this industry. Telephone operating companies in the
United States, for example, are subject to both federal and state regulation
affecting permitted rates of return and the kinds of services that may be
offered. Certain types of companies in the telecommunications industries are
engaged in fierce competition for market share that could result in increased
share price volatility.
FOREIGN INVESTING. Investing in foreign securities entails certain risks. The
securities of non-U.S. issuers generally will not be registered with, nor the
issuers thereof be subject to, the reporting requirements of the SEC.
Accordingly, there may be less publicly available information about foreign
securities and issuers than is available about domestic securities and issuers.
Foreign companies generally are not subject to uniform accounting, auditing and
financial reporting standards, practices and requirements comparable to those
applicable to domestic companies. In addition, certain costs attributable to
foreign investing, such as custody charges, are higher than those attributable
to domestic investing. Securities of some foreign companies are less liquid and
their prices may be more volatile than securities of comparable domestic
companies. The Theme Portfolios' interest and dividends from foreign issuers may
be subject to non-U.S. withholding taxes, thereby reducing the Theme Portfolios'
net investment income.
With respect to some foreign countries, there is the increased possibility of
expropriation or confiscatory taxation, limitations on the removal of funds or
other assets of the Theme Portfolios, political or social instability, or
diplomatic developments which could affect the Theme Portfolios' investments in
those countries. Moreover, individual foreign economies may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross national
product, rate of inflation, rate of savings and capital reinvestment, resource
self-sufficiency and balance of payments positions.
Each Theme Portfolio may invest in issuers domiciled in "emerging markets."
Investing in emerging market countries involves risks in addition to those risks
involved in foreign investing. Many emerging market countries have experienced
high rates of inflation for many years. In addition, emerging markets generally
are dependent heavily upon international trade and, accordingly, have been and
continue to be affected adversely by trade barriers, exchange controls, managed
adjustments in relative currency values and other protectionist measures imposed
or negotiated by the countries with which they trade. The securities markets of
emerging market countries are substantially smaller, less developed, less liquid
and more volatile than the securities markets of the developed countries. In
addition, issuers in emerging markets typically are subject to a greater degree
of change in earnings and business prospects than issuers in developed
countries.
The Theme Portfolios will also be affected favorably or unfavorably by exchange
control regulations or changes in the exchange rates between foreign currencies
and the U.S. dollar. Changes in currency exchange rates will influence the value
of the Funds' shares, and also may affect the value of dividends and interest
earned by the Theme Portfolios and gains and losses realized by the Theme
Portfolios.
LOWER QUALITY DEBT SECURITIES. 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,
Prospectus Page 26
<PAGE>
GT GLOBAL THEME FUNDS
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. 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 are also
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. See
"Description of Debt Ratings" in the Statement of Additional Information for a
full discussion of Moody's and S&P's ratings.
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 Theme Portfolios. If an issuer exercises these provisions in a
declining interest rate market, the Theme Portfolios may have to replace the
security with a lower yielding security, resulting in a decreased return for
investors. In addition, the 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 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 Theme Portfolios to obtain
accurate market quotations for purposes of valuing the Theme Portfolios
portfolio investments. The 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 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. A 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 Theme Portfolio may have
limited legal recourse in the event of a default.
ILLIQUID SECURITIES. The Financial Services Portfolio, Infrastructure Portfolio,
Natural Resources Portfolio, Consumer Products and Services Portfolio and
Telecommunications Fund each may invest up to 15% of its net assets, and the
Health Care Fund up to 10% of its total assets, in securities for which no
readily available market exists, so-called "illiquid securities." The Manager
believes that carefully selected investments in joint ventures,
Prospectus Page 27
<PAGE>
GT GLOBAL THEME FUNDS
cooperatives, partnerships and state enterprises which are illiquid
(collectively, "Special Situations") could enable the Portfolio to achieve
capital appreciation substantially exceeding the appreciation the Portfolio
would realize if it did not make such investments. However, in order to attempt
to limit investment risk, each of the Theme Portfolios will invest no more than
5% of its total assets in Special Situations.
Illiquid securities may be more difficult to value than liquid securities and
the sale of illiquid securities generally will require more time and result in
higher brokerage charges or dealer discounts and other selling expenses than the
sale of liquid securities. Moreover, illiquid restricted securities often sell
at a price lower than similar securities that are not subject to restrictions on
resale.
OPTIONS, FUTURES AND FORWARD CURRENCY TRANSACTIONS. Although each Theme
Portfolio is authorized to enter into options, futures and forward currency
transactions, a Portfolio might not enter into any such transactions. In
addition, issuers in emerging markets typically are subject to a greater degree
of change in earnings and business prospects than issuers in developed
countries. Options, futures and foreign currency transactions involve certain
risks, which include: (1) dependence on the Manager's ability to predict
movements in the prices of individual securities, fluctuations in the general
securities markets or in the appropriate market sector and movements in interest
rates and currency markets; (2) imperfect correlation, or even no correlation,
between movements in the price of options, forward contracts, futures contracts
or options thereon and movements in the price of the currency or security hedged
or used for cover; (3) the fact that skills and techniques needed to trade
options, futures contracts and options thereon or to use forward currency
contracts are different from those needed to select the securities in which a
Theme Portfolio invests; (4) lack of assurance that a liquid secondary market
will exist for any particular option, futures contract or option thereon at any
particular time; (5) the possible loss of principal under certain conditions;
(6) the possible inability of a Theme Portfolio to purchase or sell a portfolio
security at a time when it would otherwise be favorable for it to do so, or the
possible need for a Theme Portfolio to sell a security at a disadvantageous
time, due to the need for the Theme Portfolio to maintain "cover" or to set
aside securities in connection with hedging transactions; and (7) the possible
need to defer closing out of certain options, futures contracts and options
thereon and forward currency contracts in order to qualify or continue to
qualify for the beneficial tax treatment afforded regulated investment companies
under the Internal Revenue Code of 1986, as amended ("Code"). See "Dividends,
Other Distributions and Federal Income Taxation" herein and "Taxes" in the
Statement of Additional Information.
INVESTING IN SMALLER COMPANIES. While each Theme Portfolio's portfolio normally
will include securities of established suppliers of traditional products and
services, each Theme Portfolio may invest in smaller companies which can benefit
from the development of new products and services. These smaller companies may
present greater opportunities for capital appreciation, but may also involve
greater risks than large, established issuers. Such smaller companies may have
limited product lines, markets or financial resources, and their securities may
trade less frequently and in more limited volume than the securities of larger,
more established companies. As a result, the prices of the securities of such
smaller companies may fluctuate to a greater degree than the prices of the
securities of other issuers.
OTHER INFORMATION. The investment objective of each Fund may not be changed
without the approval of a majority of that Fund's outstanding voting securities.
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, each Fund has adopted certain investment limitations which
also may not be changed without shareholder approval. A complete description of
these limitations is included in the Statement of Additional Information. Unless
specifically noted, the Funds' investment policies described in this Prospectus,
and in the Statement of Additional Information, are not fundamental policies and
may be changed by vote of the Company's Board of Directors without shareholder
approval. Each Fund's policies regarding concentration and lending, and the
percentage of that Fund's assets that may be committed to borrowing, are
fundamental policies and may not be changed without shareholder approval.
The approval of the Financial Services Fund, Infrastructure Fund, Natural
Resources Fund and Consumer Products and Services Fund and of other investors in
their corresponding Portfolio, if any,
Prospectus Page 28
<PAGE>
GT GLOBAL THEME FUNDS
is not required to change the investment objective, policies or limitations of
that Portfolio, unless otherwise specified. Written notice shall be provided to
shareholders of such Fund thirty days prior to any changes in its corresponding
Portfolio's investment objective.
OTHER INFORMATION REGARDING THE PORTFOLIOS. As previously described, 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.
The Financial Services Fund, Infrastructure Fund, Natural Resources Fund and
Consumer Products and Services Fund may each redeem 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 that Fund and its shareholders to
do so. A change in a Portfolio's investment objective, policies or limitations
which is not approved by the Board or the shareholders of the corresponding Fund
could require the Fund to redeem its interest in the Portfolio. Any such
redemption could result in a distribution in kind of portfolio securities (as
opposed to a cash distribution) by the Portfolio. In addition, a distribution in
kind could result in a less diversified portfolio of investments for the Fund
and could adversely affect the liquidity of the Fund. Should such a distribution
occur, the Fund could incur brokerage fees or other transaction costs in
converting such securities to cash. Upon redemption, the Board would consider
what action might be taken, including the investment of all the investable
assets of that Fund in another pooled investment entity having substantially the
same investment objective as that Fund or the retention by that Fund of its own
investment adviser to manage that Fund's assets in accordance with the
investment objective, policies and limitations discussed herein with respect to
each such Fund and its investment in its corresponding Portfolio.
In addition to selling its interest to its corresponding Fund, the Financial
Services Portfolio, Infrastructure Portfolio, Natural Resources Portfolio and
Consumer Products and Services Portfolio may each sell its interests to other
non-affiliated investment companies and/or other institutional investors. All
institutional investors in a Portfolio will pay a proportionate share of that
Portfolio's expenses and will invest in that Portfolio on the same terms and
conditions. However, if another investment company invests all of its assets in
a Portfolio, it would not be required to sell its shares at the same public
offering price as the Portfolio's corresponding Fund and may charge different
sales commissions. Therefore, investors in the Financial Services Fund,
Infrastructure Fund, Natural Resources Fund and Consumer Products and Services
Fund may experience different returns from investors in another investment
company which invests exclusively in its corresponding Portfolio. As of the date
of this Prospectus, the Financial Services Fund, Infrastructure Fund, Natural
Resources Fund and Consumer Products and Services Fund are the only
institutional investors in their corresponding Portfolios.
The Financial Services Fund, Infrastructure Fund, Natural Resources Fund and
Consumer Products and Services Fund may each be materially affected by the
actions of large investors in its corresponding Portfolio, if any. For example,
as with all open-end investment companies, if a large investor were to redeem
its interest in a Portfolio, (1) that Portfolio's remaining investors could
experience higher pro rata operating expenses, thereby producing lower returns;
and (2) that Portfolio's security holdings may become less diverse, resulting in
increased risk. Institutional investors in a Portfolio that have a greater pro
rata ownership interest in that Portfolio than its corresponding Fund could have
effective voting control over the operation of that Portfolio.
Prospectus Page 29
<PAGE>
GT GLOBAL 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. 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 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). The Funds and GT Global reserve the right to
reject any purchase order and to suspend the offering of shares for a period of
time.
WHEN PLACING PURCHASE ORDERS, INVESTORS SHOULD SPECIFY WHETHER THE ORDER IS FOR
CLASS A OR CLASS B SHARES OF THE FUNDS. 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 Funds 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 Funds' 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.
Investors also may purchase shares of the Funds 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 a
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 a 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
Prospectus Page 30
<PAGE>
GT GLOBAL THEME FUNDS
in the Shareholder Account Manual to obtain an account number and detailed
instructions.
CERTIFICATES. Physical certificates representing the Funds' 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 Funds 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 FUNDS AND GT GLOBAL RECOMMEND THAT SHAREHOLDERS DO NOT REQUEST
ISSUANCE OF CERTIFICATES.
PURCHASING CLASS A SHARES
Each Fund's public offering price for Class A shares is the next determined net
asset value per share (see "Calculation of Net Asset Value") plus a sales charge
determined in accordance with the following schedule:
<TABLE>
<CAPTION>
SALES CHARGE AS PERCENTAGE OF DEALER
AMOUNT OF REALLOWANCE
PURCHASE ------------------------------ AS PERCENTAGE
AT THE PUBLIC OFFERING NET OF THE
OFFERING PRICE PRICE INVESTMENT OFFERING PRICE
- ----------------- ------------- --------------- -----------------
<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 brokers 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 on behalf of
a single client so that the broker'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 pursuant to a sales charge waiver 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 equal to 1% of the
lower of the original purchase price or the net asset value of such shares at
the time of redemption. See "Contingent Deferred Sales Charge -- Class A
Shares."
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), described below under "Sales Charge Waivers -- Class A
Shares."
The following purchases 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(s) 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);
(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 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
Prospectus Page 31
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GT GLOBAL THEME FUNDS
by organizations which have at least 100 but less than 1,000 employees.
(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 comprising
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.
(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 a 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 Funds' 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) An investor purchasing shares of a Fund with redemption proceeds from a
registered management investment company that is not one of the GT Global Mutual
Funds, on which the investor was subject to a front-end sales charge or a
contingent deferred sales charge.
REINSTATEMENT PRIVILEGE. Shareholders who redeem their Class A shares in a Fund
have a one-time 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 that 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. For a discussion of the federal income tax
consequences of a reinstatement, 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 a 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
Prospectus Page 32
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GT GLOBAL THEME FUNDS
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 FUNDS 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 a Fund and the Class A shares of other GT Global Mutual Funds (other than 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 FUNDS 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
Each Fund's public offering price for Class B shares is the next determined net
asset value per share. See "Calculation of Net Asset Value." No initial sales
charge is imposed. A contingent deferred 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.
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 other 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
Prospectus Page 33
<PAGE>
GT GLOBAL THEME FUNDS
asset value of such shares at the time of redemption by the applicable
percentage shown in the table below.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES CHARGE
AS A PERCENTAGE OF THE LESSER OF
NET ASSET VALUE AT REDEMPTION OR
REDEMPTION DURING THE ORIGINAL PURCHASE PRICE
- --------------------------- ---------------------------------
<S> <C>
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%
</TABLE>
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 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 sold
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 redemption. The amount of any contingent deferred sales
charge will be paid to GT Global.
CONTINGENT DEFERRED SALES
CHARGE WAIVERS
The contingent deferred sales charge will be waived for (1) exchanges, as
described below; (2) redemptions in connection with a 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 a Fund within
180 days of a prior redemption; (8) redemptions pursuant to a 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 or 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
Prospectus Page 34
<PAGE>
GT GLOBAL THEME FUNDS
(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 a 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 Funds.
Participants in the Automatic Investment Plan should not elect to receive
dividends or other distributions from the Funds in cash. A sales charge will be
applied to each automatic monthly purchase of Class A Fund 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.
DOLLAR COST AVERAGING PROGRAM. Investors may purchase Class A or Class B shares
of a 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 a Fund's net asset value is relatively low and fewer
shares when a 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 a 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 Fund shares 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) 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 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
Prospectus Page 35
<PAGE>
GT GLOBAL THEME FUNDS
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
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 brokers may charge a
fee for establishing accounts relating to the Program. Investors should contact
their brokers or GT Global for more information.
Prospectus Page 36
<PAGE>
GT GLOBAL THEME FUNDS
HOW TO MAKE EXCHANGES
- --------------------------------------------------------------------------------
Shares of any Fund may be exchanged for shares of the same class of any of the
other GT Global Mutual Funds (including the other Funds), based on their
respective net asset values without imposition of any sales charges, provided
that the registration remains identical. 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 Funds, 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
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.
An investor interested in making an exchange should contact his 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 Funds, 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 Funds employ reasonable procedures to confirm that
instructions communicated by telephone are genuine, including requiring some
form of personal identification prior to acting upon instructions received by
telephone, providing written confirmation of such transactions, and/or tape
recording of telephone instructions. The Funds may be liable for any losses due
to unauthorized or fraudulent instructions if they do 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.
OTHER INFORMATION ABOUT EXCHANGES. Purchases, redemptions and exchanges should
be made for investment purposes only. A pattern of frequent exchanges, purchases
and sales is not acceptable and can be limited by the Funds' or GT Global's
refusal to accept further purchase and exchange orders from the investor or
broker/dealer. The terms of the exchange offer described above may be modified
at any time, on 60 days' prior written notice to shareholders.
Prospectus Page 37
<PAGE>
GT GLOBAL THEME FUNDS
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. If a redeeming shareholder owns
both Class A and Class B shares of the Funds, 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 Funds 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 Funds' shares' net asset value next determined 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 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 Funds' 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.
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 OF RECORD.
Shareholders automatically have telephone privileges to authorize redemptions.
The Funds, GT
Prospectus Page 38
<PAGE>
GT GLOBAL THEME FUNDS
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 Funds employ reasonable procedures to confirm that
instructions communicated by telephone are genuine, including requiring some
form of personal identification prior to acting upon instructions received by
telephone, providing written confirmation of such transactions, and/or tape
recording of telephone instructions. The Funds may be liable for any losses due
to unauthorized or fraudulent instructions if they do not follow reasonable
procedures.
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 registered account owner(s) 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 brokers 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 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.
If the Transfer Agent is requested to redeem shares for which the Funds have not
yet received good payment, the Funds may delay payment of redemption proceeds
until they have assured themselves 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.
A 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).
Prospectus Page 39
<PAGE>
GT GLOBAL THEME FUNDS
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;" "Dividends, Other Distributions and Federal Income
Taxation -- Taxes" and "How to Redeem Shares;" for more information.
Each 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 7345
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. 4023-050701
EXCHANGES BY TELEPHONE
Call GT Global at 1-800-223-2138
EXCHANGES BY MAIL
Send complete instructions, including name of 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 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 40
<PAGE>
GT GLOBAL THEME FUNDS
CALCULATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
Each 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. Each
Fund's net asset value per share is computed by determining the value of its
total assets (which, in the case of the Financial Services Fund, Infrastructure
Fund, Natural Resources Fund and Consumer Products and Services Fund is the
value of each such Fund's investment in its corresponding Portfolio),
subtracting all of its liabilities, and dividing the result by the total number
of shares outstanding at such time. Net asset value is determined separately for
each class of shares of each Fund.
Equity securities held by the Theme Portfolios are valued at the last sale price
on the exchange or in the over-the-counter market in which such securities are
primarily traded, as of the close of business on the day the securities are
being valued, or, lacking any sales, at the last available bid price. Long-term
debt obligations are valued at the mean of representative quoted bid and asked
prices for such securities or, if such prices are not available, at prices for
securities of comparable maturity, quality and type; however, when the Manager
deems it appropriate, prices obtained from a bond pricing service will be used.
Short-term debt investments are amortized to maturity based on their cost,
adjusted for foreign exchange translation and market fluctuations, provided such
valuations represent fair value. When market quotations for futures and options
positions held by a Fund are readily available, those positions are valued based
upon such quotations.
Securities and other assets for which market quotations are not readily
available are valued at fair value determined in good faith by or under the
direction of the Company's Board of Directors or the Portfolios' Board of
Trustees, as applicable. Securities and other assets quoted in foreign
currencies are valued in U.S. dollars based on the prevailing exchange rates on
that day.
Certain of the Theme Portfolios' securities from time to time may be listed
primarily on foreign exchanges which trade on days when the NYSE is closed (such
as a Saturday). As a result, the net asset value of a Fund's shares may be
significantly affected by such trading on days when shareholders have no access
to that Fund.
The different expenses borne by each class of shares will result in different
net asset values and dividends. The per share net asset value of the Class B
shares of a Fund generally will be lower than that of the Class A shares of that
Fund because of the higher expenses borne by the Class B shares. The per share
net asset value of the Advisor Class shares of a Fund generally will be higher
than that of the Class A and Class B shares of that Fund because of the lower
expenses borne by 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 expense accrual differential between the classes.
- --------------------------------------------------------------------------------
DIVIDENDS, OTHER DISTRIBUTIONS
AND FEDERAL INCOME TAXATION
- --------------------------------------------------------------------------------
DIVIDENDS AND OTHER DISTRIBUTIONS. Each 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. Each 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
Prospectus Page 41
<PAGE>
GT GLOBAL THEME FUNDS
(the excess of net long-term capital gain over net short-term capital loss) and
net gains from foreign currency transactions, if any. Each 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 each 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 a Fund will be lower than the per
share income dividends on Class A shares of that 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 a Fund will be lower than the
per share income dividends on the Advisor Class shares of that 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 STATUS
OF DIVIDENDS AND OTHER DISTRIBUTIONS IS THE SAME WHETHER THEY ARE RECEIVED IN
CASH OR REINVESTED IN ADDITIONAL SHARES.
Any dividend or other distribution paid by a 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. Each Fund intends to continue to qualify for treatment as a regulated
investment company under the Code. In each taxable year that a 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, net gains from certain foreign currency
transactions and net short-term capital gain) and net capital gain that is
distributed to its shareholders. Each Portfolio expects that it also will not be
liable for any federal income tax.
Dividends from a 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 a
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.
Each 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, the shareholders' respective
shares of any foreign taxes treated as paid by the Fund, in which event each
shareholder 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.
Each 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
Prospectus Page 42
<PAGE>
GT GLOBAL THEME FUNDS
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 a 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 (including another Fund)
generally will have similar tax consequences. However, special tax rules apply
when a shareholder (1) disposes of Class A shares of a 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 a Fund are purchased within 30 days before or after
redeeming other shares of that 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 Funds and their 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 Company's Board of Directors and the Portfolio's Board of Trustees have
overall responsibility for the operation of the Funds and the Portfolios,
respectively, and have approved contracts with various financial organizations
to provide certain services required by each Fund. See "Directors, Trustees, and
Executive Officers" in the Statement of Additional Information for a complete
description of the Directors of the Funds and the Trustees of the Portfolios.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Services provided by Chancellor LGT
Asset Management, Inc. (the "Manager") as the Theme Portfolios' investment
manager and administrator include, but are not limited to, determining the
composition of the investment portfolio of the Portfolios and placing orders to
buy, sell or hold particular securities. In addition, the Manager provides the
following administration services to the Portfolios and the Funds: furnishing
corporate officers and clerical staff; providing office space, services and
equipment; and supervising all matters relating to the Portfolios' and the
Funds' operation.
The Financial Services Fund, Infrastructure Fund, Natural Resources Fund and
Consumer Products and Services Fund each pays the Manager administration fees
computed daily and payable monthly at the annualized rate of 0.25% of such
Fund's average daily net assets. In addition, each such Fund bears its pro rata
portion of the investment management and administration fees paid by its
corresponding Portfolio to the Manager. The Financial Services Portfolio,
Infrastructure Portfolio, Natural Resources Portfolio and Consumer Products and
Services Portfolio each pays the Manager a fee, based on each such Portfolio's
average daily net assets at the annualized rate of .725% on the first $500
million, .70% on the next $500 million, .675% on the next $500 million and .65%
on all amounts thereafter. For investment management and administration services
provided to the Health Care Fund and Telecommunications Fund, each such Fund
pays the Manager a fee
Prospectus Page 43
<PAGE>
GT GLOBAL THEME FUNDS
computed daily and paid monthly based on each such Fund's average daily net
assets at the annualized rate of .975% on the first $500 million, .95% on the
next $500 million, .925% on the next $500 million and .90% on amounts
thereafter. These rates are higher than those paid by most mutual funds. Each
Theme Portfolio pays all expenses not assumed by the Manager, GT Global or other
agents. The Manager and GT Global have undertaken to limit each Theme
Portfolio's expenses (exclusive of brokerage commissions, taxes, interest and
extraordinary expenses) to the annual rate of 2.40% and 2.90% of the average
daily net assets of each Fund's Class A and Class B Shares, respectively.
The Manager also serves as each Theme Portfolio's pricing and accounting agent.
For these services the Manager receives a fee at an annual rate derived by
applying 0.03% to the first $5 billion of assets of GT Global Mutual Funds and
0.02% to the assets in excess of $5 billion, and allocating the result according
to each Fund's average daily net assets.
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
U.S. offices of the Manager are located at 50 California Street, 27th Floor, San
Francisco, CA 94111 and 1166 Avenue of the Americas, New York, NY 10036.
The Manager and its worldwide affiliates, including LGT Bank in Liechtenstein,
formerly Bank in Liechtenstein, comprise 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 a 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
- ------------, 1997, the Manager and its worldwide asset management affiliates
manage approximately $
- -- billion. In the United States, as of
- ------------, 1997, the Manager manages or administers approximately $
- -- billion of GT Global Mutual Funds. As of
- ------------, 1997, assets entrusted to Liechtenstein Global Trust total
approximately $80 billion.
On October 31, 1996, Chancellor Capital Management, Inc. ("Chancellor Capital")
merged with LGT Asset Management, Inc. As of September 30, 1996, Chancellor
Capital and its affiliates, based in New York, were the 15th largest independent
investment manager in the United States with approximately $33 billion in assets
under management. Chancellor Capital specialized in public and private U.S.
equity and bond portfolio management for over 300 U.S. institutional clients.
In addition to the investment resources of its San Francisco and New York
offices, the Manager draws upon the expertise, personnel, data and systems of
other offices of Liechtenstein Global Trust, including investment offices in
Frankfurt, Hong Kong, London, Singapore, Sydney, Tokyo, and Toronto. In managing
the GT Global Mutual Funds, the Manager employs a team approach, taking
advantage of its investment resources around the world in seeking to achieve
each Fund's investment objective. Many of the GT Global Mutual Funds' portfolio
managers are natives of the countries in which they invest, speak local
languages and/or live or work in the markets they follow.
Prospectus Page 44
<PAGE>
GT GLOBAL THEME FUNDS
The investment professionals primarily responsible for the portfolio management
of the Theme Portfolios are as follows:
GLOBAL FINANCIAL SERVICES PORTFOLIO
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE PORTFOLIO PAST FIVE YEARS
- -------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
A. James Ellman Portfolio Manager since 1995 Portfolio Manager for the Manager
San Francisco since 1995. Analyst for the Manager
from 1994 to 1995. From 1992 to 1994,
Mr. Ellman was a student at the
Harvard Graduate School of Business
Administration (where he received a
Master of Business Administration).
From 1990 to 1992, Mr. Ellman was
employed by the Federal Reserve Bank
of New York as an international bank
examiner.
GLOBAL INFRASTRUCTURE PORTFOLIO
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE PORTFOLIO PAST FIVE YEARS
- -------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
David L. Sherry Portfolio Manager since Portfolio Portfolio Manager for the Manager
San Francisco inception in 1994 since 1993. From 1992 to 1993, Mr.
Sherry was Senior Securities Analyst
for Franklin Resources, Inc. (San
Mateo, CA). From 1990 to 1992, he was
a student at University of California
at Los Angeles Graduate School of
Business (where he received a Master
of Business Administration).
Michael Mahoney Portfolio Manager since Portfolio Portfolio Manager for the Manager
San Francisco inception in 1994 since 1993. From 1991 to 1993, Mr.
Mahoney was an Investment Analyst for
the Manager.
GLOBAL NATURAL RESOURCES PORTFOLIO
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE PORTFOLIO PAST FIVE YEARS
- -------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Derek H. Webb Portfolio Manager since Portfolio Portfolio Manager for the Manager
San Francisco inception in 1994 since 1994. Analyst for the Manager
from 1992 to 1994.
</TABLE>
Prospectus Page 45
<PAGE>
GT GLOBAL THEME FUNDS
<TABLE>
<S> <C> <C>
GLOBAL CONSUMER PRODUCTS AND SERVICES PORTFOLIO
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE PORTFOLIO PAST FIVE YEARS
- -------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Derek H. Webb Portfolio Manager since Portfolio Portfolio Manager for the Manager
San Francisco inception in 1994 since 1994. Analyst for the Manager
from 1992 to 1994.
GLOBAL HEALTH CARE FUND
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND PAST FIVE YEARS
- -------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Michael Yellen Portfolio Manager since 1996 Research analyst for the Manager from
San Francisco 1994 to 1996. From 1991 to 1994, Mr.
Yellen was a securities analyst and
co-portfolio manager for Franklin
Resources, Inc. (San Mateo, CA).
Prior thereto, Mr. Yellen was a
student at Stanford University, where
he received a Bachelor's Degree in
International Relations.
GLOBAL TELECOMMUNICATIONS FUND
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND PAST FIVE YEARS
- -------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Michael Mahoney Portfolio Manager since 1993 Portfolio Manager for the Manager
San Francisco since 1993. From 1991 to 1993, Mr.
Mahoney was an Investment Analyst for
the Manager.
David L. Sherry Portfolio Manager since 1993 Portfolio Manager for the Manager
San Francisco since 1993. From 1992 to 1993, Mr.
Sherry was Senior Securities Analyst
for Franklin Resources, Inc. (San
Mateo, CA).
A. James Ellman Portfolio Manager since 1995 Portfolio Manager for the Manager
San Francisco since 1995. Analyst for the Manager
from 1994 to 1995. From 1992 to 1994,
Mr. Ellman was a student at the
Harvard Graduate School of Business
Administration (where he received a
Master of Business Administration).
</TABLE>
Prospectus Page 46
<PAGE>
GT GLOBAL THEME FUNDS
In placing orders for the Theme Portfolios' securities transactions, the Manager
seeks to obtain the best net results. Consistent with its obligation to obtain
the best net results, the Manager may consider a broker/dealer's sale of shares
of the GT Global Mutual Funds as a factor in considering through whom portfolio
transactions will be effected. Brokerage transactions for the Fund may be
executed through any Liechtenstein Global Trust affiliates.
DISTRIBUTION OF FUND SHARES. GT Global is the distributor of the Funds' 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 a 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 Company's Board of Directors
pursuant to Rule 12b-1 under the 1940 Act, with respect to each Fund's Class A
shares ("Class A Plan"), each Fund may pay GT Global a service fee at the
annualized rate of up to 0.25% of the average daily net assets of such 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 each such Fund's Class A
shares, less any amounts paid by that 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 each Fund's
Class B shares ("Class B Plan"), each Fund may pay GT Global a service fee at
the annualized rate of up to 0.25% of the average daily net assets of such
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 such 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
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
Prospectus Page 47
<PAGE>
GT GLOBAL THEME FUNDS
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.
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
CONFIRMATIONS AND REPORTS TO SHAREHOLDERS. Each time a transaction is made that
affects a shareholder's account in a Fund, the shareholder will receive from the
Transfer Agent a confirmation statement reflecting the transaction.
Confirmations for transactions effected pursuant to a Fund's Automatic
Investment Plan, Systematic Withdrawal Plan and automatic dividend reinvestment
program may be provided quarterly. Shortly after the end of each 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 a Fund to shareholders will be reported
after the end of the fiscal year on Form 1099-DIV. Under certain circumstances,
duplicate mailings of the foregoing reports to the same household may be
consolidated.
ORGANIZATION OF THE COMPANY. The Company was organized as a Maryland corporation
on October 29, 1987. From time to time, the Company has and may continue to
establish other funds, each corresponding to a distinct investment portfolio and
a distinct series of the Company's common stock. Shares of each Fund 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 a Fund will be
voted by a Fund's shareholders individually when the matter affects the specific
interest of that Fund only, such as approval of its investment management
arrangements. In addition, each class of shares of a Fund has exclusive voting
rights with respect to its distribution plan. The shares of each Fund and of all
the Company's funds will be voted in the aggregate on other matters, such as the
election of Directors and ratification of the selection by the Board of
Directors of the Company's independent accountants.
Normally there will be no annual meeting of shareholders in any year, except as
required under the 1940 Act. Each Fund would be required to hold a shareholders'
meeting in the event that at any time less than a majority of the Directors
holding office had been elected by shareholders. Directors shall continue to
hold office until their successors are elected and have qualified. Shares of
each Fund and of the Company's other funds do not have cumulative voting rights,
which means that the holders of a majority of the shares voting for the election
of Directors can elect all the Directors. A Director may be removed upon a
majority vote of the shareholders qualified to vote in the election.
Shareholders holding 10% of the Company's outstanding voting shares may call a
meeting of shareholders for the purpose of voting upon the question of removal
of any Director or for any other purpose. The 1940 Act requires the Company to
assist shareholders in calling such a meeting.
Pursuant to the Company's Articles of Incorporation, it may issue six billion
shares. Of this number, 300 million shares have been classified as shares of
each Fund, 100 million shares as Class A shares and 100 million shares as Class
B shares, except for the Telecommunications Fund, of which 200 million shares
have each been classified as Class A shares and Class B shares, respectively.
One hundred million shares have been classified as Advisor Class shares for each
Fund. These amounts may be increased from time to time in the discretion of the
Board of Directors. Each share of each Fund represents an interest in that Fund
only, has a par value of $0.0001 per share, represents an equal proportionate
interest in that Fund with other shares of that Fund and is entitled to such
dividends and other distributions out of the income earned and gain realized on
the assets belonging to that Fund as may be declared at the discretion of the
Board of Directors. Each Class A, Class B and Advisor Class share of each Fund
is equal as to earnings, assets and voting privileges, except as noted above,
and each class bears the expenses, if any, related to the distribution of its
shares. Shares of
Prospectus Page 48
<PAGE>
GT GLOBAL THEME FUNDS
each Fund when issued are fully paid and nonassessable.
ORGANIZATION OF THE PORTFOLIOS. Each Portfolio is organized as a subtrust of a
New York common law trust. The Declaration of Trust provides that the Financial
Services Fund, Infrastructure Fund, Natural Resources Fund and Consumer Products
and Services Fund and other entities investing in its corresponding Portfolio
(E.G., other investment companies, insurance company separate accounts and
common and commingled trust funds), if any, each will be liable for all
obligations of that Portfolio. However, the Directors of the Company believe
that the risk of such Funds' incurring financial loss because of such liability
is limited to circumstances in which both inadequate insurance existed and each
of the Portfolios itself was unable to meet its obligations, and that neither
the Financial Services Fund, Infrastructure Fund, Natural Resources Fund and
Consumer Products and Services Fund nor their shareholders will be exposed to a
material risk of liability by reason of the Funds' investing in their
corresponding Portfolios.
Whenever the Financial Services Fund, Infrastructure Fund, Natural Resources
Fund and Consumer Products and Services Fund is requested to vote on any
proposal of its corresponding Portfolio, such Fund will hold a meeting of such
Fund's shareholders and will cast its vote as instructed by its shareholders.
Shares for which no voting instructions are received will be voted in the same
proportion as the shares for which voting instructions are received.
SHAREHOLDER INQUIRIES. Shareholder inquiries may be made by calling the Funds
toll-free at (800) 223-2138 or by writing to the Funds at 50 California Street,
27th Floor, San Francisco, California 94111.
PERFORMANCE INFORMATION. The Funds, from time to time, may include information
on their investment results and/or comparisons of their 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 Funds may quote their average annual total return
("Standardized Return"). Standardized Return is calculated separately for each
class of shares of each Fund. Standardized Return shows percentage rates
reflecting the average annual change in the value of an assumed investment in a
Fund at the end of one-, 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 a Fund. Standardized Return assumes
the reinvestment of all dividends and other distributions at net asset value on
the reinvestment date as established by the Board of Directors.
In addition, in order to more completely represent the Funds' performance or
more accurately compare such performance to other measures of investment return,
the Funds 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 Funds' performance data will reflect past performance and will not
necessarily be indicative of future results. The Funds' 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 a Fund's
investment results with those published for other investment companies, other
investment vehicles and unmanaged indices. Each 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.
Each Fund's annual report contains additional information with respect to its
performance. The annual report is available to investors upon request and free
of charge.
TRANSFER AGENT. Shareholder servicing, reporting and general transfer agent
functions for the Funds are performed by GT Global Investor Services, Inc. The
Transfer Agent is an affiliate of the
Prospectus Page 49
<PAGE>
GT GLOBAL THEME FUNDS
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 Portfolios, Health Care
Fund and Telecommunications Fund.
COUNSEL. The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue,
N.W., Washington, D.C. 20036-1800, acts as counsel to the Company and to the
Theme Portfolios. Kirkpatrick & Lockhart LLP also acts as counsel to the
Manager, GT Global and the Transfer Agent in connection with other matters.
INDEPENDENT ACCOUNTANTS. The Theme Portfolios' 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 Funds and Portfolios,
assists in the preparation of the Funds' and Portfolios' federal and state
income tax returns and consults with the Company and the Funds and the
Portfolios 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 50
<PAGE>
GT GLOBAL THEME FUNDS
NOTES
- --------------------------------------------------------------------------------
Prospectus Page 51
<PAGE>
GT GLOBAL THEME FUNDS
NOTES
- --------------------------------------------------------------------------------
Prospectus Page 52
<PAGE>
GT GLOBAL THEME FUNDS
NOTES
- --------------------------------------------------------------------------------
Prospectus Page 53
<PAGE>
GT GLOBAL THEME FUNDS
NOTES
- --------------------------------------------------------------------------------
Prospectus Page 54
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL MUTUAL FUNDS
GT GLOBAL OFFERS A BROAD RANGE OF MUTUAL FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY OF THE GT GLOBAL
MUTUAL FUNDS, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR CALL GT GLOBAL
DIRECTLY AT 1-800-824-1580.
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL WORLDWIDE GROWTH FUND
Invests around the world, including the U.S.
GT GLOBAL INTERNATIONAL GROWTH FUND
Provides portfolio diversity by investing outside
the U.S.
GT GLOBAL EMERGING MARKETS FUND
Gives access to the growth potential of developing economies
/ / GLOBAL THEME FUNDS
GT GLOBAL CONSUMER PRODUCTS AND
SERVICES FUND
Invests in companies that manufacture, market, retail, or distribute consumer
products or services
GT GLOBAL FINANCIAL SERVICES FUND
Focuses on the worldwide opportunities from the demand for financial services
and products
GT GLOBAL HEALTH CARE FUND
Invests in growing health care industries worldwide
GT GLOBAL INFRASTRUCTURE FUND
Seeks companies that build, improve or maintain a country's infrastructure
GT GLOBAL NATURAL RESOURCES FUND
Concentrates on companies that own, explore or develop natural resources
GT GLOBAL TELECOMMUNICATIONS FUND
Invests in companies worldwide that develop, manufacture or sell
telecommunications services or equipment
/ / REGIONALLY DIVERSIFIED FUNDS
GT GLOBAL NEW PACIFIC GROWTH FUND
Offers access to the emerging and established markets of the Pacific Rim,
excluding Japan
GT GLOBAL EUROPE GROWTH FUND
Focuses on investment opportunities in the new, unified Europe
GT GLOBAL LATIN AMERICA GROWTH FUND
Invests in the emerging markets of Latin America
/ / SINGLE COUNTRY FUNDS
GT GLOBAL AMERICA SMALL CAP GROWTH FUND
Invests in equity securities of small U.S. companies
GT GLOBAL AMERICA MID CAP GROWTH FUND
Concentrates on medium-sized companies in the U.S.
GT GLOBAL AMERICA VALUE FUND
Concentrates on equity securities of large cap U.S. companies believed to be
undervalued
GT GLOBAL JAPAN GROWTH FUND
Provides U.S. investors with direct access to the Japanese market
GROWTH AND INCOME FUND
GT GLOBAL GROWTH & INCOME FUND
Invests in blue-chip stocks and government bonds from around the world
INCOME FUNDS
GT GLOBAL GOVERNMENT INCOME FUND
Earns monthly income from global government securities
GT GLOBAL STRATEGIC INCOME FUND
Allocates its assets among debt securities from the U.S., developed foreign
countries and emerging markets
GT GLOBAL HIGH INCOME FUND
Invests in debt securities in emerging markets
MONEY MARKET FUND
GT GLOBAL DOLLAR FUND
Invests in high quality, U.S. dollar-denominated money market securities
worldwide for stability and preservation of capital
[LOGO]
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY G.T. INVESTMENT FUNDS, INC.,
GT GLOBAL FINANCIAL SERVICES FUND, GLOBAL FINANCIAL SERVICES PORTFOLIO, GT
GLOBAL INFRASTRUCTURE FUND, GLOBAL INFRASTRUCTURE PORTFOLIO, GT GLOBAL
NATURAL RESOURCES FUND, GLOBAL NATURAL RESOURCES PORTFOLIO, GT GLOBAL
CONSUMER PRODUCTS AND SERVICES FUND, GLOBAL CONSUMER PRODUCTS AND SERVICES
PORTFOLIO, GT GLOBAL HEALTH CARE FUND, GT GLOBAL TELECOMMUNICATIONS FUND,
CHANCELLOR LGT ASSET MANAGEMENT, INC. OR GT GLOBAL, INC. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF ANY OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON IN SUCH
JURISDICTION TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER.
THEPR610050MC
<PAGE>
GT GLOBAL INCOME FUNDS
PROSPECTUS -- MARCH 1, 1997
- --------------------------------------------------------------------------------
GT GLOBAL GOVERNMENT INCOME FUND ("GOVERNMENT INCOME FUND") seeks a high level
of current income by investing primarily in high quality U.S. and foreign
government debt securities. The Fund's secondary objectives are capital
appreciation and protection of principal through active management of its
maturity structure and currency exposure.
GT GLOBAL STRATEGIC INCOME FUND ("STRATEGIC INCOME FUND") primarily seeks high
current income and secondarily seeks capital appreciation. The Fund allocates
its assets among debt securities of issuers in: (1) the United States; (2)
developed foreign countries; and (3) emerging markets.
GT GLOBAL HIGH INCOME FUND ("HIGH INCOME FUND") primarily seeks high current
income and secondarily seeks capital appreciation by investing all of its
investable assets in the Global High Income Portfolio ("Portfolio"), which in
turn, invests in the debt securities of issuers located in emerging markets. The
Portfolio's investment objectives are identical to those of the Fund.
There can be no assurance that any Fund or the Portfolio will achieve its
investment objectives. The investment experience of the High Income Fund will
correspond directly with the investment experience of the Portfolio.
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 Funds and the Portfolio are managed and/or administered 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.
The Funds are designed for long-term investors and not as trading vehicles, do
not represent a complete investment program and are not suitable for all
investors. An investment in any of the Funds involves risk factors that should
be reviewed carefully by potential investors. The Strategic Income Fund and the
Portfolio both are authorized to borrow money for investment purposes, which
would increase the volatility of their performance and involves additional
risks. See "Investment Objectives and Policies" and "Risk Factors."
THE STRATEGIC INCOME FUND INVESTS UP TO 50% OF ITS TOTAL ASSETS AND THE GLOBAL
HIGH INCOME PORTFOLIO INVESTS UP TO 100% OF ITS TOTAL ASSETS IN LOWER QUALITY
AND UNRATED FOREIGN GOVERNMENT BONDS WHOSE CREDIT QUALITY IS GENERALLY
CONSIDERED THE EQUIVALENT OF U.S. CORPORATE DEBT SECURITIES COMMONLY KNOWN AS
"JUNK BONDS." INVESTMENTS OF THIS TYPE ARE SUBJECT TO A GREATER RISK OF LOSS OF
PRINCIPAL AND INTEREST. PURCHASERS SHOULD CAREFULLY ASSESS THE RISKS ASSOCIATED
WITH AN INVESTMENT IN THESE FUNDS. SEE "INVESTMENT OBJECTIVES AND POLICIES" AND
"RISK FACTORS."
This Prospectus sets forth concisely information an investor should know before
investing and should be read carefully and retained for future reference. A
Statement of Additional Information, dated March 1, 1997, has been filed with
the Securities and Exchange Commission (the "SEC") and is incorporated herein by
reference. The Statement of Additional Information, which may be amended or
supplemented from time to time, is available without charge by writing to the
Funds 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.
[LOGO]
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus Page 1
<PAGE>
GT GLOBAL INCOME FUNDS
TABLE OF CONTENTS
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Page
---------
<S> <C>
Prospectus Summary........................................................................ 3
Financial Highlights...................................................................... 6
Alternative Purchase Plan................................................................. 12
Investment Objectives and Policies........................................................ 13
Risk Factors.............................................................................. 23
How To Invest............................................................................. 28
How To Make Exchanges..................................................................... 35
How to Redeem Shares...................................................................... 36
Shareholder Account Manual................................................................ 39
Calculation of Net Asset Value............................................................ 40
Dividends, Other Distributions and Federal Income Taxation................................ 40
Management................................................................................ 42
Other Information......................................................................... 46
Appendix A -- Description of Debt Ratings................................................. 49
</TABLE>
Prospectus Page 2
<PAGE>
GT GLOBAL INCOME FUNDS
PROSPECTUS SUMMARY
- ------------------------------------------------------------
The following summary is qualified in its entirety by the more detailed
information appearing in the body of this Prospectus.
<TABLE>
<S> <C> <C>
The Funds and the Portfolio: The Government Income Fund, the Strategic Income Fund and the High
Income Fund (each a "Fund," and collectively, the "Funds") is each
a non- diversified series of G.T. Investment Funds, Inc. (the
"Company"), a Maryland corporation.
Investment Objectives: The Government Income Fund primarily seeks high current income and
secondarily seeks capital appreciation and protection of
principle. The Strategic Income Fund and the High Income Fund seek
high current income and secondarily seek capital appreciation.
Principal Investments: The Government Income Fund invests primarily in high quality U.S.
and foreign government debt obligations.
The Strategic Income Fund allocates its assets among debt
securities of issuers in: (1) the United States; (2) developed
foreign countries; and (3) emerging markets, and selects
particular securities in each sector based on their relative
investment merit.
The High Income Fund invests all of its investable assets in the
Portfolio, which, in turn, invests primarily in debt securities of
issuers located in emerging markets.
Principal Risk Factors: There is no assurance that the Funds or the Portfolio will achieve
their investment objectives. The Funds' net asset values will
fluctuate, reflecting fluctuations in the market value of their
portfolio holdings.
Investments in foreign securities involve risks relating to
political and economic developments abroad and the differences
between the regulations to which U.S. and foreign issuers are
subject. Individual foreign economies also may differ favorably or
unfavorably from the U.S. economy. Changes in foreign currency
exchange rates will affect a Fund's or the Portfolio's net asset
value, earnings and gains and losses realized on sales of
securities. Securities of foreign companies may be less liquid and
their prices more volatile than those of securities of comparable
U.S. companies.
Each Fund and the Portfolio may engage in certain foreign
currency, options and futures transactions to attempt to hedge
against the overall level of investment and currency risk
associated with its present or planned investments. Such
transactions involve certain risks and transaction costs.
The Strategic Income Fund may invest up to 50% of its total
assets, and the Global High Income Portfolio may invest up to 100%
of its total assets, in debt securities rated below investment
grade or, if not rated, determined by the Manager to be of
comparable quality. The Portfolio will normally invest at least
65% of its total assets in debt securities of issuers in emerging
markets. See "Investment Objectives and Policies" and "Risk
Factors."
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 ------, 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."
</TABLE>
Prospectus Page 3
<PAGE>
GT GLOBAL INCOME FUNDS
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
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 0.35% of the
average daily net assets of each Fund's Class A shares.
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 each Fund's Class B shares.
Shares Available Through: Shares of each Fund's common stock are available through
broker/dealers who have entered into agreements to sell shares
with the Funds' 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. See "How
to Invest" and "Shareholder Account Manual."
Exchange Privileges: Shares of one Fund may be exchanged without a sales charge for
shares of the corresponding class 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 either through broker/dealers or the Funds'
transfer agent, GT Global Investor Services, Inc. ("Transfer
Agent"). See "How to Redeem Shares" and "Shareholder Account
Manual."
Dividends and Other Dividends paid monthly from net investment income and net
Distributions: short-term capital gains; other distributions paid annually from
net capital gain and net gains from foreign currency transactions,
if any.
Reinvestment: Dividends and 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 Government Income Fund, Strategic
Income Fund and High Income Fund are quoted daily in the financial
section of most newspapers.
Other Features:
Class A Shares Letter of Intent Reinstatement Privilege
Quantity Discounts Systematic Withdrawal Plan
Right of Accumulation Automatic Investment Plan
Portfolio Rebalancing Program Dollar Cost Averaging Program
Class B Shares Reinstatement Privilege Automatic Investment Plan
Systematic Withdrawal Plan Dollar Cost Averaging Program
Portfolio Rebalancing Program
</TABLE>
Prospectus Page 4
<PAGE>
GT GLOBAL INCOME FUNDS
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
SUMMARY OF INVESTOR COSTS. The expenses and maximum transaction costs associated
with investing in the Class A and Class B shares of each Fund, the annual
operating expenses for the Government Income Fund, and the Strategic Income
Fund, and the aggregate annual operating expenses for the High Income Fund and
the Portfolio are reflected in the following tables (1):
<TABLE>
<CAPTION>
GOVERNMENT STRATEGIC INCOME HIGH INCOME
INCOME FUND FUND FUND
---------------- ---------------- ----------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION COSTS (2):
Maximum sales charge on purchases of shares (as a % of
offering price).......................................... 4.75% None 4.75% None 4.75% None
Sales charges on reinvested distributions to
shareholders............................................. None None None None None None
Maximum deferred sales charge (as a % of net asset value at
time of purchase or sale, whichever is less)............. None 5.0% None 5.0% None 5.0%
Redemption charges......................................... None None None None None None
Exchange fees:
-- On first four exchanges each year..................... None None None None None None
-- On each additional exchange........................... $7.50 $7.50 $7.50 $7.50 $7.50 $7.50
ANNUAL FUND OPERATING EXPENSES (3):
(AS A % OF AVERAGE NET ASSETS)
Investment management and administration fees.............. % % % % % %
12b-1 distribution and service fees........................ % % % % % %
Other expenses............................................. % % % % % %
------- ------- ------- ------- ------- -------
Total Fund Operating Expenses.............................. % % % % % %
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
</TABLE>
HYPOTHETICAL EXAMPLE OF EFFECT OF EXPENSES:
An investor directly or indirectly would have paid the following expenses at the
end of the periods shown on a $1,000 investment, assuming a 5% annual return:
<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---- ----- ----- -----
<S> <C> <C> <C> <C>
Government Income Fund
Class A Shares (4)..................................................................... $ $ $ $
Class B Shares
Assuming a complete redemption at end of period (5).................................. $ $ $ $
Assuming no redemption............................................................... $ $ $ $
Strategic Income Fund
Class A Shares (4)..................................................................... $ $ $ $
Class B Shares
Assuming a complete redemption at end of period (5).................................. $ $ $ $
Assuming no redemption............................................................... $ $ $ $
High Income Fund
Class A Shares (4)..................................................................... $ $ $ $
Class B Shares
Assuming a complete redemption at end of period (5).................................. $ $ $ $
Assuming no redemption............................................................... $ $ $ $
</TABLE>
- --------------
(1) THESE TABLES ARE INTENDED TO ASSIST INVESTORS IN UNDERSTANDING THE VARIOUS
COSTS AND EXPENSES ASSOCIATED WITH INVESTING IN A FUND. 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. THE
"HYPOTHETICAL EXAMPLE" IS NOT A REPRESENTATION OF PAST OR FUTURE EXPENSES;
EACH FUND'S ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN. The tables
and the assumption in the example of a 5% annual return are required by
regulation of the Securities and Exchange Commission applicable to all
mutual funds; the 5% annual return is not a prediction of and does not
represent the Funds' projected or actual performance. The Board of Directors
of the Company believes that the aggregate per share expenses of the High
Income Fund and the Portfolio will be less than or approximately equal to
the expenses which the Fund would incur if the assets of that Fund were
invested directly in the type of securities being held by the Portfolio.
(2) 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 generally
declines by 1% annually thereafter, reaching zero after six years. See "How
to Invest."
(3) Expenses are based on the Funds' fiscal year ended October 31, 1996. "Other
Expenses" include custody, transfer agency, legal, audit and other operating
expenses. See "Management" herein and the Statement of Additional
Information for more information. The Funds also offer Advisor Class shares
to certain categories of investors. See "Alternative Purchase Plan." Advisor
Class shares are not subject to 12b-1 disribution or service fees.
(4) Assumes payment of maximum sales charge by the investor.
(5) Assumes deduction of the applicable contingent deferred sales charge.
Prospectus Page 5
<PAGE>
GT GLOBAL INCOME FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The tables below provide condensed information concerning income and capital
changes for one share of each class of shares of the Government Income Fund, the
Strategic Income Fund, and the High Income Fund offered through this Prospectus,
for the periods shown. For the period March 29, 1988 (commencement of
operations) to October 22, 1992, the Strategic Income Fund was known as G.T.
Global Bond Fund and operated under different investment objectives, policies
and limitations. This information is supplemented by the financial statements
and accompanying notes appearing in the Statement of Additional Information. The
financial statements and notes for fiscal year ended October 31, 1996 and each
of the preceding four years have been audited by Coopers & Lybrand L.L.P.,
independent accountants, whose report thereon also is included in the Statement
of Additional Information.
GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
CLASS A+
-----------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------------------------
1996 1995(C) 1994(c) 1993(c) 1992 1991 1990 1989
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of
period......................... $ 8.63 $ 11.07 $ 9.83 $ 10.29 $ 10.46 $ 10.45 $ 10.86
-------- -------- -------- -------- -------- -------- -------- --------
Income from investment
operations:
Net investment income......... 0.62 0.65 0.74 0.92 0.99 1.18 1.15
Net realized and unrealized
gain (loss) on investments... 0.15 (1.52) 1.34 (0.31) (0.07) (0.02) (0.35)
-------- -------- -------- -------- -------- -------- -------- --------
Net increase (decrease)
resulting from investment
operations................... 0.77 (0.87) 2.08 0.61 0.92 1.16 0.80
-------- -------- -------- -------- -------- -------- -------- --------
Distributions:
Net investment income......... (0.59) (0.65) (0.74) (0.83) (1.00) (1.15) (1.20)
Net realized gain on
investments.................. (0.00) (0.27) (0.00) (0.13) (0.09) (0.00) (0.00)
In excess of net realized gain
on investments............... (0.00) (0.55) (0.00) (0.00) (0.00) (0.00) (0.00)
Return of capital............. (0.00) (0.10) (0.00) (0.00) (0.00) (0.00) (0.00)
Sources other than net
investment income............ (0.00) (0.00) (0.10) (0.11) (0.00) (0.00) (0.01)
-------- -------- -------- -------- -------- -------- -------- --------
Total distributions......... (0.59) (1.57) (0.84) (1.07) (1.09) (1.15) (1.21)
-------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of period.. $ 8.81 $ 8.63 $ 11.07 $ 9.83 $ 10.29 $ 10.46 $ 10.45
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
Total investment return(d)...... 9.22% (8.87)% 21.9% 6.3% 9.4% 11.9% 7.2%
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
Ratios and supplemental data:
Net assets, end of period (in
000's)......................... $385,404 $502,094 $708,301 $623,387 $399,200 $259,726 $122,526
Ratio of net investment income
to average net assets.......... 6.98% 6.87% 7.1% 9.0% 9.5% 11.4% 10.7%
Ratio of expenses to average net
assets:
With expense reductions....... 1.35% 1.33% 1.4% 1.6% 1.6% 1.8% 1.7%
Without expense reductions.... 1.38% --%** --%** --%** --%** --%** --%**
Portfolio turnover rate +++..... 385% 625% 495% 351% 326% 334% 413%
<CAPTION>
MARCH 29, 1988
(COMMENCE-
MENT OF
OPERATIONS) TO
OCTOBER 31,
1988
--------------
<S> <C>
Per Share Operating Performance:
Net asset value, beginning of
period......................... $11.43
--------------
Income from investment
operations:
Net investment income......... 0.49*
Net realized and unrealized
gain (loss) on investments... (0.44)
--------------
Net increase (decrease)
resulting from investment
operations................... 0.05
--------------
Distributions:
Net investment income......... (0.49)
Net realized gain on
investments.................. (0.12)
In excess of net realized gain
on investments............... (0.00)
Return of capital............. (0.00)
Sources other than net
investment income............ (0.01)
--------------
Total distributions......... (0.62)
--------------
Net asset value, end of period.. $10.86
--------------
--------------
Total investment return(d)...... 1.1%(a)
--------------
--------------
Ratios and supplemental data:
Net assets, end of period (in
000's)......................... $57,063
Ratio of net investment income
to average net assets.......... 7.41%(b)*
Ratio of expenses to average net
assets:
With expense reductions....... 1.8%(b)*
Without expense reductions.... --%**
Portfolio turnover rate +++..... 291%(b)
<FN>
- ------------------
+ All capital shares issued and outstanding as of October 21, 1992 were
reclassified as Class A shares.
++ Commencing October 22, 1992, the Fund began offering Class B shares.
+++ Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
* Net of $0.01 per share of Fund operating expenses reimbursed by the
Manager.
** Calculation of "Ratio of expenses to average net assets" was made without
considering the effect of expense reductions, if any.
(a) Not annualized.
(b) Annualized.
(c) These selected per share data were calculated based upon weighted average
shares outstanding during the period.
(d) Total investment return does not include sales charges.
</TABLE>
Prospectus Page 6
<PAGE>
GT GLOBAL INCOME FUNDS
GOVERNMENT INCOME FUND
(CONTINUED)
<TABLE>
<CAPTION>
CLASS B++
---------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------------
1996 1995(C) 1994(c) 1993(c)
-------- -------- ----------- -----------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.......................................... $ 8.64 $ 11.07 $ 9.83
-------- -------- ----------- -----------
Income from investment operations:
Net investment income....................................................... 0.55 0.59 0.67
Net realized and unrealized gain (loss) on investments...................... 0.14 (1.52) 1.34
-------- -------- ----------- -----------
Net increase (decrease) resulting from investment operations................ 0.69 (0.93) 2.01
-------- -------- ----------- -----------
Distributions:
Net investment income....................................................... (0.53) (0.59) (0.67)
Net realized gain on investments............................................ (0.00) (0.27) (0.00)
In excess of net realized gain on investments............................... (0.00) (0.54) (0.00)
Return of capital........................................................... (0.00) (0.10) (0.00)
Sources other than net investment income.................................... (0.00) (0.00) (0.10)
-------- -------- ----------- -----------
Total distributions....................................................... (0.53) (1.50) (0.77)
-------- -------- ----------- -----------
Net asset value, end of period................................................ $ 8.80 $ 8.64 $ 11.07
-------- -------- ----------- -----------
-------- -------- ----------- -----------
Total investment return(d).................................................... 8.22% (9.39)% 21.1%
-------- -------- ----------- -----------
-------- -------- ----------- -----------
Ratios and supplemental data:
Net assets, end of period (in 000's).......................................... $235,481 $ 262,405 $ 182,972
Ratio of net investment income to average net assets.......................... 6.33% 6.22% 6.5%
Ratio of expenses to average net assets:
With expense reductions..................................................... 2.00% 1.98% 2.0%
Without expense reductions.................................................. 2.03% --%** --%**
Portfolio turnover rate +++................................................... 385% 625% 495%
<CAPTION>
OCTOBER 22,
1992 TO
OCTOBER 31,
1992
-----------
<S> <C>
Per Share Operating Performance:
Net asset value, beginning of period.......................................... $ 9.87
-----------
Income from investment operations:
Net investment income....................................................... 0.02
Net realized and unrealized gain (loss) on investments...................... (0.06)
-----------
Net increase (decrease) resulting from investment operations................ (0.04)
-----------
Distributions:
Net investment income....................................................... (0.00)
Net realized gain on investments............................................ (0.00)
In excess of net realized gain on investments............................... (0.00)
Return of capital........................................................... (0.00)
Sources other than net investment income.................................... (0.00)
-----------
Total distributions....................................................... (0.00)
-----------
Net asset value, end of period................................................ $ 9.83
-----------
-----------
Total investment return(d).................................................... (0.4)%(a)
-----------
-----------
Ratios and supplemental data:
Net assets, end of period (in 000's).......................................... $ 2,624
Ratio of net investment income to average net assets.......................... 8.0%(b)
Ratio of expenses to average net assets:
With expense reductions..................................................... 1.9%(b)
Without expense reductions.................................................. --%**
Portfolio turnover rate +++................................................... 351%
</TABLE>
- ------------------
+ All capital shares issued and outstanding as of October 21, 1992 were
reclassified as Class A shares.
++ Commencing October 22, 1992, the Fund began offering Class B shares.
+++ Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
* Net of $0.01 per share of Fund operating expenses reimbursed by the Manager.
** Calculation of "Ratio of expenses to average net assets" was made without
considering the effect of expense reductions, if any.
(a) Not annualized.
(b) Annualized.
(c) These selected per share data were calculated based upon weighted average
shares outstanding during the period.
(d) Total investment return does not include sales charges.
Prospectus Page 7
<PAGE>
GT GLOBAL INCOME FUNDS
STRATEGIC INCOME FUND
<TABLE>
<CAPTION>
CLASS A+
--------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------------------------------
1996 1995(C) 1994 1993(c) 1992 1991 1990 1989
-------- -------- -------- --------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of
period........................ $ 10.88 $ 13.61 $ 11.25 $ 10.91 $ 11.20 $ 11.17 $ 11.25
-------- -------- -------- --------- --------- --------- --------- --------
Income from investment
operations:
Net investment income......... 0.97 0.79 0.96 0.86 0.84* 1.04* 0.82*
Net realized and unrealized
gain (loss) on investments... (0.69) (2.14) 2.85 0.31 (0.02) (0.17) (0.10)
-------- -------- -------- --------- --------- --------- --------- --------
Net increase (decrease) from
investment operations........ 0.28 (1.35) 3.81 1.17 0.82 0.87 0.72
-------- -------- -------- --------- --------- --------- --------- --------
Distributions:
Net investment income......... (0.80) (0.79) (0.96) (0.83) (0.60) (0.84) (0.80)
Net realized gain on
investments.................. -- (0.38) (0.37) (0.00) (0.51) (0.00) (0.00)
Return of capital............. (0.04) (0.21) (0.00) (0.00) (0.00) (0.00) (0.00)
Sources other than net
investment income............ -- (0.00) (0.12) (0.00) (0.00) (0.00) (0.00)
-------- -------- -------- --------- --------- --------- --------- --------
Total distributions......... (0.84) (1.38) (1.45) (0.83) (1.11) (0.84) (0.80)
-------- -------- -------- --------- --------- --------- --------- --------
Net asset value, end of period.. $ 10.32 $ 10.88 $ 13.61 $ 11.25 $ 10.91 $ 11.20 $ 11.17
-------- -------- -------- --------- --------- --------- --------- --------
-------- -------- -------- --------- --------- --------- --------- --------
Total investment return(d)...... 3.06% (10.44)% 37.0% 11.1% 7.7% 8.3% 6.8%
-------- -------- -------- --------- --------- --------- --------- --------
-------- -------- -------- --------- --------- --------- --------- --------
Ratios and supplemental data:
Net assets, end of period (in
000's)........................ $188,165 $275,241 $ 287,870 $ 83,849 $ 55,967 $ 44,545 $ 37,820
Ratio of net investment income
to average net assets......... 9.64% 6.74% 7.2% 7.6% 7.2%* 9.6%* 7.7%*
Ratio of expenses to average net
assets:
With expense reductions....... 1.42% 1.40% 1.7% 1.8% 1.9%* 1.9%* 1.8%*
Without expense reductions.... 1.45% --%** --%** --%** --%** --%** --%**
Ratio of interest expenses to
average net assets............ N/A 0.10% N/A N/A N/A N/A N/A
Portfolio turnover rate+++...... 238% 583% 310% 418% 630% 501% 385%
<CAPTION>
MARCH 29, 1988
(COMMENCE-
MENT OF
OPERATIONS) TO
OCTOBER 31,
1988
---------------
<S> <C>
Per Share Operating Performance:
Net asset value, beginning of
period........................ $ 11.43
---------------
Income from investment
operations:
Net investment income......... 0.45*
Net realized and unrealized
gain (loss) on investments... (0.24)
---------------
Net increase (decrease) from
investment operations........ 0.21
---------------
Distributions:
Net investment income......... (0.39)
Net realized gain on
investments.................. (0.00)
Return of capital............. (0.00)
Sources other than net
investment income............ (0.00)
---------------
Total distributions......... (0.39)
---------------
Net asset value, end of period.. $ 11.25
---------------
---------------
Total investment return(d)...... 1.2%(a)
---------------
---------------
Ratios and supplemental data:
Net assets, end of period (in
000's)........................ $ 21,830
Ratio of net investment income
to average net assets......... 7.2%*(e)
Ratio of expenses to average net
assets:
With expense reductions....... 1.7%*(e)
Without expense reductions.... --%**
Ratio of interest expenses to
average net assets............ N/A
Portfolio turnover rate+++...... 340%(e)
</TABLE>
- ------------------
+ All capital shares issued and outstanding as of October 21, 1992 were
reclassified as Class A shares.
++ Commencing October 22, 1992, the Fund began offering Class B shares.
+++ Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
* Includes reimbursement by the Manager of Fund operating expenses of $0.01,
$0.04, $0.02 and 0.05 for the year ended October 31, 1991, 1990, 1989 and
1988, respectively. Without such reimbursements, the expense ratios would
have been 1.92%, 2.20%, 2.02% and 2.42% and the ratio of net investment
income to average net assets would have been 7.16%, 9.26%, 7.56% and 6.42%
for the year ended October 31, 1991, 1990, 1989 and 1988, respectively.
** Calculation of "Ratio of expenses to average net assets" was made without
considering the effect of expense reductions, if any.
(a) Not annualized.
(b) Ratios are not meaningful due to short period of operation of Class B
shares.
(c) These selected per share data were calculated based upon weighted average
shares outstanding during the period.
(d) Total investment return does not include sales charges.
(e) Annualized.
<TABLE>
<CAPTION>
AVERAGE NUMBER OF
AMOUNT OF DEBT AVERAGE AMOUNT OF FUND'S SHARES AVERAGE AMOUNT OF
OUTSTANDING AT DEBT OUTSTANDING OUTSTANDING DEBT PER SHARE
END OF PERIOD DURING THE PERIOD DURING THE PERIOD DURING THE PERIOD
-------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Class A --
Year Ended October 31, 1995... $ 0 $ 0 21,156,980 $ 0
Class B --
37,786,015
</TABLE>
Prospectus Page 8
<PAGE>
GT GLOBAL INCOME FUNDS
STRATEGIC INCOME FUND
(CONTINUED)
<TABLE>
<CAPTION>
CLASS B++
-------------------------------------------
YEAR ENDED OCTOBER 31,
-------------------------------------------
1996 1995(C) 1994(C) 1993(c)
------- ------- ----------- -----------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period............................................ $ 10.88 $ 13.60 $ 11.24
------- ------- ----------- -----------
Income from investment operations:
Net investment income......................................................... 0.91 0.73 0.89
Net realized and unrealized gain (loss) on investments........................ (0.69) (2.14) 2.85
------- ------- ----------- -----------
Net increase (decrease) from investment operations............................ 0.22 (1.41) 3.74
------- ------- ----------- -----------
Distributions:
Net investment income......................................................... (0.73) (0.72) (0.89)
Net realized gain on investments.............................................. -- (0.38) (0.37)
Return of capital............................................................. (0.04) (0.21) (0.00)
Sources other than net investment income...................................... -- (0.00) (0.12)
------- ------- ----------- -----------
Total distributions......................................................... (0.77) (1.31) (1.38)
------- ------- ----------- -----------
Net asset value, end of period.................................................. $ 10.33 $ 10.88 $ 13.60
------- ------- ----------- -----------
------- ------- ----------- -----------
Total investment return(d)...................................................... 2.48% (11.02)% 36.2%
------- ------- ----------- -----------
------- ------- ----------- -----------
Ratios and supplemental data:
Net assets, end of period (in 000's)............................................ $357,852 $ 458,550 $ 310,431
Ratio of net investment income to average net assets............................ 8.99% 6.09% 6.5%
Ratio of expenses to average net assets:
With expense reductions....................................................... 2.07% 2.05% 2.4%
Without expense reductions.................................................... 2.10% --%** --%**
Ratio of interest expenses to average net assets................................ N/A 0.10% N/A
Portfolio turnover rate+++...................................................... 238% 583% 310%
<CAPTION>
OCTOBER 22,
1992 TO
OCTOBER 31,
1992
-----------
<S> <C>
Per Share Operating Performance:
Net asset value, beginning of period............................................ $ 11.36
-----------
Income from investment operations:
Net investment income......................................................... 0.01
Net realized and unrealized gain (loss) on investments........................ (0.13)
-----------
Net increase (decrease) from investment operations............................ (0.12)
-----------
Distributions:
Net investment income......................................................... (0.00)
Net realized gain on investments.............................................. (0.00)
Return of capital............................................................. (0.00)
Sources other than net investment income...................................... (0.00)
-----------
Total distributions......................................................... (0.00)
-----------
Net asset value, end of period.................................................. $ 11.24
-----------
-----------
Total investment return(d)...................................................... (1.1)%(a)
-----------
-----------
Ratios and supplemental data:
Net assets, end of period (in 000's)............................................ $ 533
Ratio of net investment income to average net assets............................ N/A(b)
Ratio of expenses to average net assets:
With expense reductions....................................................... N/A(b)
Without expense reductions.................................................... --%**
Ratio of interest expenses to average net assets................................ N/A
Portfolio turnover rate+++...................................................... 418%
</TABLE>
- ------------------
+ All capital shares issued and outstanding as of October 21, 1992 were
reclassified as Class A shares.
++ Commencing October 22, 1992, the Fund began offering Class B shares.
+++ Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
* Includes reimbursement by the Manager of Fund operating expenses of $0.01,
$0.04, $0.02 and 0.05 for the year ended October 31, 1991, 1990, 1989 and
1988, respectively. Without such reimbursements, the expense ratios would
have been 1.92%, 2.20%, 2.02% and 2.42% and the ratio of net investment
income to average net assets would have been 7.16%, 9.26%, 7.56% and 6.42%
for the year ended October 31, 1991, 1990, 1989 and 1988, respectively.
** Calculation of "Ratio of expenses to average net assets" was made without
considering the effect of expense reductions, if any.
(a) Not annualized.
(b) Ratios are not meaningful due to short period of operation of Class B
shares.
(c) These selected per share data were calculated based upon weighted average
shares outstanding during the period.
(d) Total investment return does not include sales charges.
(e) Annualized.
<TABLE>
<CAPTION>
AVERAGE NUMBER OF
AMOUNT OF DEBT AVERAGE AMOUNT OF FUND'S SHARES AVERAGE AMOUNT OF
OUTSTANDING AT DEBT OUTSTANDING OUTSTANDING DEBT PER SHARE
END OF PERIOD DURING THE PERIOD DURING THE PERIOD DURING THE PERIOD
-------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Class A --
Year Ended October 31, 1995... $ 0 $ 0 21,156,980 $ 0
Class B --
37,786,015
</TABLE>
Prospectus Page 9
<PAGE>
GT GLOBAL INCOME FUNDS
HIGH INCOME FUND
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------
OCTOBER 22, 1992
(COMMENCEMENT
YEAR ENDED OCTOBER 31, OF OPERATIONS)
-------------------------------------- TO OCTOBER 31,
1996 1995 1994 (c) 1993 (c) 1992
-------- -------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period...................................... $ 12.56 $ 14.92 $ 11.43 $11.43
-------- -------- -------- -------- -------
Income from investment operations:
Net investment income................................................... 1.35 0.94 0.78 0.00
Net realized and unrealized gain (loss) on investments.................. (1.09) (1.87) 3.92 0.00
-------- -------- -------- -------- -------
Net increase (decrease) from investment operations...................... 0.26 (0.93) 4.70 0.00
-------- -------- -------- -------- -------
Distributions:
Net investment income................................................... (1.03) (0.94) (0.78) (0.00)
Net realized gain on investments........................................ (0.03) (0.27) (0.00) (0.00)
In excess of net realized gain on investments........................... -- (0.22) (0.00) (0.00)
Sources other than net income........................................... -- (0.00) (0.43) (0.00)
Return of capital....................................................... (0.06) -- -- --
-------- -------- -------- -------- -------
Total distributions................................................... (1.12) (1.43) (1.21) (0.00)
-------- -------- -------- -------- -------
Net asset value, end of period............................................ $ 11.70 $ 12.56 $ 14.92 $11.43
-------- -------- -------- -------- -------
-------- -------- -------- -------- -------
Total investment return(e)................................................ 2.81% (6.45)% 43.6% 0.0%(b)
-------- -------- -------- -------- -------
-------- -------- -------- -------- -------
Ratios and supplemental data:
Net assets, end of period (in 000's)...................................... $142,002 $167,974 $143,171 $ 207
Ratio of net investment income (loss) to average net assets............... 11.85% 7.00% 6.4% N/A(d)
Ratio of expenses to average net assets................................... 1.75% 1.57% 2.2% N/A(d)
Ratio of interest expense to average net assets........................... N/A 0.22% N/A N/A
Portfolio turnover rate (f)...............................................
</TABLE>
- ------------------
(a) Annualized.
(b) Not annualized.
(c) These selected per share data were calculated based upon weighted average
shares during the year.
(d) Ratios are not meaningful due to short period of operation.
(e) Total investment return does not include sales charges.
(f) The High Income Fund invests only in the Portfolio and does not engage in
securities transactions. Accordingly, the portfolio turnover rates presented
are for the Portfolio.
<TABLE>
<CAPTION>
AVERAGE NUMBER OF
AMOUNT OF DEBT AVERAGE AMOUNT OF FUND'S SHARES AVERAGE AMOUNT OF
OUTSTANDING AT DEBT OUTSTANDING OUTSTANDING DEBT PER SHARE
END OF PERIOD DURING THE PERIOD DURING THE PERIOD DURING THE PERIOD
-------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Class A --
Year Ended October 31, 1995... $ 0 $ 0 12,506,489 $ 0
Class B --
18,165,351
</TABLE>
Prospectus Page 10
<PAGE>
GT GLOBAL INCOME FUNDS
HIGH INCOME FUND
(CONTINUED)
<TABLE>
<CAPTION>
CLASS B
--------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------
1996 1995 1994 (c) 1993 (c)
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period......................................... $ 12.56 $ 14.90 $ 11.43
-------- -------- -------- --------
Income from investment operations:
Net investment income...................................................... 1.27 0.86 0.70
Net realized and unrealized gain (loss) on investments..................... (1.09) (1.85) 3.90
-------- -------- -------- --------
Net increase (decrease) from investment operations......................... 0.18 (0.99) 4.60
-------- -------- -------- --------
Distributions:
Net investment income...................................................... (0.96) (0.86) (0.70)
Net realized gain on investments........................................... (0.03) (0.27) (0.00)
In excess of net realized gain on investments.............................. -- (0.22) (0.00)
Sources other than net income.............................................. -- (0.00) (0.43)
Return of capital.......................................................... (0.06) -- --
-------- -------- -------- --------
Total distributions...................................................... (1.05) (1.35) (1.13)
-------- -------- -------- --------
Net asset value, end of period............................................... $ 11.69 $ 12.56 $ 14.90
-------- -------- -------- --------
-------- -------- -------- --------
Total investment return(e)................................................... 2.07% (6.99)% 42.6%
-------- -------- -------- --------
-------- -------- -------- --------
Ratios and supplemental data:
Net assets, end of period (in 000's)......................................... $214,897 $232,423 $127,035
Ratio of net investment income (loss) to average net assets.................. 11.20% 6.35% 5.8%
Ratio of expenses to average net assets...................................... 2.40% 2.22% 2.8%
Ratio of interest expense to average net assets.............................. N/A 0.22% N/A
Portfolio turnover rate (f)..................................................
<CAPTION>
OCTOBER 22, 1992
(COMMENCEMENT
OF OPERATIONS)
TO OCTOBER 31,
1992
----------------
<S> <C>
Per Share Operating Performance:
Net asset value, beginning of period......................................... $11.43
-------
Income from investment operations:
Net investment income...................................................... 0.00
Net realized and unrealized gain (loss) on investments..................... 0.00
-------
Net increase (decrease) from investment operations......................... 0.00
-------
Distributions:
Net investment income...................................................... (0.00)
Net realized gain on investments........................................... (0.00)
In excess of net realized gain on investments.............................. (0.00)
Sources other than net income.............................................. (0.00)
Return of capital.......................................................... --
-------
Total distributions...................................................... (0.00)
-------
Net asset value, end of period............................................... $11.43
-------
-------
Total investment return(e)................................................... 0.0%(b)
-------
-------
Ratios and supplemental data:
Net assets, end of period (in 000's)......................................... $ 53
Ratio of net investment income (loss) to average net assets.................. N/A(d)
Ratio of expenses to average net assets...................................... N/A(d)
Ratio of interest expense to average net assets.............................. N/A
Portfolio turnover rate (f)..................................................
</TABLE>
- ------------------
(a) Annualized.
(b) Not annualized.
(c) These selected per share data were calculated based upon weighted average
shares during the year.
(d) Ratios are not meaningful due to short period of operation.
(e) Total investment return does not include sales charges.
(f) The High Income Fund invests only in the Portfolio and does not engage in
securities transactions. Accordingly, the portfolio turnover rates presented
are for the Portfolio.
<TABLE>
<CAPTION>
AVERAGE NUMBER OF
AMOUNT OF DEBT AVERAGE AMOUNT OF FUND'S SHARES AVERAGE AMOUNT OF
OUTSTANDING AT DEBT OUTSTANDING OUTSTANDING DEBT PER SHARE
END OF PERIOD DURING THE PERIOD DURING THE PERIOD DURING THE PERIOD
-------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Class A --
Year Ended October 31, 1995... $ 0 $ 0 12,506,489 $ 0
Class B --
18,165,351
</TABLE>
Prospectus Page 11
<PAGE>
GT GLOBAL INCOME FUNDS
ALTERNATIVE PURCHASE PLAN
- --------------------------------------------------------------------------------
DIFFERENCES BETWEEN THE CLASSES. The primary distinction between the two classes
of each 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 a 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 Exchange Shares." 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 each 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 each Fund also bear annual service and distribution fees of up to
0.35% of the average daily net assets of that class.
CLASS B SHARES. Class B shares of each 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 that 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% of the lesser of the original purchase price or the net asset value of
Class B shares at the time of redemption. The higher service and distribution
fees paid by the Class B shares of each Fund will 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
shares of a 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% annual
service and distribution fees on a Fund's Class B shares will approximate or
exceed the expense of the applicable 4.75% maximum initial sales charge plus the
0.35% service and distribution fees on that Fund's Class A shares. For example,
if net asset value remains constant, the Class B shares' service and
distribution fees would be equal to the Class A shares' initial maximum sales
charge and service and distribution fees approximately seven years after
purchase. Thereafter, Class B shares would experience higher cumulative
expenses. Investors who expect to maintain their investment in a 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 service and
distribution fees of Class A shares. Class B investors, however, enjoy the
benefit of permitting all their dollars to work from the time the investments
are 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 Funds' future returns cannot be predicted, however, there
can be no assurance that such a positive return will be achieved.
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 a 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 a
Fund is waived for
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GT GLOBAL INCOME FUNDS
certain eligible purchasers and these purchasers' entire purchase price would be
immediately invested in a 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. 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 a 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 the Class A and Class B shares of each
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 may be 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 a
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 comprising or affiliated with Liechtenstein Global Trust; and (e) any
of the companies comprising or affiliated with Liechtenstein Global Trust.
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES
AND POLICIES
- --------------------------------------------------------------------------------
GOVERNMENT INCOME FUND
The Government Income Fund seeks a high level of current income by investing
primarily in high quality debt securities of the U.S. and foreign governments,
their agencies and instrumentalities. The Fund's secondary objectives are
capital appreciation and protection of principal through active management of
its maturity structure and currency exposure.
At least 65% of the Fund's total assets normally are invested in debt
obligations issued or guaranteed by the U.S. or foreign governments (including
foreign states, provinces or municipalities) or their agencies, authorities or
instrumentalities. For purposes of this policy, the Fund considers debt
obligations of supranational entities organized or supported by several national
governments, such as the World Bank and the Asian Development Bank, to be
"government securities."
The Fund invests primarily in high quality government debt securities. "High
quality" debt securities are those rated in the top two ratings categories of
Moody's Investors Service, Inc. ("Moody's") or Standard and Poor's Ratings Group
("S&P") or, if not rated, determined to be of comparable quality by the Manager.
A description of Moody's and S&P ratings is included in the Appendix to this
Prospectus.
The Fund currently contemplates that it will invest principally in obligations
of the United States, Canada, Japan, the Western European nations, New Zealand
and Australia, as well as in multinational currency units. Under normal market
conditions, the Fund invests in issues of not less than three different
countries; investments in the securities of any one country, other than the
United States, normally represent no more than 40% of the Fund's total assets.
The Fund will not invest in a foreign currency or in securities denominated in a
foreign currency if such currency is not at the time of investment considered by
the Manager to be fully exchangable into U.S. dollars (or a multinational
currency unit) without legal restriction.
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GT GLOBAL INCOME FUNDS
The Fund may also invest up to 35% of its total assets in: (1) foreign
government securities that are not high quality but are rated at least
"investment grade," i.e., rated within the four highest ratings categories of
Moody's or S&P or, if not rated, determined by the Manager to be of comparable
quality; (2) corporate debt obligations of U.S. or foreign issuers rated at
least investment grade by Moody's or S&P, including debt obligations convertible
into equity securities or having attached warrants or rights to purchase equity
securities; and (3) common stocks, preferred stocks and warrants to acquire such
securities, provided that the Fund will not invest more than 20% of its total
assets in such securities.
STRATEGIC INCOME FUND
The Strategic Income Fund primarily seeks high current income and secondarily
seeks capital appreciation.
The Fund invests in debt securities of issuers in: (1) the United States; (2)
developed foreign countries; and (3) emerging markets. The Fund selects debt
securities from those issued by governments, their agencies and
instrumentalities; central banks; and commercial banks and other corporate
entities. Debt securities in which the Fund may invest include bonds, notes,
debentures, and other similar instruments. The Fund normally invests at least
50% of its total assets in U.S. and foreign debt and other fixed income
securities that, at the time of purchase, are rated at least investment grade by
Moody's or S&P or, if not rated, determined by the Manager to be of comparable
quality. No more than 50% of the Fund's total assets may be invested in
securities rated below investment grade. Such securities involve a high degree
of risk and are predominantly speculative. They are the equivalent of high
yield, high risk bonds, commonly known as "junk bonds." The Fund may also invest
in securities that are in default as to payment of principal and/or interest.
The Fund's investments in emerging market securities may consist substantially
of Brady Bonds (see "General Policies -- Brady Bonds," below) and other
sovereign debt securities issued by emerging market governments that are traded
in the markets of developed countries or groups of developed countries. The
Manager may invest in debt securities of emerging market issuers that it
determines to be suitable investments for the Fund without regard to ratings.
Currently, the substantial majority of emerging market debt securities are
considered to have a credit quality below investment grade. The Fund also may
invest in below-investment grade debt securities of corporate issuers in the
United States and in developed foreign countries, subject to the overall 50%
limitation. See "Risk Factors" for a description of the risks associated with
investment in emerging market and other lower quality debt securities.
HIGH INCOME FUND
The High Income Fund primarily seeks high current income, and secondarily seeks
capital appreciation. The Fund seeks its objectives by investing all of its
investable assets in the Portfolio, which in turn seeks the same objectives as
the Fund by normally investing at least 65% of its total assets in debt
securities of issuers in emerging markets.
The Portfolio intends to invest in the following types of debt securities:
bonds, notes and debentures of emerging market governments; securities issued or
guaranteed by such governments' agencies or instrumentalities; securities issued
or guaranteed by the central banks of emerging market countries; and securities
issued by other banks and companies in such countries and securities denominated
in or indexed to the currencies of emerging markets. Under current market
conditions, the Portfolio expects its investments in emerging market securities
to consist substantially of Brady Bonds (see "General Policies -- Brady Bonds,"
below) and other sovereign debt securities.
The Portfolio may also invest up to 35% of its total assets in (1) equity
securities of issuers in emerging markets included in the list below under the
caption "Emerging Markets"; (2) equity and debt securities of issuers in
developed countries, including the United States; (3) securities of issuers in
emerging markets not included in the emerging markets list, if investing therein
becomes feasible and desirable subsequent to the date of this Prospectus; and
(4) cash and money market instruments. In evaluating investments in securities
of issuers in developed markets, the Manager will consider, among other things,
the business activities of the issuer in emerging markets and the impact that
developments in emerging markets are likely to have on the issuer's financial
condition.
Under normal circumstances, substantially all of the Portfolio's assets will be
invested in debt securities of both governmental and corporate issuers in
emerging markets. Emerging markets debt securities generally are considered to
have a credit quality below investment grade, as defined above. Lower quality
securities involve a high degree of risk and are predominantly speculative.
These debt securities are the equivalent of high yield, high risk bonds,
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<PAGE>
GT GLOBAL INCOME FUNDS
commonly known as "junk bonds." See "Risk Factors." Many emerging market debt
securities are not rated by U.S. ratings agencies such as Moody's and S&P. The
Portfolio's ability to achieve its investment objectives is thus more dependent
on the Manager's credit analysis. The Portfolio may invest in securities that
are in default as to payment of principal and/or interest.
OTHER INFORMATION REGARDING THE PORTFOLIO. As previously described, investors
should be aware that the High Income Fund, unlike mutual funds which directly
acquire and manage their own portfolios of securities, seeks to achieve its
investment objectives by investing all of its investable assets in the
Portfolio, which is a separate investment company. Since the Fund will invest
only in the Portfolio, the Fund's shareholders will acquire only an indirect
interest in the investments of the Portfolio. The High Income Fund may redeem
its investment from the Portfolio at any time, if the Board of Directors of the
Company determines that it is in the best interests of the Fund and its
shareholders to do so. A change in the Portfolio's investment objectives,
policies or limitations which is not approved by the Board or the shareholders
of the corresponding Fund could require the Fund to redeem its interest in the
Portfolio. Any such redemption could result in a distribution in kind of
portfolio securities (as opposed to a cash distribution) by the Portfolio. In
addition, a distribution in kind could result in a less diversified portfolio of
investments for the Fund and could adversely affect the liquidity of the Fund.
Should such a distribution occur, the Fund could incur brokerage fees or other
transaction costs in converting such securities to cash. Upon redemption, the
Board would consider what action might be taken, including the investment of all
the investable assets of the Fund in another pooled investment entity having
substantially the same investment objectives as the Fund or the retention by the
Fund of its own investment adviser to manage the Fund's assets in accordance
with the investment objectives, policies and limitations discussed herein with
respect to the Portfolio.
In addition to selling its interests to the Fund, the Portfolio may sell its
interests to other non-affiliated investment companies and/or other
institutional investors. All institutional investors in the Portfolio will pay a
proportionate share of the Portfolio's expenses and will invest in the Portfolio
on the same terms and conditions. However, if another investment company invests
all of its assets in the Portfolio, it would not be required to sell its shares
at the same public offering price as the Fund and may charge different sales
commissions. Therefore, investors in the Fund may experience different returns
from investors in another investment company which invests exclusively in the
Portfolio. As of the date of this Prospectus, the High Income Fund is the only
institutional investor in the Portfolio.
Investors in the Fund should be aware that the Funds' investment in the
Portfolio may be materially affected by the actions of large investors in the
Portfolio, if any. For example, as with all open-end investment companies, if a
large investor were to redeem its interest in the Portfolio, the Portfolio's
remaining investors could experience higher pro rata operating expenses, thereby
producing lower returns. As a result, the Portfolio's security holdings may
become less diverse, resulting in increased risk. Institutional investors in the
Portfolio that have a greater pro rata ownership interest in the Portfolio than
the Fund could have effective voting control over the operation of the
Portfolio. A change in the Portfolio's fundamental objectives, policies and
restrictions, which is not approved by the shareholders of the Fund, could
require the Fund to redeem its interest in the Portfolio. Any such redemption
could result in a distribution in kind of portfolio securities (as opposed to a
cash distribution) by the Portfolio. Should such a distribution occur, the Fund
could incur brokerage fees or other transaction costs in converting such
securities to cash. In addition, a distribution in kind could result in a less
diversified portfolio of investments for the Fund and could affect adversely the
liquidity of the Fund.
GENERAL POLICIES
TEMPORARY DEFENSIVE STRATEGIES. 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. Pursuant to such a defensive strategy,
the Government Income Fund, the Strategic Income Fund and the Portfolio
temporarily may hold cash (U.S. dollars, foreign currencies or multinational
currency units) and/or invest up to 100% of their respective assets in high
quality debt securities or money market instruments of U.S. or foreign issuers.
In addition, for temporary defensive purposes, most or all of the Government
Income Fund's, the Strategic Income Fund's or the Portfolio's investments may be
made in the United States and denominated in U.S. dollars. To the
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<PAGE>
GT GLOBAL INCOME FUNDS
extent the Funds or the Portfolio employ a temporary defensive strategy, they
will not be invested so as to achieve directly their investment objectives.
In addition, pending investment of proceeds from new sales of Fund shares or to
meet ordinary daily cash needs, the Government Income Fund, the Strategic Income
Fund and the Portfolio may hold cash (U.S. dollars, foreign currencies or
multinational currency units) and may invest in high quality foreign or domestic
money market instruments.
EMERGING MARKET SECURITIES. The Strategic Income Fund and the Portfolio consider
"emerging markets" to consist of all countries determined by the Manager to have
developing or emerging economies and markets. These countries generally include
every country in the world except the United States, Canada, Japan, Australia,
New Zealand and most countries located in Western Europe. The Strategic Income
Fund and the Portfolio will consider investment in the following emerging
markets:
<TABLE>
<S> <C> <C>
Algeria Greece Peru
Argentina Hong Kong Philippines
Bolivia Hungary Poland
Botswana India Portugal
Brazil Indonesia Republic of
Bulgaria Israel Slovakia
Chile Ivory Coast Russia
China Jamaica Singapore
Colombia Jordan Slovenia
Costa Rica Kenya South Africa
Cyprus Malaysia South Korea
Czech Mauritius Sri Lanka
Republic Mexico Swaziland
Dominican Morocco Taiwan
Republic Nicaragua Thailand
Ecuador Nigeria Turkey
Egypt Oman Uruguay
El Salvador Pakistan Venezuela
Finland Panama Zambia
Ghana Paraguay Zimbabwe
</TABLE>
The Strategic Income Fund and the Portfolio will not be invested in all such
markets at all times. Moreover, investing in some of those markets currently may
not be desirable or feasible, due to the lack of adequate custody arrangements,
overly burdensome repatriation requirements and similar restrictions, the lack
of organized and liquid securities markets, unacceptable political risks or for
other reasons.
As used in this Prospectus and the Statement of Additional Information, an
issuer in an emerging market is an entity: (i) for which the principal
securities trading market is an emerging market, as defined above; (ii) that
(alone or on a consolidated basis) derives 50% or more of its total revenue from
either goods produced, sales made or services performed in emerging markets; or
(iii) organized under the laws of, or with a principal office in, an emerging
market.
ASSET ALLOCATION. The Government Income Fund, the Strategic Income Fund and the
Portfolio each invests in debt obligations allocated among diverse markets and
denominated in various currencies, including U.S. dollars, or in multinational
currency units such as European Currency Units. The Government Income Fund, the
Strategic Income Fund and the Portfolio may purchase securities that are issued
by the government or a company or financial institution of one country but
denominated in the currency of another country (or a multinational currency
unit). The Funds are designed for investors who wish to accept the risks
entailed in such investments, which are different from those associated with a
portfolio consisting entirely of securities of U.S. issuers denominated in U.S.
dollars. See "Risk Factors."
The Manager allocates the assets of the Government Income Fund, the Strategic
Income Fund and the Portfolio in securities of issuers in countries and in
currency denominations where the combination of fixed income market returns, the
price appreciation potential of fixed income securities and currency exchange
rate movements will present opportunities primarily for high current income and
secondarily for capital appreciation (and, in the case of the Government Income
Fund, secondarily for capital appreciation and protection of principal). In so
doing, the Manager intends to take full advantage of the different yield, risk
and return characteristics that investment in the fixed income markets of
different countries can provide for U.S. investors. Fundamental economic
strength, credit quality and currency and interest rate trends are the principal
determinants of the emphasis given to various country, geographic and industry
sectors within the Government Income Fund, the Strategic Income Fund and the
Portfolio. Securities held by the Government Income Fund, the Strategic Income
Fund and the Portfolio may be invested in without limitation as to maturity.
The Manager selects securities of particular issuers on the basis of its views
as to the best values then currently available in the marketplace. Such values
are a function of yield, maturity, issue classification and quality
characteristics, coupled with expectations regarding the local and world
economies, movements in the general level and term of
Prospectus Page 16
<PAGE>
GT GLOBAL INCOME FUNDS
interest rates, currency values, political developments and variations in the
supply of funds available for investment in the world bond market relative to
the demands placed upon it.
The Manager generally evaluates currencies on the basis of fundamental economic
criteria (e.g., relative inflation, interest rate levels and trends, growth rate
forecasts, balance of payments status and economic policies) as well as
technical and political data. The Manager may seek to protect a Fund against
such negative currency movements through the use of sophisticated investment
techniques. See "Options, Futures and Forward Currency Transactions" and "Swaps,
Caps, Floors and Collars."
BRADY BONDS. The Strategic Income Fund and the Portfolio may invest in "Brady
Bonds," which are debt restructurings that provide for the exchange of cash and
loans for newly issued bonds. Brady Bonds have been issued by the countries of,
among others, Albania, Argentina, Brazil, Bulgaria, Costa Rica, Dominican
Republic, Ecuador, Jordan, Mexico, Nigeria, Philippines, Poland, Uruguay,
Venezuela and are expected to be issued by Panama, Peru and other emerging
market countries. Approximately $139 billion in principal amount of Brady Bonds
are outstanding, the largest proportion having been issued by Brazil, Argentina
and Mexico. Brady Bonds issued by Brazil, Argentina and Mexico currently are
rated below investment grade. As of the date of this Prospectus, the Strategic
Income Fund and the Portfolio are not aware of the occurrence of any payment
defaults on Brady Bonds. Investors should recognize, however, that Brady Bonds
have been issued only recently and, accordingly, do not have a long payment
history.
The Strategic Income Fund and the Portfolio may invest in either collateralized
or uncollateralized Brady Bonds. U.S. dollar-denominated, collateralized Brady
Bonds, which may be fixed rate par bonds or floating rate discount bonds, are
collateralized in full as to principal by U.S. Treasury zero coupon bonds having
the same maturity as the bonds. Interest payments on such bonds generally are
collateralized by cash or securities in an amount that, in the case of fixed
rate bonds, is equal to at least one year of rolling interest payments or, in
the case of floating rate bonds, initially is equal to at least one year's
rolling interest payments based on the applicable interest rate at that time and
is adjusted at regular intervals thereafter.
LOAN PARTICIPATIONS AND ASSIGNMENTS. The Strategic Income Fund and the Portfolio
may invest in fixed and floating rate loans ("Loans") arranged through private
negotiations between a foreign entity and one or more financial institutions
("Lenders"). The majority of the Fund's and the Portfolio's investments in Loans
in emerging markets is expected to be in the form of participations in Loans
("Participations") and assignments of portions of Loans from third parties
("Assignments"). Participations typically will result in the Fund and/or the
Portfolio having a contractual relationship only with the Lender, not with the
borrower government. The Fund and/or the Portfolio will have the right to
receive payments of principal, interest and any fees to which it is entitled
only from the Lender selling the Participation and only upon receipt by the
Lender of the payments from the borrower. In connection with purchasing
Participations, the Fund and/or the Portfolio generally will have no right to
enforce compliance by the borrower with the terms of the loan agreement relating
to the loan ("Loan Agreement"), nor any rights of set-off against the borrower,
and the Fund and/or the Portfolio may not directly benefit from any collateral
supporting the Loan in which it has purchased the Participation. As a result,
the Fund and/or the Portfolio will assume the credit risk of both the borrower
and the Lender that is selling the Participation.
In the event of the insolvency of the Lender selling a Participation, the Fund
and/or the Portfolio may be treated as a general creditor of the Lender and may
not benefit from any set-off between the Lender and the borrower. The Fund
and/or the Portfolio will acquire Participations only if the Lender
interpositioned between the Fund and/or the Portfolio and the borrower is
determined by the Manager to be creditworthy. When the Fund and/or the Portfolio
purchases Assignments from Lenders, the Fund and/or the Portfolio will acquire
direct rights against the borrower on the Loan. However, since Assignments are
arranged through private negotiations between potential assignees and assignors,
the rights and obligations acquired by the Fund and/or the Portfolio as the
purchaser of an Assignment may differ from, and be more limited than, those held
by the assigning Lender.
WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES. The Government Income Fund, the
Strategic Income Fund and the Portfolio may purchase debt securities on a
"when-issued" basis and may purchase or sell such securities on a "forward
Prospectus Page 17
<PAGE>
GT GLOBAL INCOME FUNDS
commitment" basis in order to hedge against anticipated changes in interest
rates and prices. The price, which is generally expressed in yield terms, is
fixed at the time the commitment is made, but delivery and payment for the
securities take place at a later date. When-issued securities and forward
commitments may be sold prior to the settlement date, but the Funds and the
Portfolio will purchase or sell when-issued securities and forward commitments
only with the intention of actually receiving or delivering the securities, as
the case may be. No income accrues on securities which have been purchased
pursuant to a forward commitment or on a when-issued basis prior to delivery of
the securities. If a Fund or the Portfolio disposes of the right to acquire a
when-issued security prior to its acquisition or disposes of its right to
deliver or receive against a forward commitment, it may incur a gain or loss. At
the time a Fund or the Portfolio enters into a transaction on a when-issued or
forward commitment basis, a segregated account consisting of cash or liquid
securities equal to the value of the when-issued or forward commitment
securities will be established and maintained with its custodian and will be
marked to market daily. There is a risk that the securities may not be delivered
and that a Fund or the Portfolio may incur a loss. The Government Income Fund
may invest up to 5% if its total assets in a combination of securities purchased
on a when-issued basis or with respect to which it has entered into forward
commitment agreements.
The Strategic Income Fund and the Portfolio may also sell securities on a "when,
as and if issued" basis for hedging purposes. Under such a transaction, the Fund
or the Portfolio is required to deliver at a future date a security it does not
presently hold, but which it has a right to receive if the security is issued.
Issuance of the security may not occur, in which case the Fund or Portfolio
would have no obligation to the other party, and would not receive payment for
the sale. Selling securities on a "when, as and if issued" basis may reduce risk
of loss to the extent that such a sale wholly or partially offsets unfavorable
price movements on the investments being hedged. However, such sales also limit
the amount the Fund or Portfolio can receive if the "when, as and if issued"
security is in fact issued.
BORROWING, REVERSE REPURCHASE AGREEMENTS AND ROLL TRANSACTIONS. The Government
Income Fund may borrow from banks or may borrow through reverse repurchase
agreements and "roll" transactions in connection with meeting requests for the
redemption of Fund shares. The Government Income Fund also may borrow up to 5%
of its total assets for temporary or emergency purposes other than to meet
redemptions. However, the Government Income Fund will not borrow for investment
purposes, nor will the Fund purchase securities while borrowings are
outstanding.
Both the Strategic Income Fund and the Portfolio are authorized to borrow money
from banks in an amount up to 33 1/3% of its total assets (including the amount
borrowed), less all liabilities and indebtedness other than the borrowings and
may use the proceeds of such borrowings for investment purposes. The Strategic
Income Fund and the Portfolio will borrow for investment purposes only when the
Manager believes that such borrowings will benefit the Fund or the Portfolio,
respectively, after taking into account considerations such as the costs of the
borrowing and the likely investment returns on the securities purchased with the
borrowed monies.
Borrowing for investment purposes is known as leveraging, which is a speculative
practice. Such borrowing by the Strategic Income Fund and the Portfolio creates
the opportunity for increased net income and appreciation but, at the same time,
involves special risk considerations. For example, leveraging might exaggerate
changes in the net asset value of Fund shares and in the yield realized by the
Fund or the Portfolio. Although the principal amount of such borrowings will be
fixed, the Fund's and the Portfolio's assets may change in value during the time
the borrowing is outstanding. By leveraging the Fund or the Portfolio, changes
in net asset values, higher or lower, may be greater in degree than if leverage
was not employed. To the extent the income derived from the assets obtained with
borrowed funds exceeds the interest and other expenses that the Fund or the
Portfolio will have to pay, the Fund's or the Portfolio's net income will be
greater than if borrowing was not used. Conversely, if the income from the
assets obtained with borrowed funds is not sufficient to cover the cost of
borrowing, the net income of the Fund or the Portfolio will be less than if
borrowing were not used, and therefore the amount available for distribution to
shareholders as dividends will be reduced. The Strategic Income Fund and the
Portfolio each expects that some of its borrowings may be made on a secured
basis.
In addition to the foregoing borrowings, the Strategic Income Fund and the
Portfolio each may borrow money for temporary or emergency purposes or payments
in an amount not exceeding
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<PAGE>
GT GLOBAL INCOME FUNDS
5% of the value of its total assets (not including the amount borrowed) provided
that the total amount borrowed by the Strategic Income Fund or the Portfolio for
any purpose does not exceed 33 1/3% of its total assets.
The Funds and the Portfolio may also enter into reverse repurchase agreements
with a bank or recognized securities dealer, although the Strategic Income Fund
currently has no intention of doing so with respect to more than 5% of its total
assets. Under a reverse repurchase agreement, the Funds or the Portfolio would
sell securities and agree to repurchase them at a particular price at a future
date. At the time a Fund or the Portfolio enters into a reverse repurchase
agreement, it will establish and maintain a segregated account with an approved
custodian containing cash or liquid securities having a value not less than the
repurchase price, including accrued interest. Reverse repurchase agreements
involve the risk that the market value of the securities retained in lieu of
sale by a Fund or the Portfolio may decline below the price of the securities a
Fund or the Portfolio has sold but is obligated to repurchase. In the event the
buyer of securities under a reverse repurchase agreement files for bankruptcy or
becomes insolvent, such buyer or its trustee or receiver may receive an
extension of time to determine whether to enforce a Fund's or the Portfolio's
obligation to repurchase the securities, and a Fund's or the Portfolio's use of
the proceeds of the reverse repurchase agreement may effectively be restricted
pending such decision.
The Strategic Income Fund and the Portfolio also may enter into "dollar rolls,"
in which the Fund or the Portfolio sells fixed income securities for delivery in
the current month and simultaneously contracts to repurchase substantially
similar (same type, coupon and maturity) securities on a specified future date.
During the roll period, the Fund or the Portfolio would forego principal and
interest paid on such securities. The Fund or the Portfolio would be compensated
by the difference between the current sales price and the forward price for the
future purchase, as well as by the interest earned on the cash proceeds of the
initial sale. See "Investment Objectives and Policies" in the Statement of
Additional Information.
Reverse repurchase agreements and dollar rolls will be treated as borrowings and
will be deducted from the Strategic Income Fund's or the Portfolio's assets for
purposes of calculating compliance with the Fund's or the Portfolio's borrowing
limitation. See "Investment Limitations" in the Statement of Additional
Information.
SECURITIES LENDING. The Government Income Fund, the Strategic Income Fund and
the Portfolio may lend their respective portfolio securities to broker/dealers
or to other institutional investors. Securities lending allows a Fund to retain
ownership of the securities loaned and, at the same time, earn additional income
that may be used to offset the Fund's custody fees. At all times a loan is
outstanding, each Fund and the Portfolio requires the borrower to maintain with
the Fund's or the Portfolio's custodian, collateral consisting of cash, U.S.
government securities or certain irrevocable letters of credit equal to at least
the value of the borrowed securities, plus any accrued interest. Each Fund and
the Portfolio limits its loans of portfolio securities to an aggregate of 30% of
the value of its total assets, measured at the time any such loan is made. 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 loaned securities and possible loss of rights in the collateral
should the borrower fail financially.
ZERO COUPON SECURITIES. The Strategic Income Fund and the Portfolio may invest
in certain zero coupon securities that are "stripped" U.S. Treasury notes and
bonds. They also may invest in zero coupon and other deep discount securities
issued by foreign governments and domestic and foreign corporations, including
certain Brady Bonds and other foreign debt and in payment-in-kind securities.
Zero coupon securities pay no interest to holders prior to maturity, and
payment-in-kind securities pay interest in the form of additional securities.
However, a portion of the original issue discount on zero coupon securities and
the "interest" on payment-in-kind securities will be included in the investing
Fund's or Portfolio's income. Accordingly, for a Fund to continue to qualify for
tax treatment as a regulated investment company and to avoid a certain excise
tax (see "Taxes" in the Statement of Additional Information), it may be required
to distribute an amount that is greater than the total amount of cash it
actually receives (or, in the case of the High Income Fund, its share of the
total amount of cash the Portfolio actually receives). These distributions must
be made from the Fund's (or, in the case of the High Income Fund, its, or its
share of the Portfolio's) cash assets or, if necessary, from the proceeds of
sales of portfolio securities. The Fund
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GT GLOBAL INCOME FUNDS
or the Portfolio will not be able to purchase additional income-producing
securities with cash used to make such distributions, and its current income
ultimately may be reduced as a result. Zero coupon and payment-in-kind
securities usually trade at a deep discount from their face or par value and
will be subject to greater fluctuations of market value in response to changing
interest rates than debt obligations of comparable maturities that make current
distributions of interest in cash.
SYNTHETIC SECURITY POSITIONS. The Government Income Fund, the Strategic Income
Fund and the Portfolio may utilize combinations of futures on bonds and forward
currency contracts to create investment positions that have substantially the
same characteristics as bonds of the same type as those on which the futures
contracts are written. Investment positions of this type are generally referred
to as "synthetic securities."
For example, in order to establish a synthetic security position for a Fund or
the Portfolio that is comparable to owning a Japanese government bond, the
Manager might purchase futures contracts on Japanese government bonds in the
desired principal amount and purchase forward currency contracts for Japanese
Yen in an amount equal to the then current purchase price for such bonds in the
Japanese cash market, with each contract having approximately the same delivery
date.
The Manager might roll over the futures and forward currency contract positions
before taking delivery in order to continue the Fund's or the Portfolio's
investment position, or the Manager might close out those positions, thus
effectively selling the synthetic security. Further, the amount of each contract
might be adjusted in response to market conditions and the forward currency
contract might be changed in amount or eliminated in order to hedge against
currency fluctuations.
The Manager would create synthetic security positions for a Fund or the
Portfolio when it believes that it can obtain a better yield or achieve cost
savings in comparison to purchasing actual bonds or when comparable bonds are
not readily available in the market. Synthetic security positions are subject to
the risk that changes in the value of purchased futures contracts may differ
from changes in the value of the bonds that might otherwise have been purchased
in the cash market. Also, while the Manager believes that the cost of creating
synthetic security positions generally will be materially lower than the cost of
acquiring comparable bonds in the cash market, a Fund or the Portfolio will
incur transaction costs in connection with each purchase of a futures or forward
currency contract. The use of futures contracts and forward currency contracts
to create synthetic security positions also is subject to substantially the same
risks as those that exist when these instruments are used in connection with
hedging strategies. See "Options, Futures and Forward Currency Transactions"
below and "Options, Futures and Currency Strategies" in the Statement of
Additional Information.
OPTIONS, FUTURES AND FORWARD CURRENCY TRANSACTIONS. The Government Income Fund,
the Strategic Income Fund and the Portfolio may use forward currency contracts,
futures contracts, options on securities, options on indices, options on
currencies, and options on futures contracts to attempt to hedge against the
overall level of investment and currency risk normally associated with the
Funds' or Portfolio's investment. The Strategic Income Fund and the Portfolio
also may enter into interest rate, currency and index swaps and purchase or sell
related caps, floors and collars and other similar instruments. See "Swaps,
Caps, Floors and Collars" below. These instruments are often referred to as
"derivatives," which may be defined as financial instruments whose performance
is derived, at least in part, from the performance of another asset (such as a
security, currency or an index of securities). The Government Income Fund, the
Strategic Income Fund and the Portfolio may enter into such instruments up to
the full value of their portfolio assets. See "Options, Futures and Forward
Currency Strategies" in the Statement of Additional Information.
To attempt to hedge against adverse movements in exchange rates between
currencies, the Government Income Fund, the Strategic Income Fund and the
Portfolio may enter into forward currency contracts for the purchase or sale of
a specified currency at a specified future date. Such contracts may involve the
purchase or sale of a foreign currency against the U.S. dollar or may involve
two foreign currencies. The Government Income Fund, the Strategic Income Fund
and the Portfolio may enter into forward currency contracts either with respect
to specific transactions or with respect to the respective Fund's or the
Portfolio's portfolio positions. Each Fund and the Portfolio also may purchase
and sell put and call options on currencies, futures contracts on currencies and
options on such futures contracts to hedge against movements in exchange rates.
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GT GLOBAL INCOME FUNDS
In addition, each Fund and the Portfolio may purchase and sell put and call
options on securities to hedge against the risk of fluctuations in the prices of
securities held by the Fund or the Portfolio or that the Manager intends to
include in the Fund's or the Portfolio's portfolio. The Funds and the Portfolio
also may purchase and sell put and call options on indices to hedge against
overall fluctuations in the securities markets generally or in a specific market
sector.
Further, the Funds and the Portfolio may sell index futures contracts and may
purchase put options or write call options on such futures contracts to protect
against a general market or market sector decline that could adversely affect
the Fund's or the Portfolio's portfolio. The Funds and the Portfolio also may
purchase index futures contracts and purchase call options or write put options
on such contracts to hedge against a general market or market sector advance and
thereby attempt to lessen the cost of future securities acquisitions. A Fund or
the Portfolio may use interest rate futures contracts and options thereon to
hedge its portfolio against changes in the general level of interest rates.
Although a Fund or the Portfolio might not enter into any such transactions,
options, futures and foreign currency transactions involve certain risks, which
include: (1) dependence on the Manager's ability to predict movements in the
prices of individual securities, fluctuations in the general securities markets
and movements in interest rates and currency markets; (2) imperfect correlation,
or even no correlation, between movements in the price of forward contracts,
options, futures contracts or options thereon and movements in the price of the
currency or security hedged or used for cover; (3) the fact that skills and
techniques needed to trade options, futures contracts and options thereon or to
use forward currency contracts are different from those needed to select the
securities in which a Fund or the Portfolio invests; (4) lack of assurance that
a liquid secondary market will exist for any particular option, futures contract
or option thereon at any particular time; (5) the possible loss of principal
under certain conditions; (6) the possible inability of a Fund or the Portfolio
to purchase or sell a portfolio security at a time when it would otherwise be
favorable for it to do so, or the possible need for a Fund or the Portfolio to
sell a security at a disadvantageous time, due to the need for the Fund or the
Portfolio to maintain "cover" or to set aside securities in connection with
hedging transactions; and (7) the possible need of a Fund or the Portfolio to
defer closing out of certain options, futures contracts and options thereon and
forward currency contracts in order to qualify or continue to qualify for the
beneficial tax treatment afforded regulated investment companies under the
Internal Revenue Code of 1986, as amended ("Code"). See "Dividends, Other
Distributions and Federal Income Taxation" herein and "Taxes" in the Statement
of Additional Information.
SWAPS, CAPS, FLOORS AND COLLARS. The Strategic Income Fund and the Portfolio may
enter into interest rate, currency and index swaps, and purchase or sell related
caps, floors and collars and other derivative instruments. The Strategic Income
Fund and the Portfolio expect to enter into these transactions primarily to
preserve a return or spread on a particular investment or portion of its
portfolio, to protect against currency fluctuations, as a technique for managing
the portfolio's duration (I.E., the price sensitivity to changes in interest
rates) or to protect against any increase in the price of securities the Fund or
the Portfolio anticipates purchasing at a later date. The Fund and the Portfolio
intend to use these transactions as hedges, and neither will sell interest rate
caps or floors if it does not own securities or other instruments providing an
income stream roughly equivalent to what the Fund or the Portfolio may be
obligated to pay.
Interest rate swaps involve the exchange by the Fund or the Portfolio with
another party of their respective commitments to pay or receive interest (for
example, an exchange of floating rate payments for fixed rate payments) with
respect to a notional amount of principal. A currency swap is an agreement to
exchange cash flows on a notional amount based on changes in the values of the
reference indices.
The purchase of a cap entitles the purchaser to receive payments on a notional
principal amount from the party selling the cap to the extent that a specified
index exceeds a predetermined interest rate. The purchase of an interest rate
floor entitles the purchaser to receive payments on a notional principal amount
from the party selling the floor to the extent that a specified index falls
below a predetermined interest rate or amount. A collar is a combination of a
cap and a floor that preserves a certain return within a predetermined range of
interest rates or values.
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GT GLOBAL INCOME FUNDS
INDEXED COMMERCIAL PAPER. The Strategic Income Fund and the Portfolio may invest
without limitation in commercial paper which is indexed to certain specific
foreign currency exchange rates. The terms of such commercial paper provide that
its principal amount is adjusted upwards or downwards (but not below zero) at
maturity to reflect changes in the exchange rate between two currencies while
the obligation is outstanding. The Strategic Income Fund and the Portfolio will
purchase such commercial paper with the currency in which it is denominated and,
at maturity, will receive interest and principal payments thereon in that
currency, but the amount of principal payable by the issuer at maturity will
change in proportion to the change (if any) in the exchange rate between the two
specified currencies between the date the instrument is issued and the date the
instrument matures. While such commercial paper entails the risk of loss of
principal, the potential for realizing gains as a result of changes in foreign
currency exchange rates enables the Fund and the Portfolio to hedge against a
decline in the U.S. dollar value of investments denominated in foreign
currencies while seeking to provide an attractive money market rate of return.
The Fund and the Portfolio will not purchase such commercial paper for
speculation.
OTHER INDEXED SECURITIES. The Government Income Fund, Strategic Income Fund and
the Portfolio may invest in indexed securities (in addition to indexed
commercial paper), which are securities whose prices are indexed to the prices
of other securities, securities indices, currencies, precious metals or other
commodities, or other financial indicators. Indexed securities typically, but
not always, are debt securities or deposits whose value at maturity or coupon
rate is determined by reference to a specific instrument or statistic. The
performance of indexed securities depends to a great extent on the performance
of the security, currency, or other instrument to which they are indexed, and
may also be influenced by interest rate changes in the United States and abroad.
At the same time, indexed securities are subject to the credit risks associated
with the issuer of the security, and their values may decline substantially if
the issuer's creditworthiness deteriorates. Indexed securities may be more
volatile than the underlying instruments. New forms of indexed securities
continue to be developed. Each Fund and Portfolio may invest in such securities
to the extent consistent with its investment objectives.
ILLIQUID SECURITIES. The Government Income Fund may invest up to 10% of its
total assets, and the Strategic Income Fund and the Portfolio up to 15% of their
total assets, in securities for which no readily available market exists,
so-called "illiquid securities." The Manager believes that carefully selected
investments in joint ventures, cooperatives, partnerships and state enterprises
which are illiquid (collectively, "Special Situations") could enable a Fund or
the Portfolio to achieve capital appreciation substantially exceeding the
appreciation a Fund or the Portfolio would realize if it did not make such
investments.
Illiquid securities may be more difficult to value than liquid securities and
the sale of illiquid securities generally will require more time and result in
higher brokerage charges or dealer discounts and other selling expenses than the
sale of liquid securities. Moreover, illiquid restricted securities often sell
at a price lower than similar securities that are not subject to restrictions on
resale.
OPTIONS, FUTURES AND FORWARD CURRENCY TRANSACTIONS. Although each Fund and the
Portfolio are authorized to enter into options, futures and forward currency
transactions, the Funds and the Portfolio might not enter into any such
transactions. In addition, issuers in emerging markets typically are subject to
a greater degree of change in earnings and business prospects than issuers in
developed countries. Options, futures and foreign currency transactions involve
certain risks, which include: (1) dependence on the Manager's ability to predict
movements in the prices of individual securities, fluctuations in the general
securities markets or in the appropriate market sector and movements in interest
rates and currency markets; (2) imperfect correlation, or even no correlation,
between movements in the price of options, forward contracts, futures contracts
or options thereon and movements in the price of the currency or security hedged
or used for cover; (3) the fact that skills and techniques needed to trade
options, futures contracts and options thereon or to use forward currency
contracts are different from those needed to select the securities in which a
Fund or Portfolio invests; (4) lack of assurance that a liquid secondary market
will exist for any particular option, futures contract or option thereon at any
particular time; (5) the possible loss of principal under certain conditions;
(6) the possible inability of a Fund or Portfolio to purchase or sell a
portfolio security at a time when it would otherwise be favorable for it to do
so, or the possible need
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GT GLOBAL INCOME FUNDS
for a Fund or Portfolio to sell a security at a disadvantageous time, due to the
need for the Fund or Portfolio to maintain "cover" or to set aside securities in
connection with hedging transactions; and (7) the possible need to defer closing
out of certain options, futures contracts and options thereon and forward
currency contracts in order to qualify or continue to qualify for the beneficial
tax treatment afforded regulated investment companies under the Code. See
"Dividends, Other Distributions and Federal Income Taxation" herein and "Taxes"
in the Statement of Additional Information.
OTHER INFORMATION. Each Fund's investment objectives may not be changed without
the approval of a majority of the respective Fund's outstanding voting
securities. A "majority of the Fund's outstanding voting securities" means the
lesser of (i) 67% of the 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, each Fund has adopted certain investment
limitations which also may not be changed without shareholder approval. A
complete description of these limitations is included in the Statement of
Additional Information. Each Fund's other investment policies described herein
are not fundamental policies and may be changed by a vote of a majority of the
Company's Board of Directors without shareholder approval.
According to the Manager, as of December 31, 1996, over
- ---% of the value of all outstanding government debt obligations throughout the
world was represented by obligations denominated in currencies other than the
U.S. dollar. Moreover, from time to time, the debt securities of issuers located
outside the United States have substantially outperformed the debt obligations
of U.S. issuers. Accordingly, the Manager believes that the Government Income
Fund's and the Strategic Income Fund's policy of investing in debt securities
throughout the world and the Portfolio's policy of investing in debt securities
of issuers in emerging markets may enable the achievement of results superior to
those produced by mutual funds with similar objectives to those of the Funds and
the Portfolio that invest solely in debt securities of U.S. issuers.
The approval of the High Income Fund and of other investors in the Portfolio, if
any, is not required to change the investment objectives, policies or
limitations of the Portfolio, unless otherwise specified. Written notice shall
be provided to shareholders of the High Income Fund thirty days prior to any
changes in the Portfolio's investment objectives.
- --------------------------------------------------------------------------------
RISK FACTORS
- --------------------------------------------------------------------------------
GENERAL. There is no assurance that any Fund or the Portfolio will achieve its
investment objectives. The Funds' net asset value will fluctuate, reflecting
fluctuations in the market value of its portfolio positions and its net currency
exposure. The value of fixed income securities held by the Government Income
Fund, the Strategic Income Fund and the Portfolio generally fluctuates inversely
with interest rate movements. Longer term bonds held by the Government Income
Fund, the Strategic Income Fund or the Portfolio are subject to greater interest
rate risk.
Each Fund and the Portfolio is classified under the 1940 Act as a
"non-diversified" fund; therefore, the Government Income Fund, the Strategic
Income Fund, the High Income Fund (through its investment in the Portfolio) and
the Portfolio each will be able, with respect to 50% of their total assets, to
invest more than 5% of their total assets in obligations of one issuer. To the
extent that a Fund or the Portfolio invests in a smaller number of issuers, the
value of each Fund's shares may fluctuate more widely and the Funds and the
Portfolio may be subject to greater investment and credit risk with respect to
their portfolios.
FOREIGN INVESTING. Investing in foreign securities entails certain risks. The
securities of non-U.S. issuers generally are not registered with the SEC, nor
are the issuers thereof usually subject to the SEC's reporting requirements.
Accordingly, there may be less publicly available information about foreign
securities and issuers than is available with respect to U.S. securities and
issuers. Foreign companies generally are not subject to uniform
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GT GLOBAL INCOME FUNDS
accounting, auditing and financial reporting standards, practices and
requirements comparable to those applicable to U.S. companies. In addition,
certain costs attributable to foreign investing, such as custody charges, are
higher than those attributable to domestic investing. Securities of some foreign
companies are less liquid and their prices may be more volatile than securities
of comparable domestic companies. The Government Income and Strategic Income
Funds' and the Portfolio's interest and dividends from foreign issuers may be
subject to non-U.S. withholding taxes, thereby reducing their net investment
income.
With respect to some foreign countries, there is the increased possibility of
expropriation or confiscatory taxation, limitations on the removal of funds or
other assets of the Government Income Fund, the Strategic Income Fund and the
Portfolio, political or social instability, or diplomatic developments which
could affect the investments of the Government Income Fund, the Strategic Income
Fund and the Portfolio in those countries. Moreover, individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation, rate of savings
and capital reinvestment, resource self-sufficiency and balance of payments
positions.
CURRENCY RISK. Since the Government Income Fund, the Strategic Income Fund and
the Portfolio normally invest substantially in securities denominated in
currencies other than the U.S. dollar, and because they may hold foreign
currencies, they will be affected favorably or unfavorably by exchange control
regulations or changes in the exchange rates between such currencies and the
U.S. dollar. Changes in currency exchange rates will influence the value of the
Funds' shares, and also may affect the value of dividends and interest earned by
the Funds and gains and losses realized by the Funds. Currencies generally are
evaluated on the basis of fundamental economic criteria (e.g., relative
inflation and interest rate levels and trends, growth rate forecasts, balance of
payments status and economic policies) as well as technical and political data.
The exchange rates between the U.S. dollar and other currencies are determined
by supply and demand in the currency exchange markets, the international balance
of payments, governmental intervention, speculation and other economic and
political conditions. If the currency in which a security is denominated
appreciates against the U.S. dollar, the dollar value of the security will
increase. Conversely, a decline in the exchange rate of the currency would
adversely affect the value of the security expressed in U.S. dollars.
In addition, many of the currencies in emerging market countries have
experienced steady devaluations relative to the U.S. dollar and major
devaluations have historically occurred in certain countries.
INVESTING IN EMERGING MARKETS. Because of the special risks associated with
investing in emerging markets, an investment in the Strategic Income Fund and
the Portfolio should be considered speculative. Investors are strongly advised
to consider carefully the special risks involved in emerging markets, which are
in addition to the usual risks of investing in developed foreign markets around
the world.
Investing in emerging markets involves risks relating to potential political and
economic instability within such markets and the risks of expropriation,
nationalization, confiscation of assets and property or the imposition of
restrictions on foreign investment and on repatriation of capital invested. In
the event of such expropriation, nationalization or other confiscation in any
emerging market, the Strategic Income Fund or the Portfolio could lose its
entire investment in that market.
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 have had and may continue to have negative
effects on the economies and securities markets of certain emerging market
countries.
Economies in emerging markets generally are dependent heavily upon international
trade and, accordingly, have been and may continue to be affected adversely by
trade barriers, exchange controls, managed adjustments in relative currency
values and other protectionist measures imposed or negotiated by the countries
with which they trade. These economies also have been and may continue to be
affected adversely by economic conditions in the countries in which they trade.
The securities markets of emerging countries are substantially smaller, less
developed, less liquid and more volatile than the securities markets of the
United States and other more developed countries. Disclosure and regulatory
standards in many respects are less stringent than in the United States and
other major markets. There also may be a lower level of monitoring and
regulation of emerging securities markets and the activities of
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GT GLOBAL INCOME FUNDS
investors in such markets, and enforcement of existing regulations has been
extremely limited.
In addition, brokerage commissions, custodial services and other costs relating
to investment in foreign markets generally are more expensive than in the United
States, particularly with respect to emerging markets. Such markets have
different settlement and clearance procedures. In certain markets there have
been times when settlements have been unable to keep pace with the volume of
securities transactions, making it difficult to conduct such transactions. The
inability of the Strategic Income Fund or the Portfolio to make intended
securities purchases due to settlement problems could cause the Strategic Income
Fund or the Portfolio to forego attractive investment opportunities. Inability
to dispose of a portfolio security caused by settlement problems could result
either in losses to the Strategic Income Fund or the Portfolio due to subsequent
declines in value of the portfolio security or, if the Strategic Income Fund or
the Portfolio has entered into a contract to sell the security, could result in
possible liability to the purchaser.
The risk also exists that an emergency situation may arise in one or more
emerging markets as a result of which trading of securities may cease or may be
substantially curtailed and prices for the Strategic Income Fund's or the
Portfolio's portfolio securities in such markets may not be readily available.
Section 22(e) of the 1940 Act permits a registered investment company to suspend
redemption of its shares for any period during which an emergency exists, as
determined by the SEC. Accordingly, when the Strategic Income Fund or the
Portfolio believes that appropriate circumstances warrant, it will promptly
apply to the SEC for a determination that an emergency exists within the meaning
of Section 22(e) of the 1940 Act. During the period commencing from the
Strategic Income Fund's or the Portfolio's identification of such conditions
until the date of SEC action, the portfolio securities of the Strategic Income
Fund or the Portfolio in the affected markets will be valued at fair value as
determined in good faith by or under the direction of the Company's Board of
Directors or the Portfolio's Board of Trustees.
LOAN PARTICIPATIONS AND ASSIGNMENTS. The Strategic Income Fund and the Portfolio
may have difficulty disposing of Assignments and Participations. The liquidity
of such securities is limited and, the Fund and the Portfolio anticipate that
such securities could be sold only to a limited number of institutional
investors. The lack of a liquid secondary market could have an adverse impact on
the value of such securities and on the Fund's and the Portfolio's ability to
dispose of particular Assignments or Participations when necessary to meet the
Fund's and/or the Portfolio's liquidity needs or in response to a specific
economic event, such as a deterioration in the creditworthiness of the borrower.
The lack of a liquid secondary market for Assignments and Participations also
may make it more difficult for the Fund and/or the Portfolio to assign a value
to those securities for purposes of valuing the Fund's or the Portfolio's
portfolio and calculating its net asset value.
SOVEREIGN DEBT. The Strategic Income Fund and the Portfolio may invest in
sovereign debt securities of emerging market governments, including Brady Bonds.
Investments in such securities involve special risks. The issuer of the debt or
the governmental authorities that control the repayment of the debt may be
unable or unwilling to repay principal or interest when due in accordance with
the terms of such debt. Periods of economic uncertainty may result in the
volatility of market prices of sovereign debt obligations and in turn a Fund's
net asset value, to a greater extent than the volatility inherent in domestic
fixed income securities.
A sovereign debtor's willingness or ability to repay principal and pay interest
in a timely manner may be affected by, among other factors, its cash flow
situation, the extent of its foreign reserves, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of the debt
service burden to the economy as a whole, the sovereign debtor's policy toward
principal international lenders and the political constraints to which a
sovereign debtor may be subject. Emerging market governments could default on
their sovereign debt. Such sovereign debtors also may be dependent on expected
disbursements from foreign governments, multilateral agencies and other entities
abroad to reduce principal and interest arrearages on their debt. The commitment
on the part of these governments, agencies and others to make such disbursements
may be conditioned on a sovereign debtor's implementation of economic reforms
and/or economic performance and the timely service of such debtor's obligations.
Failure to implement such reforms, achieve such levels of economic performance
or repay principal or interest when due, may result in the cancellation of such
third parties' commitments to lend funds to the sovereign debtor, which may
further impair such debtor's ability or willingness to timely service its debts.
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GT GLOBAL INCOME FUNDS
The occurrence of political, social or diplomatic changes in one or more of the
countries issuing sovereign debt could adversely affect the Fund's or the
Portfolio's investments. Emerging markets are faced with social and political
issues and some of them have experienced high rates of inflation in recent years
and have extensive internal debt. Among other effects, high inflation and
internal debt service requirements may adversely affect the cost and
availability of future domestic sovereign borrowing to finance governmental
programs, and may have other adverse social, political and economic
consequences. Political changes or a deterioration of a country's domestic
economy or balance of trade may affect the willingness of countries to service
their sovereign debt. Although the Manager intends to manage the Strategic
Income Fund and the Portfolio in a manner that will minimize the exposure to
such risks, there can be no assurance that adverse political changes will not
cause the Fund or the Portfolio to suffer a loss of interest or principal on any
of its holdings.
In recent years, some of the emerging market countries in which the Strategic
Income Fund and the Portfolio expect to invest have encountered difficulties in
servicing their sovereign debt obligations. Some of these countries have
withheld payments of interest and/or principal of sovereign debt. These
difficulties have also led to agreements to restructure external debt
obligations -- in particular, commercial bank loans, typically by rescheduling
principal payments, reducing interest rates and extending new credits to finance
interest payments on existing debt. In the future, holders of emerging market
sovereign debt securities may be requested to participate in similar
rescheduling of such debt. Certain emerging market countries are among the
largest debtors to commercial banks and foreign governments. Currently, Brazil,
Mexico and Argentina are the largest debtors among developing countries. At
times certain emerging market countries have declared moratoria on the payment
of principal and interest on external debt; such a moratorium is currently in
effect in certain emerging market countries. There is no bankruptcy proceeding
by which a creditor may collect in whole or in part sovereign debt on which an
emerging market government has defaulted.
The ability of emerging market governments to make timely payments on their
sovereign debt securities is likely to be influenced strongly by a country's
balance of trade and its access to trade and other international credits. A
country whose exports are concentrated in a few commodities could be vulnerable
to a decline in the international prices of one or more of such commodities.
Increased protectionism on the part of a country's trading partners could also
adversely affect its exports. Such events could diminish a country's trade
account surplus, if any. To the extent that a country receives payment for its
exports in currencies other than hard currencies, its ability to make hard
currency payments could be affected.
Investors should also be aware that certain sovereign debt instruments in which
the Strategic Income Fund and the Portfolio may invest involve great risk. As
noted above, sovereign debt obligations issued by emerging market governments
generally are deemed to be the equivalent in terms of quality to securities
rated below investment grade by Moody's and S&P. Such securities are regarded as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligations and involve
major risk exposure to adverse conditions. Some of such securities, with respect
to which the issuer currently may not be paying interest or may be in payment
default, may be comparable to securities rated D by S&P or C by Moody's. The
Strategic Income Fund and the Portfolio may have difficulty disposing of and
valuing certain sovereign debt obligations because there may be a limited
trading market for such securities. Because there is no liquid secondary market
for many of these securities, the Strategic Income Fund and the Portfolio
anticipate that such securities could be sold only to a limited number of
dealers or institutional investors.
LOWER QUALITY DEBT SECURITIES. Under normal market conditions the Strategic
Income Fund may invest up to 50% of its total assets in debt securities rated
below investment grade, and substantially all the Portfolio's assets will be so
invested. Such investments involve a high degree of risk.
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. 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 quality debt that is not in default as to
principal or interest and such
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GT GLOBAL INCOME FUNDS
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing. Lower quality debt securities are also
generally considered to be subject to greater risk than higher quality
securities with regard to a deterioration of general economic conditions. These
securities are the equivalent of high yield, high risk bonds, commonly known as
"junk bonds." As noted above, the Strategic Income Fund and the Portfolio may
invest in debt securities rated below C, which are in default as to principal
and/ or interest.
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 quality in response to subsequent events, so that an issuer's
current financial condition may be better or worse than a rating indicates. See
"Appendix" for a full discussion of Moody's and S&P's ratings.
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 Strategic Income Fund or the Portfolio. If an issuer exercises
these provisions in a declining interest rate market, the Strategic Income Fund
or the Portfolio may have to replace the security with a lower yielding
security, resulting in a decreased return for investors. In addition, the
Strategic Income Fund and the Portfolio may have difficulty disposing of lower
quality securities because there may be a thin trading market for such
securities. There may be no established retail secondary market for many of
these securities, and the Strategic Income Fund and the Portfolio anticipate
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 Strategic Income Fund and the Portfolio to obtain accurate
market quotations for purposes of valuing the securities in the portfolios of
the Strategic Income Fund and the Portfolio. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may also decrease the
values and liquidity of lower quality securities, especially in a thinly traded
market. The Strategic Income Fund and the Portfolio also may acquire lower
quality debt securities during an initial underwriting or may acquire lower
quality debt securities which are sold without registration under applicable
securities laws. Such securities involve special considerations and risks.
Factors having an adverse effect on the market value of lower rated securities
or their equivalents purchased by the Strategic Income Fund and the Portfolio
will adversely impact net asset value of the Strategic Income Fund and the High
Income Fund. See "Risk Factors" in the Statement of Additional Information. In
addition to the foregoing, such factors may 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.
The Strategic Income Fund and the Portfolio each also may incur additional
expenses to the extent it is required to seek recovery upon a default in the
payment of principal or interest on its portfolio holdings, and the Fund and the
Portfolio may have limited legal recourse in the event of a default. Debt
securities issued by governments in emerging markets can differ from debt
obligations issued by private entities in that remedies from defaults generally
must be pursued in the courts of the defaulting government, and legal recourse
is therefore somewhat diminished. Political conditions, in terms of a
government's willingness to meet the terms of its debt obligations, also are of
considerable
Prospectus Page 27
<PAGE>
GT GLOBAL INCOME FUNDS
significance. There can be no assurance that the holders of commercial bank debt
may not contest payments to the holders of debt securities issued by governments
in emerging markets in the event of default by the governments under commercial
bank loan agreements.
As of October 31, 1996, the Strategic Income Fund and the Portfolio had
- ---% and
- ---%, respectively, of their total net assets in debt securities that received a
rating from Moody's and
- ---% and
- ---%, respectively, of their total net assets in debt securities that were not
so rated. In addition, the Strategic Income Fund and the Portfolio had
- ---% and
- ---%, respectively, of their total net assets in cash and cash items. The
Strategic Income Fund had the following percentages of its total net assets
invested in rated securities: Aaa --
- ---%, Aa --
- ---%, A --
- ---%, Baa --
- ---%, Ba --
- ---%, B --
- ---%, Caa --
- ---%, Ca --
- ---%, C --
- ---%. Included under the unrated category are securities comprising 26.2% of the
Strategic Income Fund's total net assets which, while unrated, have been
determined by the Manager to be of comparable quality to securities in the
following rating categories: Baa (
- ---%); Ba (
- ---%); and B (
- ---%). The Portfolio had the following percentages of its total net assets
invested in rated securities: Aaa --
- ---%, Aa --
- ---%, A --
- ---%, Baa --
- ---%, Ba --
- ---%, B --
- ---%, Caa --
- ---%, Ca --
- ---%, C --
- ---%. Included under the unrated category are securities comprising 56.3% of the
Portfolio's total net assets which have been determined by the Manager to be of
comparable quality to securities in the following rating categories: Baa (
- ---%); Ba (
- ---%); and B (
- ---%). It should be noted that the allocation of the investments of the
Strategic Income Fund and the Portfolio by rating on any given date will vary
and should not be considered representative of the future portfolio composition
of the Strategic Income Fund or the Portfolio.
- --------------------------------------------------------------------------------
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.
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 Code Section 403(b)(7) and
other tax-qualified employer-sponsored retirement accounts, if made under a
systematic investment plan providing for monthly or quarterly payments of at
least that amount), and the minimum for additional purchases is $100 (with a $25
minimum for IRAs, Code Section 403(b)(7) custodial accounts and other tax-
qualified employer-sponsored retirement accounts, as mentioned above). The Funds
and GT Global reserve the right to reject any purchase order.
WHEN PLACING PURCHASE ORDERS, INVESTORS SHOULD SPECIFY WHETHER THE ORDER IS FOR
CLASS A OR CLASS B SHARES OF A 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 Funds 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/dealer, at the investor's option, subsequent purchases may be made
directly through GT Global. See "Shareholder Account Manual."
Prospectus Page 28
<PAGE>
GT GLOBAL INCOME FUNDS
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 Account Application indicating the
class of shares 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.
Investors also may purchase shares of the Funds 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
Funds. 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 Funds. 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. Physical certificates representing a 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 a 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 FUNDS AND GT GLOBAL RECOMMEND THAT SHAREHOLDERS DO NOT REQUEST
ISSUANCE OF CERTIFICATES.
PURCHASING CLASS A SHARES
Each Fund's public offering price for Class A shares is the next determined net
asset value per share (see "Calculation of Net Asset Value") plus a sales charge
determined in accordance with the following schedule.
<TABLE>
<CAPTION>
SALES CHARGE AS PERCENTAGE OF
AMOUNT OF DEALER
PURCHASE ------------------------------ REALLOWANCE AS
AT THE PUBLIC OFFERING NET PERCENTAGE OF THE
OFFERING PRICE PRICE INVESTMENT OFFERING PRICE
- ---------------- ------------- --------------- -------------------
<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% *
<FN>
- ------------------
* GT Global will pay the following commissions to brokers 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 on behalf of
a single client so that the broker'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.
</TABLE>
All shares purchased pursuant to a sales charge waiver based on the purchase
equalling at least $500,000 will be subject to a contingent deferred sales
charge for the first year after their purchase equal to 1% of the lower of the
original purchase price or the net asset value of such shares at the time of
redemption. See "Contingent Deferred Sales Charge -- Class A Shares."
From time to time, GT Global may reallow to broker/ dealers the full amount of
the sales charge on
Prospectus Page 29
<PAGE>
GT GLOBAL INCOME FUNDS
Class A shares 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), described below under "Sales Charge Waivers -- Class A
Shares."
The following purchases 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, including purchases in connection with
an employee benefit plan(s) exclusively for the benefit of such individual(s),
such as an IRA, individual plans under Code Section 403(b) or a self-employed
individual retirement plan ("Keogh Plan") and purchases made by a company
controlled by such individual(s).
(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 plans under Code Section 401(k), 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.
(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 comprising of
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 that
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.
(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 Fund 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 Fund 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
Prospectus Page 30
<PAGE>
GT GLOBAL INCOME FUNDS
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) An investor purchasing shares of a fund with redemption proceeds from a
registered management investment company that is not one of the GT Global Mutual
Funds, on which the investor was subject to a front-end sales charge or a
contingent deferred sales charge.
REINSTATEMENT PRIVILEGE. Shareholders who redeem their Class A shares in a Fund
have a one-time 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 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. For a discussion of the federal income tax
consequences of a reinstatement, 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
brokers or the Transfer Agent.
RIGHT OF ACCUMULATION. Pursuant to the Right of Accumulation, investors are
permitted to purchase shares of the Funds 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 the 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 brokers, 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 FUNDS AND
OTHER GT GLOBAL MUTUAL FUND (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 Funds and the Class A shares of other GT Global Mutual Funds (other than
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 qualification for
such treatment. THE FOREGOING LOI WILL APPLY ONLY TO CLASS A SHARES OF THE FUNDS
AND SHARES OF ANY GT GLOBAL MUTUAL FUND THAT OFFERS A SINGLE CLASS OF SHARES
(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 a sales charge. If a shareholder within
one year after the date of
Prospectus Page 31
<PAGE>
GT GLOBAL INCOME FUNDS
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. 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. The waivers set
forth under "Contingent Deferred Sales Charge Waivers" apply to redemptions of
Class A shares upon which a contingent deferred sales charge would otherwise be
imposed.
PURCHASING CLASS B SHARES
Each Fund's public offering price for Class B shares is the next determined net
asset value per share. See "Calculation of Net Asset Value." No initial sales
charge is imposed. A contingent deferred 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.
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 other 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.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE AS A PERCENTAGE OF THE
LESSER OF NET ASSET VALUE AT
REDEMPTION OR THE ORIGINAL
REDEMPTION DURING PURCHASE PRICE
- ------------------------------ -----------------------------
<S> <C>
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%
</TABLE>
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 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 sold
without a contingent deferred sales charge. The number of shares needed to fund
the remaining $335.00 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 a 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 redemption. The amount of any contingent deferred sales
charge will be paid to GT Global.
Prospectus Page 32
<PAGE>
GT GLOBAL INCOME FUNDS
CONTINGENT DEFERRED
SALES CHARGE WAIVERS
The contingent deferred sales charge will be waived for: (1) exchanges, as
described below; (2) redemptions in connection with each 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 a Fund within
180 days of a prior redemption, and (8) redemptions pursuant to a 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
asset) 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 or 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 a Fund through the GT Global Automatic Investment Plan. Under this
Plan, an amount specified by the shareholder of $100 or more (or $25 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 a Fund in cash. A sales charge will be
applied to each automatic monthly purchase of Class A Fund 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.
DOLLAR COST AVERAGING PROGRAM. Investors may purchase Class A or Class B shares
of a 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 a Fund's net asset value is relatively low and fewer
shares when a 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 a 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
Prospectus Page 33
<PAGE>
GT GLOBAL INCOME FUNDS
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 Fund shares
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 their 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) 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 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 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
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 brokers may charge a
fee for establishing accounts relating to the Program. Investors should contact
their brokers or GT Global for more information.
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GT GLOBAL INCOME FUNDS
HOW TO MAKE EXCHANGES
- --------------------------------------------------------------------------------
Shares of each Fund may be exchanged for shares of the same class 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. 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 -- Taxes." In addition to the Funds,
the GT Global Mutual Funds currently include:
-- GT GLOBAL WORLDWIDE GROWTH FUND
-- GT GLOBAL INTERNATIONAL GROWTH FUND
-- GT GLOBAL EMERGING MARKETS FUND
-- GT GLOBAL HEALTH CARE FUND
-- GT GLOBAL TELECOMMUNICATIONS FUND
-- GT GLOBAL FINANCIAL SERVICES FUND
-- GT GLOBAL INFRASTRUCTURE FUND
-- GT GLOBAL NATURAL RESOURCES FUND
-- GT GLOBAL CONSUMER PRODUCTS AND SERVICES 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 DOLLAR FUND
Up to four exchanges each year per Fund may be made without charge. A $7.50
service charge will be imposed on each subsequent exchange. If a shareholder
does not surrender all of his or her shares in an exchange, the remaining
balance in the shareholder'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.
An investor interested in making an exchange should contact his broker/dealer or
the Transfer Agent to request the prospectus of the other GT Global Mutual
Fund(s) being considered. Certain brokers may charge a fee for handling
exchanges.
EXCHANGES BY TELEPHONE. A shareholder may give exchange instructions to the
shareholder's broker/ dealer or to 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 Funds, 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 Funds employ reasonable procedures to confirm that
instructions communicated by telephone are genuine, including requiring some
form of personal identification prior to acting upon instructions received by
telephone, providing written confirmation of such transactions, and/or tape
recording of telephone instructions.
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.
OTHER INFORMATION ABOUT EXCHANGES. Purchases, redemptions and exchanges should
be made for investment purposes only. A pattern of frequent exchanges, purchases
and sales is not acceptable and can be limited by a Fund's or GT Global's
refusal to accept further purchase and exchange orders from the shareholder or
broker/dealer. The terms of the exchange offer described above may be modified
at any time, on 60 days' prior written notice to shareholders.
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GT GLOBAL INCOME FUNDS
HOW TO REDEEM SHARES
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Shares of each Fund 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. If a redeeming shareholder owns
both Class A and Class B shares of a 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
that sell shares of a 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 shares' net asset value next determined after the broker/dealer receives the
request or 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 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 a 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.
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 OF RECORD.
Shareholders automatically have telephone privileges to authorize redemptions.
The Funds, GT Global and the Transfer Agent will not be liable for
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GT GLOBAL INCOME FUNDS
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,
including requiring some form of personal identification prior to acting upon
instructions received by telephone, 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 registered account owner(s) 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 brokers 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 of the
Fund 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.
CHECKWRITING -- GOVERNMENT INCOME FUND -- CLASS A SHARES. Class A shareholders
of Government Income Fund may redeem their Government Income Fund shares by
writing checks, a supply of which may be obtained through the Transfer Agent,
against their Government Income Fund accounts. The minimum check amount is $300.
When the check is presented to the Transfer Agent for payment, the Transfer
Agent will cause the Government Income Fund to redeem a sufficient number of
Class A shares to cover the amount of the check. This procedure enables the
shareholder to continue receiving dividends on those shares until such time as
the check is presented to the Transfer Agent for payment. Cancelled checks are
not returned. However, such shareholders may obtain photocopies of their
cancelled checks upon request. If a shareholder does not own sufficient Class A
shares to cover a check, the check will be returned to the payee marked
"nonsufficient funds." Checks written in amounts less than $300 also will be
returned. The Government Income Fund and the Transfer Agent reserve the right to
terminate or modify the checkwriting service at any time or to impose a service
charge in connection with it.
Because the aggregate amount of Government Income Fund Class A shares owned by a
shareholder is likely to change each day, shareholders should not attempt to
redeem all of their Government Income Fund shares held in their accounts by
using the check redemption procedure. Charges may be imposed for specially
imprinted checks, business checks, copies of cancelled checks, stop payment
orders, checks returned "nonsufficient funds" and checks returned because they
are written for less than $300. These charges will be paid by redeeming
automatically an appropriate number of Government Income Fund Class A shares.
Shareholders of Government Income Fund Class A shares who are interested in
checkwriting should obtain the necessary forms by calling the Transfer Agent at
the number provided in the Shareholder Account Manual. Checkwriting generally is
not available to persons who hold Government Income Fund Class A shares in tax-
deferred retirement plan accounts.
OTHER IMPORTANT REDEMPTION INFORMATION. A request for redemption will not be
processed until
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GT GLOBAL INCOME FUNDS
all of the necessary documentation has been received in good order. A
shareholder in doubt as to what documents are required should contact his
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.
If the Transfer Agent is requested to redeem shares for which a Fund has not yet
received good payment, the Fund may delay payment of redemption proceeds until
it 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.
A Fund may redeem the shares of any shareholder whose account is reduced to less
than $500 in net asset 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).
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GT GLOBAL INCOME FUNDS
SHAREHOLDER ACCOUNT MANUAL
- --------------------------------------------------------------------------------
Shareholders are encouraged to place purchase, exchange and redemption orders
through their brokers. 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.
Each 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 7345
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. 4023-050701
EXCHANGES BY TELEPHONE
Call GT Global at 1-800-223-2138
EXCHANGES BY MAIL
Send complete instructions, including name of Fund exchanging from, 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, California 94120-7893
REDEMPTIONS BY TELEPHONE
Call GT Global at 1-800-223-2138
REDEMPTIONS BY MAIL
Send complete instructions, including name of Fund, class of shares, amount of
redemption, shareholder's registered name and account number, to:
GT Global
P.O. Box 7893
San Francisco, California 94120-7893
OVERNIGHT MAIL
Overnight mail services do not deliver to post office boxes. To send purchase,
exchange or redemption orders by overnight mail, comply with the above
instructions but send to the following address:
GT Global Investor Services
California Plaza
2121 N. California Boulevard
Suite 450
Walnut Creek, California 94596
ADDITIONAL QUESTIONS
Shareholders with additional questions regarding purchase, exchange and
redemption procedures should call GT Global at 1-800-223-2138.
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GT GLOBAL INCOME FUNDS
CALCULATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
The Funds calculate net asset value as of the close of normal 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. Each
Fund's net asset value per share is computed by determining the value of its
total assets (which, in the case of the High Income Fund is the value of its
investment in the Portfolio) subtracting all of its liabilities, and dividing
the result by the total number of shares outstanding at such time. Net asset
value is determined separately for each class of shares of each Fund.
Long-term debt obligations held by a Fund or the Portfolio are valued at the
mean of representative quoted bid and asked prices for such securities or, if
such prices are not available, at prices for securities of comparable maturity,
quality and type; however, when the Manager deems it appropriate, prices
obtained from a bond pricing service will be used. Short-term debt investments
are amortized to maturity based on their cost, adjusted for foreign exchange
translation and market fluctuations. Equity securities are valued at the last
sale price on the exchange or in the OTC market in which such securities are
primarily traded, as of the close of business on the day the securities are
being valued, or, lacking any sales, at the last available bid price. When
market quotations for futures and options positions held by a Fund or the
Portfolio are readily available, those positions are valued based upon such
quotations.
Securities and other assets for which market quotations are not readily
available are valued at fair value determined in good faith by or under the
direction of the Company's Board of Directors or the Portfolio's Board of
Trustees. Securities and other assets quoted in foreign currencies are valued in
U.S. dollars based on the prevailing exchange rates on that day.
Each Fund's portfolio securities, from time to time, may be listed primarily on
foreign exchanges or OTC dealer markets which may trade on days when the NYSE is
closed (such as Saturday). As a result, the net asset values of a Fund's shares
may be significantly affected by such trading on days when shareholders have no
access to that Fund.
The different expenses borne by each class of shares will result in different
net asset values and dividends. The per share net asset value of the Class B
shares of a Fund generally will be lower than that of the Class A shares of that
Fund because of the higher expenses borne by the Class B shares. The per share
net asset value of the Advisor Class shares of a Fund generally will be higher
than that of the Class A and Class B shares of that Fund because of the lower
expenses borne by the Advisor Class shares. It is expected, however, that the
net asset value per share of the classes of a Fund will tend to converge
immediately after the payment of dividends, which will differ by approximately
the amount of the service and distribution expense accrual differential between
the classes.
- --------------------------------------------------------------------------------
DIVIDENDS, OTHER DISTRIBUTIONS
AND FEDERAL INCOME TAXATION
- --------------------------------------------------------------------------------
DIVIDENDS AND OTHER DISTRIBUTIONS. Each Fund pays monthly dividends from its net
investment income, if any, which includes accrued interest, earned discount
(including both original issue and market discounts) and dividends less
applicable expenses. Each Fund also normally 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. Each Fund may make an additional dividend
or other distribution if necessary to avoid a 4% excise tax on certain
undistributed income and gain.
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GT GLOBAL INCOME FUNDS
Dividends and other distributions paid by each 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 a Fund will be lower than the per
share income dividends on Class A shares of that 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 a Fund will be lower than the
per share income dividends on the Advisor Class shares of that 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 STATUS
OF DIVIDENDS AND OTHER DISTRIBUTIONS IS THE SAME WHETHER THEY ARE RECEIVED IN
CASH OR REINVESTED IN ADDITIONAL SHARES.
Any dividend or other distribution paid by a 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. Each Fund intends to continue to qualify for treatment as a regulated
investment company under the Code. In each taxable year that a 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, net gains from certain foreign currency
transactions and net short-term capital gain) and net capital gain that is
distributed to its shareholders. The Portfolio expects that it also will not be
liable for any federal income tax.
Dividends from a Fund's investment company taxable income are taxable to its
shareholders as ordinary income to the extent of the Fund's earnings and
profits. Distributions of a 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.
Each 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, the shareholders' respective
shares of any foreign taxes treated as paid by the Fund, in which event each
shareholder 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.
Each 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
Prospectus Page 41
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GT GLOBAL INCOME FUNDS
whether a proper taxpayer identification number is on file with a 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 (including another Fund)
generally will have similar tax consequences. However, special tax rules apply
when a shareholder (1) disposes of Class A shares of a Fund through a redemption
or exchange within 90 days after purchase and (2) subsequently acquires Class A
shares of the 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 the shares were acquired, and that
amount will increase the adjusted basis of the shares subsequently acquired. In
addition, if shares of a Fund are purchased within 30 days before or after
redeeming other shares of that 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 each 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 are therefore urged to consult their
tax advisers.
- --------------------------------------------------------------------------------
MANAGEMENT
- --------------------------------------------------------------------------------
The Company's Board of Directors and the Portfolio's Board of Trustees have
overall responsibility for the operation of the Funds and the Portfolio,
respectively, and have approved contracts with various financial organizations
to provide, among other things, day to day management services required by the
Funds and the Portfolio. See "Directors, Trustees, and Executive Officers" in
the Statement of Additional Information for a complete description of the
Directors of each of the Funds and the Trustees of the Portfolio.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Services provided by Chancellor LGT
Asset Management, Inc. (the "Manager") as the Government Income Fund's, the
Strategic Income Fund's and the Portfolio's investment manager and administrator
include, but are not limited to, determining the composition of the investment
portfolio of the Government Income Fund, the Strategic Income Fund and the
Portfolio and placing orders to buy, sell or hold particular securities. In
addition, the Manager provides the following administration services to the
Funds and the Portfolio: furnishing corporate officers and clerical staff;
providing office space, services and equipment; and supervising all matters
relating to the Government Income Fund's, the Strategic Income Fund's and the
Portfolio's operation.
The Government Income Fund and the Strategic Income Fund each pays the Manager
administration fees computed daily and payable monthly, based on their
respective average daily net assets, for such services at the annualized rate of
.725% on the first $500 million, .70% on the next $1 billion, .675% on the next
$1 billion, and .65% on amounts thereafter. The High Income Fund pays
administration fees, directly to the Manager at the annualized rate of 0.25% of
the Fund's average daily net assets. In addition, the Fund bears its pro rata
portion of the investment management and administration fees paid by the
Portfolio to the Manager. The Portfolio pays such fees, based on the average
daily net assets of the Portfolio, directly to the Manager at the annualized
rate of .475% on the first $500 million, .45% on the next $1 billion, .425% on
the next $1 billion and .40% on amounts thereafter, plus 2% of the Portfolio's
total investment income as stated in the Portfolio's Statement of Operations,
calculated in accordance with generally accepted accounting principles, adjusted
daily for currency revaluations, on a marked to market basis, of the Portfolio's
assets; provided, however,
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GT GLOBAL INCOME FUNDS
that during any fiscal year this amount shall not exceed 2% of the Portfolio's
total investment income calculated in accordance with generally accepted
accounting principles. These rates are higher than those paid by most mutual
funds. Each Fund pays all expenses not assumed by the Manager, GT Global or any
other agents. The Manager and GT Global have undertaken to limit the expenses of
the Class A and Class B shares of the Government Income Fund and the Strategic
Income Fund (exclusive of brokerage commissions, taxes, interest and
extraordinary expenses) to the maximum annual level of 1.85% and 2.50% of the
average daily net assets of such Funds' Class A and Class B shares,
respectively. The Manager and GT Global have undertaken to limit the expenses of
the Class A and Class B shares of the High Income Fund (and such Fund's pro-rata
portion of the Portfolio's expenses) to the maximum annual level of 2.20% and
2.85% of the average daily net assets of such Fund's Class A and Class B shares,
respectively.
The Manager also serves as each Fund's pricing and accounting agent. For these
services the Manager receives a fee at an annual rate derived by applying 0.03%
to the first $5 billion of assets of GT Global Mutual Funds and 0.02% to the
assets in excess of $5 billion and allocating the result according to each
Fund's average daily net assets.
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
U.S. offices of the Manager are located at 50 California Street, 27th Floor, San
Francisco, CA 94111 and 1166 Avenue of the Americas, New York, NY 10036.
The Manager and its worldwide affiliates, including LGT Bank in Liechtenstein,
formerly Bank in Liechtenstein, comprise 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 a 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
- --------------, 1997, the Manager and its worldwide asset management affiliates
manage approximately $
- --- billion. In the United States, as of
- --------------, 1997, the Manager manages or administers approximately $
- --- billion of GT Global Mutual Funds. As of
- --------------, 1997, assets entrusted to Liechtenstein Global Trust total
approximately $
- --- billion.
On October 31, 1996, Chancellor Capital Management, Inc. ("Chancellor Capital")
merged with LGT Asset Management, Inc. As of September 30, 1996, Chancellor
Capital and its affiliates, based in New York, were the 15th largest independent
investment manager in the United States with approximately $33 billion in assets
under management. Chancellor Capital specialized in public and private U.S.
equity and bond portfolio management for over 300 U.S. institutional clients.
In addition to the investment resources of its San Francisco and New York
offices, the Manager draws upon the expertise, personnel, data and systems of
other offices of Liechtenstein Global Trust, including investment offices in
Frankfurt, Hong Kong, London, Singapore, Sydney, Tokyo, and Toronto. In managing
the GT Global Mutual Funds, the Manager employs a team approach, taking
advantage of its investment resources around the world in seeking to achieve
each Fund's investment objective. Many of the GT Global Mutual Funds' portfolio
managers are natives of the countries in which they invest, speak local
languages and/or live or work in the markets they follow.
Prospectus Page 43
<PAGE>
GT GLOBAL INCOME FUNDS
The investment professionals primarily responsible for the portfolio management
of the Government Income Fund, the Strategic Income Fund and the Portfolio are
as follows:
GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND LAST FIVE YEARS
- ------------------------ ------------------------ --------------------------------------------------------------------
<S> <C> <C>
Robert F. Allen Portfolio Manager since Portfolio Manager for the Manager since 1989.
San Francisco 1989
John W. Geissinger Portfolio Manager since Portfolio Manager for the Manager since --------------, 199--. Mr.
199 -- Geissinger has been a Senior Portfolio Manager and Head of the
Investment Grade Fixed Income Group at the Manager since 1993. Mr.
Geissinger was a Portfolio Manager at the Putnam Companies from1987
until 1993.
STRATEGIC INCOME FUND
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND LAST FIVE YEARS
- ------------------------ ------------------------ --------------------------------------------------------------------
<S> <C> <C>
Cheng-Hock Lau Portfolio Manager since Portfolio Manager for the Manager since --------------, 1996. Mr.
1996 Lau has been Chief Investment Officer for Developed Market Debt for
the Manager since November 1996, and was a Senior Portfolio Manager
for global/ international fixed income for the Manager from July
1995 to November 1996. Prior thereto, Mr. Lau was a Senior Vice
President and Senior Portfolio Manager for Fiduciary Trust Company
International from 1993 to 1995, and Vice President at Bankers
Trust Company from 1991 to 1993.
Simon Nocera Portfolio Manager since Chief Investment Officer for Emerging Market Debt for the Manager
San Francisco 1992 since January 1996. Mr. Nocera has been a Portfolio Manager and
Economist for the Manager since 1992. From 1991 to 1992, Mr. Nocera
was Senior Vice President and Director for Global Fixed Income
Research at The Putnam Companies. Prior thereto, Mr. Nocera was a
Financial Economist at the International Monetary Fund.
HIGH INCOME PORTFOLIO
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE PORTFOLIO LAST FIVE YEARS
- ------------------------ ------------------------ --------------------------------------------------------------------
<S> <C> <C>
Simon Nocera Portfolio Manager since Chief Investment Officer for Emerging Market Debt for the Manager
San Francisco Portfolio inception in since January 1996. Mr. Nocera has been a Portfolio Manager and
1992 Economist for the Manager since 1992. From 1991 to 1992, Mr. Nocera
was Senior Vice President and Director for Global Fixed Income
Research at The Putnam Companies. Prior thereto, Mr. Nocera was a
Financial Economist at the International Monetary Fund.
</TABLE>
In placing orders for the Government Income Fund's, Strategic Income Fund's and
the Portfolio's securities transactions, the Manager seeks to obtain the best
net results. Consistent with its obligation to obtain the best net results, the
Manager may consider a broker/dealer's sale of shares of the GT Global Mutual
Funds as a factor in considering through whom portfolio transactions will be
effected. Brokerage transactions for the Fund may be executed through any
Liechtenstein Global Trust affiliate. High portfolio turnover (over 100%)
involves correspondingly greater brokerage commissions and other transaction
costs that the Funds or the Portfolio will bear directly and could result in the
realization of net capital gains which would be taxable when distributed to
shareholders. See "Dividends, Other Distributions, and Federal Income Taxation."
Prospectus Page 44
<PAGE>
GT GLOBAL INCOME FUNDS
DISTRIBUTION OF FUND SHARES. GT Global is the distributor of each 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,
California 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 investments in
Class B shares.
GT Global, at its own expense, may provide additional promotional incentives to
brokers that sell shares of the Funds and/or shares of the other GT Global
Mutual Funds. In some instances additional compensation or promotional
incentives may be offered to brokers 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. 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 Company's Board of Directors
pursuant to Rule 12b-1 under the 1940 Act, with respect to each Fund's Class A
shares ("Class A Plan"), each 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 0.35% 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 each Fund's
Class B shares ("Class B Plan"), each 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 by GT Global in excess of 1.00% annually may be carried forward for
reimbursement in subsequent years as long as that Plan continues in effect.
GT Global's service and distribution expenses covered by the Plans include the
payment of commissions; the cost of any additional compensation paid by GT
Global to broker/dealers; the costs of printing and mailing to prospective
investors 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. Banks and broker/ dealer affiliates of banks also may
execute dealer agreements with GT Global for the purpose of selling shares of
the Fund. 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.
Prospectus Page 45
<PAGE>
GT GLOBAL INCOME FUNDS
OTHER INFORMATION
- --------------------------------------------------------------------------------
CONFIRMATIONS AND REPORTS TO SHAREHOLDERS. Each time a transaction is made that
affects a shareholder's account in a Fund, the shareholder will receive from the
Transfer Agent a confirmation statement reflecting the transaction.
Confirmations for transactions effected pursuant to a Fund's Automatic
Investment Plan, Systematic Withdrawal Plan, and automatic dividend reinvestment
program may be provided quarterly. Shortly after the end of each Fund's fiscal
year on October 31 and fiscal half-year on April 30 of each year, shareholders
receive an annual and a semiannual report, respectively. In addition, the
federal income status of distributions made by the Fund to shareholders are
reported after the end of each calendar year on Form 1099-DIV. Under certain
circumstances duplicate mailings of the foregoing reports to the same household
may be consolidated.
ORGANIZATION OF THE COMPANY. The Company was organized as a Maryland corporation
on October 29, 1987. From time to time, the Company has and may continue to
establish other funds, each corresponding to a distinct investment portfolio and
a distinct series of the Company's common stock. Shares of each Fund 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 a 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 Fund has
exclusive voting rights with respect to its distribution plan. The shares of all
the Company's funds will be voted in the aggregate on all other matters, such as
the election of Directors and ratification of the Board of Directors' selection
of the Company's independent accountants.
Normally there will be no annual meeting of shareholders of the Company in any
year, except as required under the 1940 Act. The Company would be required to
hold a shareholders' meeting in the event that at any time less than a majority
of the Directors holding office had been elected by shareholders. Directors
shall continue to hold office until their successors are elected and have
qualified. Shares of the Company's funds do not have cumulative voting rights,
which means that the holders of a majority of the shares voting for the election
of Directors can elect all the Directors. A Director may be removed upon a
majority vote of the shareholders qualified to vote in the election.
Shareholders holding 10% of the Company's outstanding voting shares may call a
meeting of shareholders for the purpose of voting upon the question of removal
of any Director or for any other purpose. The 1940 Act requires the Company to
assist shareholders in calling such a meeting.
Pursuant to the Company's Articles of Incorporation, it may issue six billion
shares. Of this number, 300 million shares have been classified as shares of the
Strategic Income Fund and the High Income Fund; 100 million shares of each Fund
have been classified as Class A and Class B shares, respectively. In addition,
500 million shares have been classified as shares of Government Income Fund; 200
million shares have each been classified as Class A and Class B shares,
respectively. Moreover, 100 million shares have been classified as Advisor Class
shares of each Fund. This amount may be increased from time to time in the
discretion of the Board of Directors. Each share of a Fund represents an
interest in that Fund only, has a par value of $0.0001 per share, represents an
equal proportionate interest 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 Directors. Each Class A, Class B and Advisor Class
share of a Fund is equal as to earnings, assets and voting privileges, except as
noted above, and each class bears the expenses, if any, related to the
distribution of its shares. Shares of each Fund when issued are fully paid and
nonassessable.
ORGANIZATION OF THE PORTFOLIO. The Portfolio is organized as a trust under the
laws of the state of New York. The Portfolio's Declaration of Trust provides
that the High Income Fund and other entities investing in the Portfolio (E.G.,
other investment companies, insurance company separate accounts and common and
commingled trust
Prospectus Page 46
<PAGE>
GT GLOBAL INCOME FUNDS
funds), if any, each will be liable for all obligations of the Portfolio.
However, the Directors of the Company believe that the risk of the High Income
Fund incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance existed and the Portfolio
itself was unable to meet its obligations, and that neither the High Income Fund
nor its shareholders will be exposed to a material risk of liability by reason
of the High Income Fund's investing in the Portfolio. Any information received
from the Portfolio in the Portfolio shareholder report will be provided to the
High Income Fund's shareholders.
Whenever the High Income Fund is requested to vote on any proposal of the
Portfolio, the High Income Fund will hold a meeting of Fund shareholders and
will cast its vote as instructed by Fund shareholders. Shares for which no
voting instructions are received will be voted in the same proportion as the
shares for which voting instructions are received.
SHAREHOLDER INQUIRIES. Shareholder inquiries may be made by calling the Funds
toll free at (800) 223-2138 or by writing to the Funds at 50 California Street,
27th Floor, San Francisco, California 94111.
PERFORMANCE INFORMATION. The Funds, from time to time, may include information
on their investment results and/or comparisons of their 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. Investors should be aware that as of October 22, 1992,
the investment objectives of the Strategic Income Fund were changed from
long-term high capital appreciation, primarily and moderate income, secondarily,
to primarily high current income and secondarily capital appreciation. In
addition, the investment policies and limitations of the Strategic Income Fund
were modified.
In such materials, each Fund may quote its average annual total return
("Standardized Return"). Standardized Return is calculated separately for each
class of shares of each 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 one-, 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 at net asset
value on the reinvestment date as established by the Board of Directors.
In addition, in order to more completely represent each Fund's performance or
more accurately compare such performance to other measures of investment return,
each 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); it
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.
Each Fund also may refer in advertising and promotional materials to its yield,
which will fluctuate over time. A Fund's yield shows the rate of income that it
earns on its investments, expressed as a percentage of the public offering price
of its shares. A Fund calculates yield by determining the interest income it
earned from its portfolio investments for a specified thirty-day period (net of
expenses), dividing such income by the average number of shares outstanding, and
expressing the result as an annualized percentage based on the public offering
price at the end of that thirty-day period. Yield accounting methods differ from
the methods used for other accounting purposes. Accordingly, a Fund's yield may
not equal the dividend income actually paid to investors or the income reported
in its financial statements. Yield is calculated separately for Class A and
Class B shares of each Fund.
Each Fund's performance data will reflect past performance and will not
necessarily be indicative of future results. A Fund's investment results will
vary from time to time depending upon market conditions, the composition of its
portfolio and its operating expenses. These factors and possible differences in
calculation methods should be considered when comparing a Fund's investment
results with those published for other investment companies, other investment
vehicles and unmanaged
Prospectus Page 47
<PAGE>
GT GLOBAL INCOME FUNDS
indices. Each Fund's results also should be considered relative to the risks
associated with its investment objectives and policies. See "Investment Results"
in the Statement of Additional Information.
Each Fund's annual report contains additional information with respect to its
performance. The annual report is available to investors upon request and free
of charge.
TRANSFER AGENT. Shareholder servicing, reporting and general transfer agent
functions for the Funds 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 its offices at California Plaza, 2121
N. California Boulevard, Suite 450, Walnut Creek, California 94596.
CUSTODIAN. State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, is custodian of each Fund's and the Portfolio's assets.
COUNSEL. The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue,
N.W., Washington, D.C. 20036-1800, acts as counsel to the Company, the Funds and
the Portfolio. Kirkpatrick & Lockhart LLP also acts as counsel to the Manager,
GT Global and the Transfer Agent in connection with other matters.
INDEPENDENT ACCOUNTANTS. The Company's and each Fund's and the Portfolio'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 each Fund and the Portfolio, assist in the preparation of each Fund's and the
Portfolio's federal and state income tax returns and consult with the Company,
each Fund and the Portfolio 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 48
<PAGE>
GT GLOBAL INCOME FUNDS
APPENDIX A
DESCRIPTION OF DEBT RATINGS
- --------------------------------------------------------------------------------
DESCRIPTION OF BOND RATINGS
MOODY'S INVESTORS SERVICE, INC. ("Moody's") rates the 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 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. They are rated lower than the best
bond 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 risks appear somewhat
larger.
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 some time in the future.
Baa -- Medium-grade obligations. 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 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 through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its
Prospectus Page 49
<PAGE>
GT GLOBAL INCOME FUNDS
generic rating category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the Company ranks in the lower end of its generic
rating category.
STANDARD & POOR'S RATINGS GROUP ("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 -- High grade. Very strong capacity to pay interest and repay
principal. Generally, these bonds differ from AAA issues only in a small
degree.
A -- Have a strong capacity to pay interest and repay principal although
it is somewhat more susceptible to the adverse effects of change in
circumstances and economic conditions than debt in higher rated categories.
BBB -- Regarded as having adequate capacity to pay interest and repay
principal. These bonds normally exhibit adequate protection parameters, but
adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity to pay interest and repay principal than for
debt in higher rated categories.
BB, B, CCC, CC, C -- Debt rated "BB," "B," "CCC," "CC," and "C" are
regarded, on balance, as predominantly speculative with respect to capacity
to pay interest and repay principal in accordance with the terms of this
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 which 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" 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. The "D" rating also will 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
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.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
MOODY'S employs the designation "Prime-1" to indicate commercial paper having a
superior ability for repayment of senior short-term debt obligations. Prime-1
repayment ability will often be evidenced by many of the
Prospectus Page 50
<PAGE>
GT GLOBAL INCOME FUNDS
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. Issues rated Prime-2 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 ratings of commercial paper are graded into several categories ranging from
"A1" for the highest quality obligations to "D" for the lowest. Issues in the
"A" category are delineated with numbers 1, 2, and 3 to indicate the relative
degree of safety. 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 payments on issues with this designation
is satisfactory; however, the relative degree of safety is not as high as for
issues designated "A-1."
Prospectus Page 51
<PAGE>
GT GLOBAL INCOME FUNDS
NOTES
- --------------------------------------------------------------------------------
Prospectus Page 52
<PAGE>
GT GLOBAL INCOME FUNDS
NOTES
- --------------------------------------------------------------------------------
Prospectus Page 53
<PAGE>
GT GLOBAL INCOME FUNDS
NOTES
- --------------------------------------------------------------------------------
Prospectus Page 54
<PAGE>
GT GLOBAL INCOME FUNDS
NOTES
- --------------------------------------------------------------------------------
Prospectus Page 55
<PAGE>
GT GLOBAL INCOME FUNDS
GT GLOBAL MUTUAL FUNDS
GT GLOBAL OFFERS A BROAD RANGE OF MUTUAL FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY GT GLOBAL MUTUAL
FUND, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR CALL GT GLOBAL DIRECTLY AT
1-800-824-1580.
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL WORLDWIDE GROWTH FUND
Invests around the world, including the U.S.
GT GLOBAL INTERNATIONAL GROWTH FUND
Provides portfolio diversity by investing outside
the U.S.
GT GLOBAL EMERGING MARKETS FUND
Gives access to the growth potential of developing economies
/ / GLOBAL THEME FUNDS
GT GLOBAL CONSUMER PRODUCTS AND
SERVICES FUND
Invests in companies that manufacture, market, retail, or distribute consumer
products or services
GT GLOBAL FINANCIAL SERVICES FUND
Focuses on the worldwide opportunities from the demand for financial services
and products
GT GLOBAL HEALTH CARE FUND
Invests in growing health care industries worldwide
GT GLOBAL INFRASTRUCTURE FUND
Seeks companies that build, improve or maintain a country's infrastructure
GT GLOBAL NATURAL RESOURCES FUND
Concentrates on companies that own, explore or develop natural resources
GT GLOBAL TELECOMMUNICATIONS FUND
Invests in companies worldwide that develop, manufacture or sell
telecommunications services or equipment
/ / REGIONALLY DIVERSIFIED FUNDS
GT GLOBAL NEW PACIFIC GROWTH FUND
Offers access to the emerging and established markets of the Pacific Rim,
excluding Japan
GT GLOBAL EUROPE GROWTH FUND
Focuses on investment opportunities in the new, unified Europe
GT GLOBAL LATIN AMERICA GROWTH FUND
Invests in the emerging markets of Latin America
/ / SINGLE COUNTRY FUNDS
GT GLOBAL AMERICA SMALL CAP GROWTH FUND
Invests in equity securities of small U.S. companies
GT GLOBAL AMERICA MID CAP GROWTH FUND
Concentrates on medium-sized companies in the U.S.
GT GLOBAL AMERICA VALUE FUND
Concentrates on equity securities of large cap U.S. companies believed to be
undervalued
GT GLOBAL JAPAN GROWTH FUND
Provides U.S. investors with direct access to the Japanese market
GROWTH AND INCOME FUND
GT GLOBAL GROWTH & INCOME FUND
Invests in blue-chip stocks and government bonds from around the world
INCOME FUNDS
GT GLOBAL GOVERNMENT INCOME FUND
Earns monthly income from global government securities
GT GLOBAL STRATEGIC INCOME FUND
Allocates its assets among debt securities from the U.S., developed foreign
countries and emerging markets
GT GLOBAL HIGH INCOME FUND
Invests in debt securities in emerging markets
MONEY MARKET FUND
GT GLOBAL DOLLAR FUND
Invests in high quality, U.S. dollar-denominated money market securities
worldwide for stability and preservation of capital
[LOGO]
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY CHANCELLOR LGT ASSET
MANAGEMENT, INC., G.T. INVESTMENT FUNDS, INC., GT GLOBAL GOVERNMENT INCOME
FUND, GT GLOBAL STRATEGIC INCOME FUND, GT GLOBAL HIGH INCOME FUND, GLOBAL
HIGH INCOME PORTFOLIO, OR GT GLOBAL, INC. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF ANY OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
INCPR610018MC
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
PROSPECTUS -- MARCH 1, 1997
- --------------------------------------------------------------------------------
GT GLOBAL GROWTH & INCOME FUND ("FUND") seeks long-term capital appreciation
together with current income. The Fund invests in a global portfolio of both
equity and debt securities, in such relative proportions as deemed most
appropriate by the Fund's investment manager in view of then-current economic
and market conditions. There can be no assurance that the Fund will achieve its
investment objective.
The Fund's investment manager, Chancellor LGT Asset Management, Inc. (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 information an investor should know before
investing and should be read carefully and retained for future reference. A
Statement of Additional Information, dated March 1, 1997, has been filed with
the Securities and Exchange Commission ("SEC") and is incorporated herein by
reference. The Statement of Additional Information which may be amended or
supplemented from time to time, is available without charge by writing to the
Fund at 50 California Street, San Francisco, California 94111, or by calling
(800) 824-1580.
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.
An investment in the GT Global Growth & Income Fund offers the following
advantages:
/ / Professional Management by a Leading Manager with Offices in the World's
Major Markets
/ / Low $500 Minimum Investment
/ / Alternative Purchase Plan
/ / Automatic Dividend and Other Distribution Reinvestment at No Additional
Sales Charge
/ / Exchange Privileges with the Corresponding Classes of the Other GT Global
Mutual Funds
/ / Reduced Sales Charge Plans
/ / Dollar Cost Averaging Program
/ / Automatic Investment Plan
/ / Systematic Withdrawal Plan
FOR FURTHER INFORMATION, CALL
(800) 824-1580 OR CONTACT YOUR FINANCIAL ADVISOR.
[LOGO]
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus Page 1
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
TABLE OF CONTENTS
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Page
---------
<S> <C>
Prospectus Summary........................................................................ 3
Financial Highlights...................................................................... 6
Alternative Purchase Plan................................................................. 8
Investment Objective and Policies......................................................... 9
How To Invest............................................................................. 13
How To Make Exchanges..................................................................... 20
How To Redeem Shares...................................................................... 21
Shareholder Account Manual................................................................ 23
Calculation of Net Asset Value............................................................ 24
Dividends, Other Distributions and Federal Income Taxation................................ 24
Management................................................................................ 26
Other Information......................................................................... 29
</TABLE>
Prospectus Page 2
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
PROSPECTUS SUMMARY
- ------------------------------------------------------------
The following summary is qualified in its entirety by the more detailed
information appearing in the body of this Prospectus.
<TABLE>
<S> <C> <C>
The Fund: The Fund is a non-diversified series of G.T. Investment Funds, Inc.
Investment Objective: The Fund seeks long-term capital appreciation together with
current income.
Principal Investments: Invests primarily in blue-chip equity securities and high quality
government bonds of issuers located in the United States and
throughout the world.
There is no assurance that the Fund will achieve its investment
objective. The Fund's net asset value will fluctuate, reflecting
fluctuations in the market value of its portfolio positions
Principal Risk Factors: holdings. Investments in foreign securities involve risks relating
to political and economic developments abroad and the differences
between the regulations to which U.S. and foreign issuers are
subject. Individual foreign economies also may differ favorably or
unfavorably from the U.S. economy. Changes in foreign currency
exchange rates will affect the Fund's net asset value, earnings
and gains and losses realized on sales of securities. Securities
of foreign companies may be less liquid and their prices more
volatile than those of securities of comparable U.S. companies.
The value of debt securities held by the Fund generally fluctuates
inversely with interest rate movements. Certain investment grade
debt securities may possess speculative qualities. The Fund may
engage in certain foreign currency, options and futures transac-
tions to attempt to hedge against the overall level of investment
and currency risk associated with its present or planned
investments. Such transactions involve certain risks and
transaction costs. See "Investment Objective and Policies."
Investment Manager: Chancellor LGT Asset Management, Inc. (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 , 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 0.35% of the
average daily net assets of the Class A shares.
</TABLE>
Prospectus Page 3
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
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 Class B shares.
Shares Available Through: Shares of the Fund's common stock are available through
broker/dealers that 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. 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, 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 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 Dividends paid quarterly from net investment income and realized
Distributions: net short-term capital gains; other distributions paid annually
from net capital gain and net gains from foreign currency
transactions, if any.
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 Value: Class A and Class B shares are quoted daily in the financial
section of most newspapers.
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
</TABLE>
Prospectus Page 4
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
SUMMARY OF INVESTOR COSTS. The expenses and maximum transactions costs
associated with investing in the Class A and Class B shares of the Fund are
reflected in the following tables (1):
<TABLE>
<CAPTION>
CLASS A CLASS B
----------- -----------
<S> <C> <C>
SHAREHOLDER TRANSACTION COSTS (2):
Maximum sales charge on purchases of shares (as a % of offering price)............................. 4.75% None
Sales charges on reinvested distributions to shareholders.......................................... None None
Maximum deferred sales charge (as a % of net asset value at time of purchase or sale, whichever is
less)............................................................................................ None 5.0%
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 (3): (AS A % OF AVERAGE NET ASSETS)
Investment management and administration fees...................................................... 0.97% 0.97%
12b-1 distribution and service fees................................................................ 0.35% 1.00%
Other expenses..................................................................................... % %
----------- -----------
Total Fund Operating Expenses........................................................................ % %
----------- -----------
----------- -----------
</TABLE>
HYPOTHETICAL EXAMPLE OF EFFECT OF EXPENSES:
An investor would have directly or indirectly paid the following expenses at the
end of the periods shown on a $1,000 investment in the Fund, assuming a 5%
annual return:
<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---- ----- ----- -----
<S> <C> <C> <C> <C>
Class A Shares (4)........................................................................ $ $ $ $
Class B Shares:
Assuming a complete redemption at end of period (5)................................... $ $ $ $
Assuming no redemption................................................................ $ $ $ $
</TABLE>
- ------------------
(1) THESE TABLES ARE INTENDED TO ASSIST INVESTORS IN UNDERSTANDING THE VARIOUS
COSTS AND EXPENSES ASSOCIATED WITH INVESTING IN THE FUND. Long-term
shareholders may pay more than the economic equivalent of the maximum
front-end sales charges permitted by the National Association of Securities
Dealers, Inc. ("NASD") rules regarding investment companies. THE
"HYPOTHETICAL EXAMPLE" IS NOT A REPRESENTATION OF PAST OR FUTURE EXPENSES.
THE FUND'S ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN. The tables
and the assumption in the example of a 5% annual return are required by
regulation of the Securities and Exchange Commission applicable to all
mutual funds. The 5% annual return is not a prediction of and does not
represent the Fund's projected or actual performance.
(2) 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 generally
declines by 1% annually thereafter, reaching zero after six years. See "How
to Invest."
(3) Expenses are based on the Fund's fiscal year ended October 31, 1996. "Other
expenses" include custody, transfer agent, legal, audit and other expenses.
See "Management" herein 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 12b-1 distribution or service fees.
(4) Assumes payment of maximum sales charge by the investor.
(5) Assumes payment of the applicable contingent deferred sales charge.
Prospectus Page 5
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The tables below provide condensed financial information concerning income and
capital changes for one share of each class of shares of the Fund offered
through this Prospectus for the periods shown. This information is supplemented
by the financial statements and accompanying notes appearing in the Statement of
Additional Information. The financial statements and notes for the fiscal year
ended October 31, 1996 have been audited by Coopers & Lybrand L.L.P.,
independent accountants, whose report thereon is also included in the Statement
of Additional Information.
<TABLE>
<CAPTION>
CLASS A+
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SEPTEMBER 25,
1990 (COMMENCEMENT
YEAR ENDED OCTOBER 31, OF OPERATIONS) TO
---------------------------------------------------------------- OCTOBER 31,
1996 1995 1994 1993(A) 1992 1991 1990
-------- -------- -------- -------- ------- ------- ------------------
Per Share Operating Performance:
Net asset value, beginning of period.... $ $ 6.21 $ 6.29 $ 5.28 $ 5.25 $ 4.77 $ 4.76
-------- -------- -------- -------- ------- ------- -------
Income from investment operations:
Net investment income................... 0.24 0.22 0.24* 0.21* 0.27* 0.01*
Net realized and unrealized gain (loss)
on investments......................... 0.13 (0.03) 1.05 0.10 0.47 --
-------- -------- -------- -------- ------- ------- -------
Net increase (decrease) from investment
operations............................. 0.37 0.19 1.29 0.31 0.74 0.01
-------- -------- -------- -------- ------- ------- -------
Distributions:
Net investment income................. (0.22) (0.21) (0.24) (0.14) (0.26) --
Net realized gain on investments...... (0.01) (0.06) -- (0.14) -- --
Sources other than net income......... -- -- (0.04) -- -- --
-------- -------- -------- -------- ------- ------- -------
Total distributions................. (0.23) (0.27) (0.28) (0.28) (0.26) --
-------- -------- -------- -------- ------- ------- -------
Net asset value, end of period.......... $ $ 6.35 $ 6.21 $ 6.29 $ 5.28 $ 5.25 $ 4.77
-------- -------- -------- -------- ------- ------- -------
-------- -------- -------- -------- ------- ------- -------
Total investment return (e)............. 6.27% 3.14% 25.1% 5.9% 15.68% 0.2%(b)
-------- -------- -------- -------- ------- ------- -------
-------- -------- -------- -------- ------- ------- -------
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ $284,069 $317,847 $251,428 $27,754 $71,376 $9,486
Ratio of net investment income to
average net assets..................... 3.85% 3.30% 3.3%* 4.1%* 5.0%* 2.9%*(c)
Ratio of expenses to average net assets:
With expense reductions................. 1.70% 1.67% 1.8%* 1.9%* 1.9%* 0.6%*(c)
Without expense reductions.............. 1.74% --%(f) --%(f) --%(f) --%(f) --%(f)
Portfolio turnover rate+++.............. 83% 117% 24% 53% 46% none
<FN>
- ------------------
+ All capital shares issued and outstanding as of October 21, 1992 were
reclassified as Class A shares.
++ Commencing October 22, 1992 the Fund began offering Class B shares.
+++ Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
* Includes reimbursement by the Manager of Fund operating expenses of $0.005,
$0.02, $0.03 and $0.01 for the years ended October 31, 1993, 1992, 1991 and
for the period from September 25, 1990 to October 31, 1990, respectively.
Without such reimbursements, the expense ratios would have been 1.93%,
2.20%, 2.46% and 2.40% and the net investment income to average net assets
would have been 3.20%, 3.70%, 4.40% and 1.04% for the years ended October
31, 1993, 1992, 1991 and for the period from September 25, 1990 to October
31, 1990, respectively.
(a) These selected per share data were calculated based upon weighted average
shares outstanding during the year.
(b) Not annualized.
(c) Annualized.
(d) Ratios not meaningful due to short period of operation of Class B shares.
(e) Total investment return does not include sales charges.
(f) Calculation of "Ratio of expenses to average net assets" was made without
considering the effect of expense reductions, if any.
</TABLE>
Prospectus Page 6
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
<TABLE>
<CAPTION>
CLASS B++
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OCTOBER 22,
YEAR ENDED OCTOBER 31, 1992 TO
---------------------------------------- OCTOBER 31,
1996 1995 1994 1993(A) 1992(A)
-------- -------- -------- -------- -----------
Per Share Operating Performance:
Net asset value, beginning of period.... $ $ 6.21 $ 6.29 $ 5.28 $ 5.29
-------- -------- -------- -------- -----------
Income from investment operations:
Net investment income................... 0.20 0.18 0.20 0.01
Net realized and unrealized gain (loss)
on investments......................... 0.13 (0.03) 1.05 (0.02)
-------- -------- -------- -------- -----------
Net increase (decrease) from investment
operations............................. 0.33 0.15 1.25 (0.01)
-------- -------- -------- -------- -----------
Distributions:
Net investment income................. (0.18) (0.17) (0.20) --
Net realized gain on investments...... (0.01) (0.06) -- --
Sources other than net income......... -- -- (0.04) --
-------- -------- -------- -------- -----------
Total distributions................. (0.19) (0.23) (0.24) --
-------- -------- -------- -------- -----------
Net asset value, end of period.......... $ $ 6.35 $ 6.21 $ 6.29 $ 5.28
-------- -------- -------- -------- -----------
Total investment return (e)............. 5.57% 2.48% 24.3% (0.2)%(b)
-------- -------- -------- -------- -----------
Ratios and supplemental data:
Net assets, end of period (in 000's).... $356,796 $359,242 $150,768 $ 280
Ratio of net investment income to
average net assets..................... 3.20% 2.65% 2.6% N/A(d)
Ratio of expenses to average net assets:
With expense reductions................. 2.35% 2.32% 2.5%* N/A(d)
Without expense reductions.............. 2.39% --%(f) --%(f) --%(d)(f)
Portfolio turnover rate+++.............. 83% 117% 24% 53%
<FN>
- ------------------
+ All capital shares issued and outstanding as of October 21, 1992 were
reclassified as Class A shares.
++ Commencing October 22, 1992 the Fund began offering Class B shares.
+++ Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
* Includes reimbursement by the Manager of Fund operating expenses of $0.005,
$0.02, $0.03 and $0.01 for the years ended October 31, 1993, 1992, 1991 and
for the period from September 25, 1990 to October 31, 1990, respectively.
Without such reimbursements, the expense ratios would have been 1.93%,
2.20%, 2.46% and 2.40% and the net investment income to average net assets
would have been 3.20%, 3.70%, 4.40% and 1.04% for the years ended October
31, 1993, 1992, 1991 and for the period from September 25, 1990 to October
31, 1990, respectively.
(a) These selected per share data were calculated based upon weighted average
shares outstanding during the year.
(b) Not annualized.
(c) Annualized.
(d) Ratios not meaningful due to short period of operation of Class B shares.
(e) Total investment return does not include sales charges.
(f) Calculation of "Ratio of expenses to average net assets" was made without
considering the effect of expense reductions, if any.
</TABLE>
Prospectus Page 7
<PAGE>
GT GLOBAL GROWTH & INCOME 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
Exchange Shares." 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 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 0.35% of the
average daily net assets of that class.
CLASS B SHARES. Class B shares 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% 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 per share dividends than Class A shares of the Fund.
FACTORS TO CONSIDER IN CHOOSING A CLASS OF SHARES. In deciding which class 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% annual
service and distribution fees on the Class B shares will approximate or exceed
the expense of the applicable 4.75% maximum initial sales charge plus the 0.35%
service and distribution fees on the Class A shares. 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 seven 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 the investments are 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 Funds'
future returns cannot be predicted, however, there can be no assurance that such
a positive return will be achieved.
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 the 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
Prospectus Page 8
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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. 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 a
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 comprising or affiliated with Liechtenstein Global Trust; and (e) any
of the companies comprising or affiliated with Liechtenstein Global Trust.
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
AND POLICIES
- --------------------------------------------------------------------------------
The Fund's investment objective is long-term capital appreciation together with
current income. The Fund seeks its objective by investing in a global portfolio
of both equity and debt securities, allocated among diverse international
markets. There is no assurance that the Fund's investment objective will be
achieved.
At least 65% of the Fund's total assets normally will be invested in a
combination of blue-chip equity securities and high quality government bonds.
The Fund considers an equity security to be "blue chip" if: (i) during the
issuer's most recent fiscal year the security offered an above average dividend
yield relative to the latest reported dividend yield on the Morgan Stanley
Capital International World Index; AND (ii) the total equity market
capitalization of the issuer is at least $1 billion. Government bonds are deemed
to be high quality if at the time of the Fund's investment they are rated within
one of the two highest ratings categories of Moody's Investors Service, Inc.
("Moody's") or by Standard and Poor's Ratings Group ("S&P") or, if not rated,
are deemed to be of equivalent quality in the judgment of the Manager.
Up to 35% of the Fund's total assets may be invested in other equity securities
and investment grade government and corporate debt obligations which the Manager
believes will assist the Fund in achieving its objective. "Investment grade"
debt securities are those rated within one of the four highest ratings
categories of Moody's or S&P, or, if not rated, deemed to be of equivalent
quality in the judgment of the Manager.
Equity securities which the Fund may purchase include common stocks, preferred
stocks and warrants to acquire such stocks and other equity securities.
Government bonds that the Fund may purchase include debt obligations issued or
guaranteed by the United States or foreign governments (including foreign
states, provinces or municipalities) or their agencies, authorities or
instrumentalities and debt obligations of supranational entities organized or
supported by several national governments, such as the World Bank and
Prospectus Page 9
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
the Asian Development Bank. The debt obligations held by the Fund may include
debt obligations convertible into equity securities or having attached warrants
or rights to purchase equity securities. The Fund may purchase securities that
are issued by the government or a corporation or financial institution of one
nation but denominated in the currency of another nation (or a multinational
currency unit).
According to the Manager, as of December 31, 1996, approximately
- --% of the total equity market capitalization worldwide was represented by
non-U.S. equity securities, and as of December 31, 1996, more than % of the
value of all outstanding government debt obligations throughout the world was
represented by obligations denominated in currencies other than the U.S. dollar.
Moreover, from time to time the equity and debt securities of issuers located
outside the United States have substantially outperformed the equity and debt
securities of U.S. issuers. Accordingly, the Manager believes that the Fund's
policy of investing in a global portfolio of equity and debt securities may
enable the achievement of long-term results superior to those produced by mutual
funds with similar objectives to that of the Fund that invest solely in U.S.
equity and debt securities.
SELECTION OF INVESTMENTS AND ASSET ALLOCATION. Consistent with the Fund's
investment objective, the Manager employs a conservative investment style in
managing the Fund's assets. In so doing the Manager attempts to limit volatility
and risk to capital. The Manager allocates the Fund's assets among securities of
countries and in currency denominations where opportunities for meeting the
Fund's investment objective are expected to be the most attractive. The Manager
attempts to identify those countries and industries where economic and political
factors are likely to produce above-average growth rates and to further identify
companies in such countries and industries that are best positioned and managed
to benefit from these factors.
The Fund currently contemplates that it will invest principally in securities of
issuers in the United States, Canada, Japan, Western Europe, New Zealand and
Australia. The Fund may invest substantially in securities denominated in one or
more currencies. Under normal conditions, the Fund invests in issuers of not
less than three different countries and issuers of any one country, other than
the United States, will represent no more than 40% of the Fund's total assets.
The relative proportions of equity and debt securities held by the Fund at any
one time will vary, depending upon the Manager's assessment of global political
and economic conditions and the relative strengths and weaknesses of the world
equity and debt markets. To enable the Fund to respond to general economic
changes and market conditions around the world, the Fund is authorized to invest
up to 100% of its total assets in either equity securities or debt securities.
In selecting equity securities for investment, the Manager attempts to identify
and acquire only securities it deems to represent high or improving investment
quality. Securities representing high investment quality generally will include
those of well-known, established and successful issuers that the Manager
believes will continue to be successful in the future. Securities representing
improving investment quality may include those of an issuer that has improved
its sales or earnings or of an issuer the balance sheet and financial condition
of which is improving. The Manager seeks to avoid investing in equity securities
that appear overly speculative or risky, even if they have attractive features
or investment potential.
In evaluating debt securities considered for the Fund, the Manager analyzes
their yield, maturity, issue classification and quality characteristics, coupled
with expectations regarding local and world economies, movements in the general
level and term of interest rates, currency values, political developments, and
variations in the supply of funds available for investment in the world bond
market relative to the demands placed upon it. There are no limitations on the
maximum or minimum maturities of the debt securities considered by the Fund or
on the average weighted maturity of the debt portion of the Fund's portfolio.
Should the rating of debt security be revised while such security is owned by
the Fund, the Manager will evaluate what action, if any, is appropriate with
respect to such security.
The Manager generally evaluates currencies on the basis of fundamental economic
criteria (e.g., relative inflation and interest rate levels and trends, growth
rate forecasts, balance of payments status and economic policies) as well as
technical and political data. The Fund may seek to protect itself against
negative currency movements by engaging in hedging techniques through the use of
options, futures and forward currency contracts.
TEMPORARY DEFENSIVE STRATEGIES. In the interest of preserving shareholders'
capital, the Manager may
Prospectus Page 10
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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 hold cash (U.S. dollars, foreign currencies
or multinational currency units) and/or invest any portion or all of its assets
in high quality money market instruments of U.S. or foreign government or
corporate issuers, and most or all of the Fund's investments may be made in the
United States and denominated in U.S. dollars. To the extent the Fund adopts a
temporary defensive posture, it will not be invested so as to directly achieve
its investment objective. In addition, pending investment of proceeds from new
sales of Fund shares or in order to meet ordinary daily cash needs, the Fund may
hold cash (U.S. dollars, foreign currencies or multinational currency units) and
may invest in foreign or domestic high quality money market instruments.
BORROWING, REVERSE REPURCHASE AGREEMENTS AND ROLL TRANSACTIONS. The Fund may
borrow from banks or may borrow through reverse repurchase agreements and "roll"
transactions in connection with meeting requests for the redemption of Fund
shares. The Fund also may borrow up to 5% of its total assets for temporary or
emergency purposes other than to meet redemptions. The Fund may borrow up to
33 1/3% of its total assets. However, the Fund will not purchase securities
while borrowings in excess of 5% of the Fund's total assets are outstanding. Any
borrowing by the Fund may cause greater fluctuation in the value of its shares
than would be the case if the Fund did not borrow.
A reverse repurchase agreement is a borrowing transaction in which the Fund
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. A "roll"
borrowing transaction involves the Fund's sale of securities together with its
commitment (for which the Fund may receive a fee) to purchase similar, but not
identical, securities at a future date.
SECURITIES LENDING. The Fund may lend its portfolio securities to broker/dealers
or to other institutional investors. Securities lending allows the Fund to
retain ownership of the securities loaned and, at the same time, earn additional
income that may be used to offset the Fund's custody fees. The Fund limits its
loans of portfolio securities to an aggregate of 30% of the value of its total
assets, measured at the time any such loan is made. While a loan is outstanding,
the borrower must maintain with the Fund's custodian collateral consisting of
cash, U.S. government securities or certain irrevocable letters of credit equal
to at least 100% of the value of the borrowed securities, plus any accrued
interest. 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.
FOREIGN INVESTING. Investing in foreign securities entails certain risks. The
securities of non-U.S. issuers generally will not be registered with, nor the
issuers thereof be subject to the reporting requirements of the SEC.
Accordingly, there may be less publicly available information about foreign
securities and issuers than is available about domestic securities and issuers.
Foreign companies generally are not subject to uniform accounting, auditing and
financial reporting standards, practices and requirements comparable to those
applicable to domestic companies. In addition, certain costs attributable to
foreign investing, such as custody charges, are higher than those attributable
to domestic investing. Securities of some foreign companies are less liquid and
their prices may be more volatile than securities of comparable domestic
companies. The Fund's net investment income from foreign issuers may be subject
to non-U.S. withholding taxes, thereby reducing the Fund's net investment
income.
With respect to some foreign countries, there is the increased possibility of
expropriation or confiscatory taxation, limitations on the removal of funds or
other assets of the Fund, political or social instability, or diplomatic or
economic developments which could affect the Fund's investments in those
countries. Moreover, individual foreign economies may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross national
product, rate of inflation, rate of savings and capital reinvestment, resource
self-sufficiency and balance of payments positions. Investments in foreign
government securities involve special risks, including the risk that the
government issuers may be unable or unwilling to repay principal and interest
when due.
The Fund will also be affected favorably or unfavorably by exchange control
regulations or changes in the exchange rates between such currencies and the
U.S. dollar. Changes in currency exchange rates will influence the value of the
Fund's shares, and also may affect the value of dividends and
Prospectus Page 11
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
interest earned by the Fund and gains and losses realized by the Fund.
OPTIONS, FUTURES AND FORWARD CURRENCY TRANSACTIONS. To attempt to increase
return, the Fund may write call options on securities. This strategy will be
employed only when, in the opinion of the Manager, the size of the premium the
Fund receives for writing the option is adequate to compensate the Fund against
the risk that appreciation in the underlying security may not be fully realized
if the option is exercised. The Fund also is authorized to write put options to
attempt to enhance return, although it does not have the current intention of so
doing.
The Fund may also use forward currency contracts, futures contracts, options on
securities, options on currencies, options on indices and options on futures
contracts to attempt to hedge against the overall level of investment and
currency risk normally associated with the Fund's investments. These instruments
are often referred to as "derivatives," which may be defined as financial
instruments whose performance is derived, at least in part, from the performance
of another asset (such as a security, currency, or an index of securities). The
Fund may enter into such instruments up to the full value of its portfolio
assets. See "Options, Futures and Forward Currency Strategies" in the Statement
of Additional Information.
To attempt to hedge against adverse movements in exchange rates between
currencies, the Fund may enter into forward currency contracts for the purchase
or sale of a specified currency at a specified future date. Such contracts may
involve the purchase or sale of a foreign currency against the U.S. dollar, or
may involve two foreign currencies. The Fund may enter into forward currency
contracts either with respect to specific transactions or with respect to the
Fund's portfolio positions. The Fund also may purchase and sell put and call
options on currencies, futures contracts on currencies and options on such
futures contracts to hedge the Fund's portfolio against movements in exchange
rates.
In addition, the Fund may purchase and sell put and call options on equity and
debt securities to hedge against the risk of fluctuations in the prices of
securities held by the Fund or that the Manager intends to include in the Fund's
portfolio. The Fund also may purchase and sell put and call options on stock
indices to hedge against overall fluctuations in the securities markets or in a
specific market sector.
Further, the Fund may sell index futures contracts and may purchase put options
or write call options on such futures contracts to protect against a general
market or a specific market sector decline that could adversely affect the
Fund's portfolio. The Fund also may purchase index futures contracts and
purchase call options or write put options on such contracts to hedge against a
general market or market sector advance and thereby attempt to lessen the cost
of future securities acquisitions. Similarly, the Fund may use interest rate
futures contracts and options thereon to hedge the debt portion of its portfolio
against changes in the general level of interest rates.
Although the Fund is authorized to enter into options, futures and forward
currency transactions, the Fund might not enter into any such transactions.
Options, futures and foreign currency transactions involve certain risks, which
include: (1) dependence on the Manager's ability to predict movements in the
prices of individual securities, fluctuations in the general securities markets
and movements in interest rates and currency markets; (2) imperfect correlation,
or even no correlation, between movements in the price of forward contracts,
options, futures contracts or options thereon and movements in the price of the
currency or security hedged or used for cover; (3) the fact that the skills and
techniques needed to trade options, futures contracts and options thereon or to
use forward currency contracts are different from those needed to select the
securities in which the Fund invests; (4) the lack of assurance that a liquid
secondary market will exist for any particular option, futures contract or
option thereon at any particular time; (5) the possible loss of principal under
certain conditions; (6) the possible inability of the Fund to purchase or sell a
portfolio security at a time when it would otherwise be favorable for it to do
so, or the possible need for the Fund to sell a security at a disadvantageous
time, due to the need for the Fund to maintain "cover" or to set aside
securities in connection with hedging transactions; and (7) the possible need to
defer closing out certain options, futures contracts and options thereon and
forward currency contracts in order to continue to qualify for the beneficial
tax treatment afforded regulated investment companies under the Internal Revenue
Code of 1986, as amended ("Code"). See "Dividends, Other Distributions and
Federal Income Taxation" herein and "Taxes" in the Statement of Additional
Information.
Prospectus Page 12
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
OTHER POLICIES AND RISKS. The Fund's net asset value will fluctuate, reflecting
fluctuations in the market value of its portfolio positions. Equity securities,
particularly common stocks, generally represent the most junior position in an
issuer's capital structure, and entitle holders to an interest in the assets of
an issuer, if any, remaining after all more senior claims have been satisfied.
In addition, the value of debt securities held by the Fund generally will
fluctuate with changes in the perceived creditworthiness of the issuers of such
securities and movements in interest rates. Investment grade debt securities
rated Baa by Moody's are described by Moody's as having speculative
characteristics, and therefore may be affected by economic conditions and
changes in the circumstances of their issuers to a greater extent than higher
rated bonds.
The Fund may invest up to 10% of its net assets in illiquid securities and other
securities for which no readily available market exists. The Fund may also
invest up to 5% of its total assets in a combination of securities purchased on
a when-issued basis or with respect to which it has entered into forward
commitment agreements.
Although the Fund normally invests in a substantial number of issuers, the Fund
is authorized to invest, with respect to 50% of its assets, more than 5% of its
assets in the securities of a single issuer. To the extent the Fund invests in a
smaller number of issuers, the value of the Fund's shares may fluctuate more
widely and the Fund may be subject to greater investment and credit risk with
respect to its portfolio.
OTHER INFORMATION. The Fund's investment objective may not be changed without
the approval of a majority of the Fund's outstanding voting securities. A
"majority of the Fund's outstanding voting securities" means the lesser of (i)
67% of the 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 which
also may not be changed without shareholder approval. A complete description of
these limitations is included 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 may be changed by a vote of a
majority of the Company's Board of Directors without shareholder approval. The
Fund's policies regarding lending, and the percentage of Fund assets that may be
committed to borrowing, are fundamental policies and may not be changed without
shareholder approval.
- --------------------------------------------------------------------------------
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. 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 Code Section 403(b)(7) and other tax-qualified
employer-sponsored retirement accounts, if made by such investors under a
systematic investment plan providing for monthly or quarterly payments of at
least that amount), and the minimum for additional purchases is $100 (with a $25
minimum for IRAs, Code Section 403(b)(7) custodial accounts and other
tax-qualified employer-sponsored retirement accounts, as mentioned above). 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.
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
Prospectus Page 13
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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/dealer, 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.
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. 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.
PURCHASING CLASS A SHARES
The Fund's public offering price for Class A shares is the next determined net
asset value per share (see "Calculation of Net Asset Value") including any sales
charge determined in accordance with the following schedule:
<TABLE>
<CAPTION>
SALES CHARGE AS PERCENTAGE OF DEALER
AMOUNT OF REALLOWANCE AS
PURCHASE ------------------------------ PERCENTAGE OF
AT THE PUBLIC OFFERING NET THE OFFERING
OFFERING PRICE PRICE INVESTMENT PRICE
- ---------------- ------------- --------------- -------------------
<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 brokers 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 on behalf of
a single client so that the broker'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 pursuant to a sales charge waiver based on the aggregate
purchase amount
Prospectus Page 14
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
equalling at least $500,000 will be subject to a contingent deferred sales
charge, for the first year after their purchase equal to 1% of the lower of the
original purchase price or the net asset value of such shares at the time of
redemption. See "Contingent Deferred Sales Charge -- Class A Shares."
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 made pursuant to sales charge waivers (i) and (vii),
described below under "Sales Charge Waivers -- Class A Shares."
The following purchases 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(s) 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);
(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 plans under Code Section 401(k), 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.
(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 comprising
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 that
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.
(viii) Clients of administrators of tax-qualified employee benefit plans which
have entered into agreements with GT Global.
Prospectus Page 15
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
(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 Fund 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 Fund 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) An investor purchasing shares of a fund with redemption proceeds from a
registered management investment company that is not one of the GT Global Mutual
Funds, on which the investor was subject to a front-end sales charge or a
contingent deferred sales charge.
REINSTATEMENT PRIVILEGE. Shareholders who redeem their Class A shares in the
Fund have a one-time 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 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. For a discussion of the federal income tax
consequences of a reinstatement, see "Dividends, Other Distributions and Federal
Income Taxation -- Taxes."
REDUCED SALES CHARGE PLANS -- CLASS A SHARES. Class A shares of the Fund 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 brokers 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 brokers, 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
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,
Prospectus Page 16
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
provided further that such entity places all purchase and redemption orders.
Such entities should be prepared to establish their qualification 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 a 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
Each Fund's public offering price for 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 deferred 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.
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 other 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:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE AS A PERCENTAGE OF THE
LESSER OF NET ASSET VALUE AT
REDEMPTION
OR THE ORIGINAL
REDEMPTION DURING PURCHASE PRICE
- ------------------------------ -----------------------------
<S> <C>
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%
</TABLE>
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 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 sold
without a contingent deferred sales charge. The number of shares needed to fund
the remaining $335.00 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 a contingent deferred sales charge rate of 4% (the applicable rate
in the second year after purchase)
Prospectus Page 17
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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 redemption. The amount of any contingent deferred sales
charge will be paid to GT Global.
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; and (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 or 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 Fund 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.
DOLLAR COST AVERAGING PROGRAM. Investors may purchase Class A or Class B shares
of a Fund through 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
Prospectus Page 18
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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 Fund shares 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 shareholders' Personal Portfolio for
shares of the same class(es) 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 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 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
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 brokers may charge a
fee for establishing accounts relating to the Program. Investors should contact
their brokers or GT Global for more information.
Prospectus Page 19
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
HOW TO MAKE EXCHANGES
- --------------------------------------------------------------------------------
Shares of the Fund may be exchanged for shares of the same class 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. 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." In addition to the Fund, the GT
Global Mutual Funds currently include:
-- GT GLOBAL AMERICA SMALL CAP
GROWTH FUND
-- GT GLOBAL AMERICA MID CAP GROWTH FUND
-- GT GLOBAL AMERICA VALUE FUND
-- GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
-- GT GLOBAL DOLLAR FUND
-- GT GLOBAL EMERGING MARKETS FUND
-- GT GLOBAL EUROPE GROWTH FUND
-- GT GLOBAL FINANCIAL SERVICES FUND
-- GT GLOBAL GOVERNMENT INCOME FUND
-- GT GLOBAL HEALTH CARE FUND
-- GT GLOBAL HIGH INCOME FUND
-- GT GLOBAL INFRASTRUCTURE FUND
-- GT GLOBAL INTERNATIONAL GROWTH FUND
-- GT GLOBAL JAPAN GROWTH FUND
-- GT GLOBAL LATIN AMERICA GROWTH FUND
-- GT GLOBAL NATURAL RESOURCES FUND
-- GT GLOBAL NEW PACIFIC GROWTH FUND
-- GT GLOBAL STRATEGIC INCOME FUND
-- GT GLOBAL TELECOMMUNICATIONS FUND
-- GT GLOBAL WORLDWIDE GROWTH 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.
A shareholder interested in making an exchange should contact his broker or the
Transfer Agent to request the prospectus of the other GT Global Mutual Fund(s)
being considered. Certain brokers 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 previously have 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, including requiring some
form of personal identification prior to acting upon instructions received by
telephone, providing written confirmation of such transactions, and/or tape
recording of telephone instructions.
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.
OTHER INFORMATION ABOUT EXCHANGES. Purchases, redemptions and exchanges should
be made for investment purposes only. A pattern of frequent exchanges, purchases
and sales is not acceptable and can be limited by the Fund's or GT Global's
refusal to accept further purchase and exchange orders from the investor or
broker/dealer. The terms of the exchange offer described above may be modified
at any time, on 60 days' prior written notice to shareholders.
Prospectus Page 20
<PAGE>
GT GLOBAL GROWTH & INCOME 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. 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 BROKERS/DEALERS. Shareholders with accounts at
broker/dealers which 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 shares' net asset value next determined 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. All Redemptions will be
effected at the net asset value next determined after the Transfer Agent has
received the request 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 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 institutions.
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.
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 OF RECORD.
Shareholders automatically have telephone privileges to authorize redemptions.
The Fund, GT Global and the Transfer Agent will not be liable for
Prospectus Page 21
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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,
including requiring some form of personal identification prior to acting upon
instructions received by telephone, 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 registered account owner(s) 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 brokers 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 of the
Fund 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 broker or the Transfer Agent.
Except in extraordinary circumstances and as permitted under the 1940 Act,
payment for shares redeemed by telephone or in writing 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 it 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).
Prospectus Page 22
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
SHAREHOLDER ACCOUNT MANUAL
- --------------------------------------------------------------------------------
Shareholders are encouraged to place purchase, exchange and redemption orders
through their brokers. Shareholders also may place such orders directly through
GT Global 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 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 7345
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. 4023-050701
EXCHANGES BY TELEPHONE
Call GT Global at 1-800-223-2138
EXCHANGES BY MAIL
Send complete instructions, including name of 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, California 94120-7893
REDEMPTIONS BY TELEPHONE
Call GT Global at 1-800-223-2138
REDEMPTIONS BY MAIL
Send complete instructions, including name of Fund, class of shares, amount of
redemption, shareholder's registered name and account number, to:
GT Global
P.O. Box 7893
San Francisco, California 94120-7893
OVERNIGHT MAIL
Overnight mail services do not deliver to post office boxes. To send purchase,
exchange or redemption orders by overnight mail, comply with the instructions
but send to the following:
GT Global Investor Services
California Plaza
2121 N. California Boulevard
Suite 450
Walnut Creek, California 94596
ADDITIONAL QUESTIONS
Shareholders with additional questions regarding purchase, exchange and
redemption procedures may call GT Global at 1-800-223-2138.
Prospectus Page 23
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
CALCULATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund calculates its net asset value as of the close of normal 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 determining the value of its
total assets (the securities it holds plus any cash or other assets, including
the interest accrued but not yet received), subtracting all of its liabilities
(including accrued expenses), and dividing the result by the total number of
shares outstanding at such time. Net asset value is determined separately for
each class of the Fund.
Equity securities are valued at the last sale price on the exchange or in the
over-the-counter market in which such securities are primarily traded, as of the
close of business on the day the securities are being valued, or, lacking any
sales, at the last available bid price. Long-term obligations are valued at the
mean of representative quoted bid and asked prices for such securities or, if
such prices are not available, at prices for securities of comparable maturity,
quality and type; however, when the Manager deems it appropriate, prices
obtained from a bond pricing service will be used. Short-term debt investments
are amortized to maturity based on their cost, adjusted for foreign exchange
translation and market fluctuations, provided such valuations represent fair
value. When market quotations for futures and options positions held by the Fund
are readily available, those positions are valued based upon such quotations.
Securities and other assets for which market quotations are not readily
available are valued at fair value determined in good faith by or under the
direction of the Company's Board of Directors. Securities and other assets
quoted in foreign currencies are valued in U.S. dollars based on the prevailing
exchange rates on that day.
The Fund's portfolio securities, from time to time, may be listed primarily on
foreign exchanges or over-the-counter dealer markets which trade on days when
the NYSE is closed (such as a Saturday). As a result, the net asset values of
the Fund may be significantly affected by such trading on days when shareholders
cannot purchase or redeem shares of the Fund.
The different expenses borne by each class of shares 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
that 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 Fund because of the
lower expenses borne by the Advisor Class shares. It is expected, however, that
the net asset value per share of Class A and Class B shares of the Fund will
tend to converge immediately after the payment of dividends, which will differ
by approximately the amount of the service and distribution expense accrual
differential between the classes.
- --------------------------------------------------------------------------------
DIVIDENDS, OTHER DISTRIBUTIONS
AND FEDERAL INCOME TAXATION
- --------------------------------------------------------------------------------
DIVIDENDS AND OTHER DISTRIBUTIONS. The Fund pays quarterly dividends from 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 normally 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
Prospectus Page 24
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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 will be lower than the per share income
dividends on Class A shares 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 will be lower than the per share income dividends on the
Advisor Class shares 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 REINVESTED AUTOMATICALLY 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 STATUS
OF DIVIDENDS AND OTHER DISTRIBUTIONS IS THE SAME WHETHER THEY ARE RECEIVED IN
CASH OR REINVESTED IN ADDITIONAL SHARES.
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 continue 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, net gains from certain foreign currency
transactions 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, the shareholders' respective
shares of any foreign taxes paid by the Fund, in which event each shareholder
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 for 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
Prospectus Page 25
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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 the 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 Fund shares
are purchased within 30 days before or after redeeming other Fund shares
(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 Company's Board of Directors has overall responsibility for the operation of
the Fund. Pursuant to such responsibility, the Board has approved contracts with
various financial organizations to provide, among other things, day to day
management services required by the Fund. See "Directors and Executive Officers"
in the Statement of Additional Information for a complete description of the
Directors of the Fund.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Services provided by Chancellor LGT
Asset Management, Inc. ("the Manager") as the Fund's investment manager and
administrator include, but are not limited to, determining the composition of
the Fund's portfolio and placing orders to buy, sell or hold particular
securities; furnishing corporate officers and clerical staff; providing office
space, services and equipment; and supervising all matters relating to the
Fund's operation. For these services, the Fund pays the Manager investment
management and administration fees, computed daily and paid monthly, based on
the average daily net assets, at the annualized rate of .975% on the first $500
million, .95% on the next $500 million, .925% on the next $500 million and .90%
on amounts thereafter. This rate is higher than that paid by most mutual funds.
The Manager and GT Global have undertaken to limit the Fund's expenses
(exclusive of brokerage commissions, taxes, interest and extraordinary expenses)
to the annual rate of 1.85% and 2.50% of the average daily net assets of the
Fund's Class A and Class B shares, respectively.
The Manager also serves as the Fund's pricing and accounting agent. For these
services the Manager receives a fee at an annual rate derived by applying 0.03%
to the first $5 billion of assets of GT Global Mutual Funds and 0.02% to the
assets in excess of $5 billion and allocating the result according to each
Fund's average daily net assets.
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
U.S. offices of the Manager are located at 50 California Street, 27th Floor, San
Francisco, CA 94111 and 1166 Avenue of the Americas, New York, NY 10036.
The Manager and its worldwide affiliates, including LGT Bank in Liechtenstein,
formerly Bank in Liechtenstein, comprise Liechtenstein Global Trust, formerly
BIL GT Group Limited. Liechtenstein Global Trust is a provider of global asset
Prospectus Page 26
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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 a 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
- --------------, 1997, the Manager and its worldwide asset management affiliates
manage approximately $
- -- billion. In the United States, as of
- --------------, 1997, the Manager manages or administers approximately $
- -- billion of GT Global Mutual Funds. As of
- ------, 1997, assets entrusted to Liechtenstein Global Trust total approximately
$
- -- billion.
On October 31, 1996, Chancellor Capital Management, Inc. ("Chancellor Capital")
merged with LGT Asset Management, Inc. As of September 30, 1996, Chancellor
Capital and its affiliates, based in New York, were the 15th largest independent
investment manager in the United States with approximately $33 billion in assets
under management. Chancellor Capital specialized in public and private U.S.
equity and bond portfolio management for over 300 U.S. institutional clients.
In addition to the investment resources of its San Francisco and New York
offices, the Manager draws upon the expertise, personnel, data and systems of
other offices of Liechtenstein Global Trust, including investment offices in
Frankfurt, Hong Kong, London, Singapore, Sydney, Tokyo, and Toronto. In managing
the GT Global Mutual Funds, the Manager employs a team approach, taking
advantage of its investment resources around the world in seeking to achieve
each Fund's investment objective. Many of the GT Global Mutual Funds' portfolio
managers are natives of the countries in which they invest, speak local
languages and/or live or work in the markets they follow.
The investment professionals primarily responsible for the portfolio management
of the Fund are as follows:
GROWTH & INCOME FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND LAST FIVE YEARS
- ----------------------------------- ---------------------------------------- ----------------------------------------
<S> <C> <C>
Nicholas S. Train Portfolio Manager since Fund inception Portfolio Manager for the Manager since
London in 1991 1991
Paul Griffiths Portfolio Manager since 1995 Portfolio Manager for LGT Asset
London Management PLC (London) and the Manager
since 1994; from 1993 to 1994, Global
Bond Fund Manager, Lazard Investors;
from 1991 to 1993, Global Bond Fund
Manager; Sanwa International PLC
</TABLE>
In placing securities orders for the Fund's portfolio transactions, the Manager
seeks to obtain the best net results. Consistent with its obligation to obtain
the best net results, the Manager may consider a broker/dealer's sale of shares
of the GT Global Mutual Funds as a factor in considering through whom portfolio
transactions will be effected. Brokerage transactions may be executed through
any Liechtenstein Global Trust affiliate.
DISTRIBUTION OF FUND SHARES. GT Global is the distributor of the Fund's Class A
and Class B shares. GT Global is a subsidiary of Liechtenstein Global Trust with
offices at 50 California Street, 27th Floor, San Francisco, California 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 on Class A or 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
brokers 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 brokers 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
Prospectus Page 27
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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. 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 Company's Board of Directors
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 0.35% 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 that Plan continues in
effect.
GT Global's service and distribution expenses covered by the Plans include the
payment of ongoing commissions; the cost of any additional compensation paid by
GT Global to brokers/dealers; the costs of printing and mailing to prospective
investors prospectuses and other materials relating to the Fund; 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. Banks and broker/ dealer affiliates of banks may also
execute dealer agreements with GT Global for the purpose of selling shares of
the Fund. 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.
Prospectus Page 28
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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 tax status of distributions made by the Fund to shareholders are reported
after the end of each calendar year on Form 1099-DIV.
ORGANIZATION OF THE COMPANY. The Company was organized as a Maryland corporation
on October 29, 1987. From time to time, the Company has and may continue to
establish other funds, each corresponding to a distinct investment portfolio and
a distinct series of the Company's common stock. Shares of the Fund 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 Company's funds will be voted in the aggregate on other matters, such as the
election of Directors and ratification of the Board of Directors' selection of
the Company's independent accountants.
Normally there will be no annual meeting of shareholders in any year, except as
required under the 1940 Act. The Company would be required to hold a
shareholders' meeting in the event that at any time less than a majority of the
Directors holding office had been elected by shareholders. Directors shall
continue to hold office until their successors are elected and have qualified.
Shares of the Company's funds do not have cumulative voting rights, which means
that the holders of a majority of the shares voting for the election of
Directors can elect all the Directors. A Director may be removed upon a majority
vote of the shareholders qualified to vote in the election. Shareholders holding
10% of the Company's outstanding voting securities may call a meeting of
shareholders for the purpose of voting upon the question of removal of any
Director or for any other purpose. The 1940 Act requires the Company to assist
shareholders in calling such a meeting.
Pursuant to the Company's Articles of Incorporation, it may issue six billion
shares. Of this number, 300 million shares have been classified as shares of the
Fund; 100 million shares have been classified as Class A shares, 100 million
shares have been classified as Class B shares, and 100 million shares have been
classified as Advisor Class shares. This amount may be increased from time to
time in the discretion of the Board of Directors. Each share of the Fund
represents an interest in the Fund only, has a par value of $0.0001 per share,
represents an equal proportionate interest 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 Directors. Each Class A, Class B and Advisor
Class share of the Fund is equal as to earnings, assets and voting privileges,
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.
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.
Prospectus Page 29
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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 one-, 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 at net asset
value on the reinvestment date as established by the Board of Directors.
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 total return (e.g., income and capital appreciation or
depreciation); it 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 reflects past performance and is not necessarily
indicative of future results. The Fund's investment results will vary from time
to time depending upon market conditions, the composition of its portfolio and
its 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.
The Fund's annual report contains additional information with respect to its
performance. The annual report is available to investors upon request and free
of charge.
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 and a subsidiary of
Liechtenstein Global Trust, and maintains its offices at California Plaza, 2121
North California Boulevard, Suite 450, Walnut Creek, California 94596.
CUSTODIAN. State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110 is custodian of the Fund's assets.
COUNSEL. The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue,
N.W., Washington, D.C. 20036-1800, acts as counsel to the Company and the Fund.
Kirkpatrick & Lockhart LLP also acts as counsel to the Manager, GT Global and GT
Global Investor Services, Inc. in connection with other matters.
INDEPENDENT ACCOUNTANTS. The Company's and 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 Company 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 30
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
NOTES
- --------------------------------------------------------------------------------
Prospectus Page 31
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
NOTES
- --------------------------------------------------------------------------------
Prospectus Page 32
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
NOTES
- --------------------------------------------------------------------------------
Prospectus Page 33
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
GT GLOBAL MUTUAL FUNDS
GT GLOBAL OFFERS A BROAD RANGE OF MUTUAL FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY GT GLOBAL MUTUAL
FUND, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR CALL GT GLOBAL DIRECTLY AT
1-800-824-1580.
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL WORLDWIDE GROWTH FUND
Invests around the world, including the U.S.
GT GLOBAL INTERNATIONAL GROWTH FUND
Provides portfolio diversity by investing outside
the U.S.
GT GLOBAL EMERGING MARKETS FUND
Gives access to the growth potential of developing economies
/ / GLOBAL THEME FUNDS
GT GLOBAL CONSUMER PRODUCTS AND
SERVICES FUND
Invests in companies that manufacture, market, retail, or distribute consumer
products or services
GT GLOBAL FINANCIAL SERVICES FUND
Focuses on the worldwide opportunities from the demand for financial services
and products
GT GLOBAL HEALTH CARE FUND
Invests in growing health care industries worldwide
GT GLOBAL INFRASTRUCTURE FUND
Seeks companies that build, improve or maintain a country's infrastructure
GT GLOBAL NATURAL RESOURCES FUND
Concentrates on companies that own, explore or develop natural resources
GT GLOBAL TELECOMMUNICATIONS FUND
Invests in companies worldwide that develop, manufacture or sell
telecommunications services or equipment
/ / REGIONALLY DIVERSIFIED FUNDS
GT GLOBAL NEW PACIFIC GROWTH FUND
Offers access to the emerging and established markets of the Pacific Rim,
excluding Japan
GT GLOBAL EUROPE GROWTH FUND
Focuses on investment opportunities in the new, unified Europe
GT GLOBAL LATIN AMERICA GROWTH FUND
Invests in the emerging markets of Latin America
/ / SINGLE COUNTRY FUNDS
GT GLOBAL AMERICA SMALL CAP GROWTH FUND
Invests in equity securities of small U.S. companies
GT GLOBAL AMERICA MID CAP GROWTH FUND
Concentrates on medium-sized companies in the U.S.
GT GLOBAL AMERICA VALUE FUND
Concentrates on equity securities of large cap U.S. companies believed to be
undervalued
GT GLOBAL JAPAN GROWTH FUND
Provides U.S. investors with direct access to the Japanese market
GROWTH AND INCOME FUND
GT GLOBAL GROWTH & INCOME FUND
Invests in blue-chip stocks and government bonds from around the world
INCOME FUNDS
GT GLOBAL GOVERNMENT INCOME FUND
Earns monthly income from global government securities
GT GLOBAL STRATEGIC INCOME FUND
Allocates its assets among debt securities from the U.S., developed foreign
countries and emerging markets
GT GLOBAL HIGH INCOME FUND
Invests in debt securities in emerging markets
MONEY MARKET FUND
GT GLOBAL DOLLAR FUND
Invests in high quality, U.S. dollar-denominated money market securities
worldwide for stability and preservation of capital
[LOGO]
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY G.T. INVESTMENT FUNDS, INC.,
GT GLOBAL GROWTH & INCOME FUND, CHANCELLOR LGT ASSET MANAGEMENT, INC. OR GT
GLOBAL, INC. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION.
GROPR610017MC
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
PROSPECTUS -- MARCH 1, 1997
- --------------------------------------------------------------------------------
GT GLOBAL EMERGING MARKETS FUND ("EMERGING MARKETS FUND") seeks long-term growth
of capital by investing primarily in equity securities of companies in emerging
markets.
GT GLOBAL LATIN AMERICA GROWTH FUND ("LATIN AMERICA GROWTH FUND") seeks capital
appreciation by investing primarily in equity and debt securities of a broad
range of Latin American issuers. Each Fund is referred to individually as a
"Fund" and together as the "Funds."
The Funds are 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.
The Funds are investment companies designed for long term investors and not as
trading vehicles. The Funds do not represent a complete investment program nor
are the Funds suitable for all investors. The Funds may invest significantly in
lower quality and unrated foreign government bonds whose credit quality is
generally considered the equivalent of U.S. corporate debt securities commonly
known as "junk bonds." Investments of this type are subject to a greater risk of
loss of principal and interest. An investment in either Fund should be
considered speculative and subject to special risk factors, related primarily to
the Funds' investments in emerging markets and Latin America. Purchasers should
carefully assess the risks associated with an investment in either Fund. There
can be no assurance that the Funds will achieve their investment objectives.
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 for each Fund dated March 1, 1997, has
been filed with the Securities and Exchange Commission and is incorporated
herein by reference. The Statement of Additional Information, which may be
amended or supplemented from time to time, is available without charge by
writing to the Funds at 50 California Street, 27th Floor, San Francisco,
California 94111, or calling (800) 824-1580.
FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR GUARANTEED BY,
ANY BANK, NOR ARE THEY FEDERALLY INSURED BY THE FEDERAL RESERVE BOARD, THE
FEDERAL DEPOSIT INSURANCE CORPORATION, OR ANY OTHER GOVERNMENT AGENCY.
An investment in one or both of the Funds offers the following advantages:
/ / Access to Securities Markets Around the World
/ / Professional Management by a Leading Manager with Offices in the World's
Major Markets
/ / Low $500 Minimum Investment
/ / Alternative Purchase Plan
/ / Automatic Dividend and Other Distribution Reinvestment at no Additional
Sales Charge
/ / Exchange Privileges with the Corresponding Classes of the Other GT Global
Mutual Funds
/ / Reduced Sales Charge Plans
/ / Dollar Cost Averaging Program
/ / Automatic Investment Plan
/ / Systematic Withdrawal Plan
FOR FURTHER INFORMATION CALL (800) 824-1580 OR CONTACT YOUR FINANCIAL ADVISOR.
[LOGO]
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus Page 1
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
TABLE OF CONTENTS
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Page
---------
<S> <C>
Prospectus Summary........................................................................ 3
Financial Highlights...................................................................... 7
Alternative Purchase Plan................................................................. 11
Investment Objectives and Policies........................................................ 12
Risk Factors.............................................................................. 19
How to Invest............................................................................. 24
How to Make Exchanges..................................................................... 31
How to Redeem Shares...................................................................... 32
Shareholder Account Manual................................................................ 34
Calculation of Net Asset Value............................................................ 35
Dividends, Other Distributions and Federal Income Taxation................................ 35
Management................................................................................ 37
Other Information......................................................................... 40
</TABLE>
Prospectus Page 2
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------
The following summary is qualified in its entirety by the more detailed
information appearing in the body of this Prospectus.
<TABLE>
<S> <C> <C>
The Funds: The Emerging Markets Fund is a diversified series of G.T.
Investment Funds, Inc. The Latin America Growth Fund is a
non-diversified series of G.T. Investment Funds, Inc.
Investment Objectives: The Emerging Markets Fund seeks long-term growth of capital.
The Latin America Growth Fund seeks capital appreciation.
The Emerging Markets Fund normally invests at least 65% of its
Principal Investments: total assets in equity securities of companies in emerging
markets.
The Latin America Growth Fund normally invests at least 65% of its
total assets in equity and debt securities issued by Latin
American companies and governments.
Investment Manager: Chancellor LGT Asset Management, Inc. (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 ---------, 1997. The Manager and its
worldwide asset management affiliates maintain fully-staffed
investment offices in Frankfurt, Hong Kong, London, New York, San
Francisco, Singapore, Tokyo and Toronto. See "Management."
There is no assurance that the Funds will achieve their investment
Principal Risk Factors: objective. The Funds' net asset values will fluctuate, reflecting
fluctuations in the market value of its portfolio positions
holdings. Investments in foreign securities involve risks relating
to political and economic developments abroad and the differences
between the regulations to which U.S. and foreign issuers are
subject. Individual foreign economices also may differ favorably
or unfavorably from the U.S. economy. Changes in foreign currency
exchange rates will affect a Fund's net asset value, earnings and
gains and losses realized on sales of securities. Securities of
foreign companies may be less liquid and their prices more
volatile than those of securities of comparable U.S. companies.
Each Fund may engage in certain foreign currency, options and
futures transactions to attempt to hedge against the overall level
of investment and currency risk associated with its present or
planned investments. Such transactions involve certain risks and
transaction costs.
The Emerging Markets Fund may invest up to 20% of its total assets
in below investment grade debt securities. There is no limitation
on the percentage of the Latin America Growth Fund's total assets
that may be invested in below investment grade debt securities.
See "Investment Objectives and Policies."
Alternative Purchase Plan: Investors may select Class A or Class B shares, each subject to
different expenses and a different sales charge structure.
</TABLE>
Prospectus Page 3
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
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 each Fund's Class A shares.
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 each Fund's Class B shares.
Shares Available Through: Shares of common stock of the Funds are available through
broker/dealers that have entered into agreements to sell shares
with the Funds' 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. See "How
to Invest" and "Shareholder Account Manual."
Exchange Privileges: Shares of a class of either Fund may be exchanged without a sales
charge for shares of the corresponding class of other GT Global
Mutual Funds, which are open-end management investment companies
advised and/or administered by the Manager.
Redemptions: Shares may be redeemed either through broker/dealers or GT Global
Investor Services, Inc. ("Transfer Agent"). See "How to Redeem
Shares" and "Shareholder Account Manual."
Dividends and Other
Distributions: Dividends paid annually from available net investment income and
realized net short-term capital gains; other distributions paid
annually from net capital gain and net gains from foreign currency
transactions, if any.
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 each Fund are quoted daily in the
financial section of most newspapers.
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
</TABLE>
Prospectus Page 4
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
GT GLOBAL EMERGING MARKETS FUND
SUMMARY OF INVESTOR COSTS. The expenses and maximum transaction costs associated
with investing in the Class A and Class B shares of the Emerging Markets Fund
are reflected in the following tables (1):
<TABLE>
<CAPTION>
CLASS A CLASS B
----------- -----------
<S> <C> <C>
SHAREHOLDER TRANSACTION COSTS (2):
Maximum sales charge on purchases (as a % of offering price)...................................... 4.75% None
Sales charges on reinvested distributions to shareholders......................................... None None
Maximum deferred sales charge (as a % of net asset value at time of purchase or sale, whichever is
less)........................................................................................... 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 (3):
(AS A % OF AVERAGE NET ASSETS)
Investment management and administration fees..................................................... % %
12b-1 distribution and service fees............................................................... % %
Other expenses.................................................................................... % %
----- -----
Total Fund Operating Expenses....................................................................... % %
----- -----
----- -----
</TABLE>
HYPOTHETICAL EXAMPLE OF EFFECT OF EXPENSES:
An investor directly or indirectly would have paid the following expenses at the
end of the periods shown on a $1,000 investment, assuming a 5% annual return:
<TABLE>
<CAPTION>
FIVE
ONE YEAR THREE YEARS YEARS
----- ----------- -----
<S> <C> <C> <C>
Class A Shares (4)....................................................................... $ $ $
Class B Shares
Assuming a complete redemption at end of period (5)..................................
Assuming no redemption...............................................................
<CAPTION>
TEN
YEARS
-----
<S> <C>
Class A Shares (4)....................................................................... $
Class B Shares
Assuming a complete redemption at end of period (5)..................................
Assuming no redemption...............................................................
</TABLE>
- ------------------
(1) THESE TABLES ARE INTENDED TO ASSIST INVESTORS IN UNDERSTANDING THE VARIOUS
COSTS AND EXPENSES ASSOCIATED WITH INVESTING IN THE FUND. Long-term
shareholders may pay more than the economic equivalent of the maximum
front-end sales charges permitted by the National Association of Securities
Dealers, Inc. ("NASD") rules regarding investment companies. THE
"HYPOTHETICAL EXAMPLE" IS NOT A REPRESENTATION OF PAST OR FUTURE EXPENSES.
THE FUND'S ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN. The tables
and the assumption in the Hypothetical Example of a 5% annual return are
required by regulation of the Securities and Exchange Commission applicable
to all mutual funds. The 5% annual return is not a prediction of and does
not represent the Fund's projected or actual performance.
(2) 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 generally
declines by 1% annually thereafter, reaching zero after six years. See "How
to Invest."
(3) Expenses are based on the Fund's fiscal year ended October 31, 1996. "Other
expenses" include custody, transfer agency, legal, audit and other operating
expenses. See "Management" herein 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 12b-1 distribution or service fees.
(4) Assumes payment of maximum sales charge by the investor.
(5) Assumes payment of the applicable contingent deferred sales charge.
Prospectus Page 5
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
GT GLOBAL LATIN AMERICA GROWTH FUND
SUMMARY OF INVESTOR COSTS. The expenses and maximum transaction costs associated
with investing in the Class A and Class B shares of the Latin America Growth
Fund are reflected in the following tables (1):
<TABLE>
<CAPTION>
CLASS A CLASS B
----------- -----------
<S> <C> <C>
SHAREHOLDER TRANSACTION COSTS (2):
Maximum sales charge on purchases of shares (as a % of offering price)............................. 4.75% None
Sales charges on reinvested distributions to shareholders.......................................... None None
Maximum deferred sales charge (as a % of net asset value at time of purchase or sale, whichever is
less)............................................................................................ 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 (3):
(AS A % OF AVERAGE NET ASSETS)
Investment management and administration fees...................................................... % %
12b-1 distribution and service fees................................................................ % %
Other expenses..................................................................................... % %
----- -----
Total Fund Operating Expenses........................................................................ % %
----- -----
----- -----
</TABLE>
HYPOTHETICAL EXAMPLE OF EFFECT OF EXPENSES:
An investor would have directly or indirectly paid the following expenses at the
end of the periods shown on a $1,000 investment in the Fund, assuming a 5%
annual return:
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS
----- ----------- -----
<S> <C> <C> <C>
Class A Shares (4)....................................................................... $ $ $
Class B Shares
Assuming a complete redemption at end of period (5)..................................
Assuming no redemption...............................................................
<CAPTION>
TEN YEARS
-----
<S> <C>
Class A Shares (4)....................................................................... $
Class B Shares
Assuming a complete redemption at end of period (5)..................................
Assuming no redemption...............................................................
<FN>
- ------------------
(1) THESE TABLES ARE INTENDED TO ASSIST INVESTORS IN UNDERSTANDING THE VARIOUS
COSTS AND EXPENSES ASSOCIATED WITH INVESTING IN THE FUND. Long-term
shareholders may pay more than the economic equivalent of the maximum
front-end sales charges permitted by the National Association of Securities
Dealers, Inc. ("NASD") rules regarding investment companies. THE
"HYPOTHETICAL EXAMPLE" IS NOT A REPRESENTATION OF PAST OR FUTURE EXPENSES.
THE FUND'S ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN. The tables
and the assumption in the Hypothetical Example of a 5% annual return are
required by regulation of the Securities and Exchange Commission applicable
to all mutual funds. The 5% annual return is not a prediction of and does
not represent the Fund's projected or actual performance.
(2) 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 generally
declines by 1% annually thereafter, reaching zero after six years. See "How
to Invest."
(3) Expenses are based on the Fund's fiscal year ended October 31, 1996. "Other
expenses" include custody, transfer agency, legal, audit and other
operating expenses. See "Management" herein 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 12b-1 distribution or service fees.
(4) Assumes payment of maximum sales charge by the investor.
(5) Assumes payment of the applicable contingent deferred sales charge.
</TABLE>
Prospectus Page 6
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The tables below provide condensed information concerning income and capital
changes for one share of each class of shares of each Fund for the periods
shown. This information is supplemented by the financial statements and
accompanying notes appearing in the Statement of Additional Information. The
financial statements and notes for the fiscal year ended October 31, 1996, have
been audited by Coopers & Lybrand L.L.P., independent accountants, whose report
thereon also is included in the Statement of Additional Information.
GT GLOBAL EMERGING MARKETS FUND
<TABLE>
<CAPTION>
CLASS A+
------------------------------------------------------
YEAR ENDED OCTOBER 31,
------------------------------------------------------
1996 1995(E) 1994
---------------- ---------------- ----------------
<S> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of period...................... $ 18.81 $ 14.42
---------------- ---------------- ----------------
Income from investment operations:
Net investment income (loss).............................. 0.13 (0.02)
Net realized and unrealized gain (loss) on investments.... (4.32) 4.68
---------------- ---------------- ----------------
Net increase (decrease) from investment operations........ (4.19) 4.66
---------------- ---------------- ----------------
Distributions:
Net investment income................................... -- (0.01)
Net realized gain on investments........................ (0.77) (0.26)
---------------- ---------------- ----------------
Total distributions................................... (0.77) (0.27)
---------------- ---------------- ----------------
Net asset value, end of period............................ $ 13.85 $ 18.81
---------------- ---------------- ----------------
---------------- ---------------- ----------------
Total investment return (c)............................... (23.04)% 32.58%
---------------- ---------------- ----------------
---------------- ---------------- ----------------
Ratios and supplemental data:
Net assets, end of period (in 000's)...................... $252,457 $417,322
Ratio of net investment income (loss) to average net
assets................................................... 0.89% (0.11)%
Ratio of expenses to average net assets:
with expense reductions................................. 2.12% 2.06%
without expense reductions.............................. 2.14% --%(d)
Portfolio turnover rate +++............................... 114% 100%
<CAPTION>
MAY 18, 1992
(COMMENCE-
MENT OF
OPERATIONS)
1993 TO OCTOBER 31, 1992
---------------- -------------------
<S> <C> <C>
Per share operating performance:
Net asset value, beginning of period...................... $ 11.10 $ 11.43
---------------- --------
Income from investment operations:
Net investment income (loss).............................. 0.02* 0.07*
Net realized and unrealized gain (loss) on investments.... 3.38 (0.40)
---------------- --------
Net increase (decrease) from investment operations........ 3.40 (0.33)
---------------- --------
Distributions:
Net investment income................................... (0.08) --
Net realized gain on investments........................ -- --
---------------- --------
Total distributions................................... (0.08) --
---------------- --------
Net asset value, end of period............................ $ 14.42 $ 11.10
---------------- --------
---------------- --------
Total investment return (c)............................... 30.90% (2.90)%(a)
---------------- --------
---------------- --------
Ratios and supplemental data:
Net assets, end of period (in 000's)...................... $187,808 $84,558
Ratio of net investment income (loss) to average net
assets................................................... 0.1%* 1.7%*(b)
Ratio of expenses to average net assets:
with expense reductions................................. 2.4%* 2.4%*(b)
without expense reductions.............................. --%(d) --%(d)
Portfolio turnover rate +++............................... 99% 32%(b)
</TABLE>
- ------------------
+ All capital shares issued and outstanding as of March 31, 1993 were
reclassified as Class A shares.
++ Commencing April 1, 1993, the Fund began offering Class B shares.
+++ Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
* Includes reimbursement by the Manager of Fund operating expenses of $0.02
for the year ended October 31, 1993 and for the period from May 18, 1992
(commencement of operations) to October 31, 1992, respectively. Without such
reimbursements, the expense ratios would have been 2.61% and 2.91% and the
ratio of net investment income to average net assets would have been 0.36%
and 1.21% for the year ended October 31, 1993 and for the period from May
18, 1992 (commencement of operations) to October 31, 1992, respectively.
** Includes reimbursement by the Manager of Fund operating expenses of $0.02.
Without such reimbursements, the expense ratio would have been 3.63% and the
ratio of net investment income to average net assets would have been
(0.76)%.
(a) Not annualized.
(b) Annualized.
(c) Total investment return does not include sales charges.
(d) Calculation of "Ratio of expenses to average net assets" was made without
considering the effect of expense reduction, if any.
(e) These selected per share data were calculated based upon weighted average
shares outstanding during the period.
Prospectus Page 7
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
GT GLOBAL EMERGING MARKETS FUND
(CONTINUED)
<TABLE>
<CAPTION>
CLASS B++
-----------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------
1996 1995(E)
---------------- ----------------
<S> <C> <C>
Per share operating performance:
Net asset value, beginning of period......................................... $ 18.68
---------------- ----------------
Income from investment operations:
Net investment income (loss)................................................. 0.06
Net realized and unrealized gain (loss) on investments....................... (4.29)
---------------- ----------------
Net increase (decrease) from investment operations........................... (4.23)
---------------- ----------------
Distributions:
Net investment income...................................................... --
Net realized gain on investments........................................... (0.77)
---------------- ----------------
Total distributions...................................................... (0.77)
---------------- ----------------
Net asset value, end of period............................................... $ 13.68
---------------- ----------------
---------------- ----------------
Total investment return (c).................................................. (23.37)%
---------------- ----------------
---------------- ----------------
Ratios and supplemental data:
Net assets, end of period (in 000's)......................................... $225,861
Ratio of net investment income (loss) to average net assets.................. 0.39%
Ratio of expenses to average net assets:
with expense reductions.................................................... 2.62%
without expense reductions................................................. 2.64%
Portfolio turnover rate +++.................................................. 114%
<CAPTION>
APRIL 1, 1993 TO
1994 OCTOBER 31, 1993
---------------- ----------------
<S> <C> <C>
Per share operating performance:
Net asset value, beginning of period......................................... $ 14.39 $ 11.47
---------------- --------
Income from investment operations:
Net investment income (loss)................................................. (0.12) 0.00**
Net realized and unrealized gain (loss) on investments....................... 4.67 2.92
---------------- --------
Net increase (decrease) from investment operations........................... 4.55 2.92
---------------- --------
Distributions:
Net investment income...................................................... -- --
Net realized gain on investments........................................... (0.26) --
---------------- --------
Total distributions...................................................... (0.26) --
---------------- --------
Net asset value, end of period............................................... $ 18.68 $ 14.39
---------------- --------
---------------- --------
Total investment return (c).................................................. 31.77% 25.5%(a)
---------------- --------
---------------- --------
Ratios and supplemental data:
Net assets, end of period (in 000's)......................................... $291,289 $ 32,318
Ratio of net investment income (loss) to average net assets.................. (0.61)% (0.4)%**(b)
Ratio of expenses to average net assets:
with expense reductions.................................................... 2.56% 2.9%**(b)
without expense reductions................................................. --%(d) --%(d)
Portfolio turnover rate +++.................................................. 100% 99%
</TABLE>
- ------------------
+ All capital shares issued and outstanding as of March 31, 1993 were
reclassified as Class A shares.
++ Commencing April 1, 1993, the Fund began offering Class B shares.
+++ Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
* Includes reimbursement by the Manager of Fund operating expenses of $0.02
for the year ended October 31, 1993 and for the period from May 18, 1992
(commencement of operations) to October 31, 1992, respectively. Without such
reimbursements, the expense ratios would have been 2.61% and 2.91% and the
ratio of net investment income to average net assets would have been 0.36%
and 1.21% for the year ended October 31, 1993 and for the period from May
18, 1992 (commencement of operations) to October 31, 1992, respectively.
** Includes reimbursement by the Manager of Fund operating expenses of $0.02.
Without such reimbursements, the expense ratio would have been 3.63% and the
ratio of net investment income to average net assets would have been
(0.76)%.
(a) Not annualized.
(b) Annualized.
(c) Total investment return does not include sales charges.
(d) Calculation of "Ratio of expenses to average net assets" was made without
considering the effect of expense reduction, if any.
(e) These selected per share data were calculated based upon weighted average
shares outstanding during the period.
Prospectus Page 8
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
GT GLOBAL LATIN AMERICA GROWTH FUND
<TABLE>
<CAPTION>
CLASS A+
------------------------------------------------------------------
AUGUST 13, 1991
(COMMENCE-
YEAR ENDED OCTOBER 31, MENT OF
--------------------------------------------- OPERATIONS)
1996 1995(A) 1994(A) 1993(A) 1992 TO OCTOBER 31, 1991
------- ------- -------- -------- ------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period......... $26.11 $19.78 $15.59 $16.45 $ 14.29
------- ------- -------- -------- ------- ----------
Income from investment operations:
Net investment income (loss)................. 0.15 (0.08 ) 0.18 0.25 0.01
Net realized and unrealized gain (loss) on
investments................................. (9.28 ) 6.75 5.21 (0.98 ) 2.15
------- ------- -------- -------- ------- ----------
Net increase (decrease) from investment
operations.................................. (9.13 ) 6.67 5.39 (0.73 ) 2.16
------- ------- -------- -------- ------- ----------
Distributions:
Net investment income...................... 0.00 (0.19 ) (0.12 ) (0.13 ) 0.00
Net realized gain on investments........... (1.60 ) (0.15 ) (1.08 ) 0.00 0.00
------- ------- -------- -------- ------- ----------
Total distributions...................... (1.60 ) (0.34 ) (1.20 ) (0.13 ) 0.00
------- ------- -------- -------- ------- ----------
Net asset value, end of period............... $15.38 $26.11 $19.78 $15.59 $ 16.45
------- ------- -------- -------- ------- ----------
------- ------- -------- -------- ------- ----------
Total investment return (d).................. (37.16% 34.10% 37.10% (4.50% 15.10%(b)
------- ------- -------- -------- ------- ----------
------- ------- -------- -------- ------- ----------
Ratios and supplemental data:
Net assets, end of period (in 000's)......... $182,462 $336,960 $129,280 $94,085 $125,038
Ratio of net investment income (loss) to
average net assets.......................... 0.86% (0.29% 1.30%* 1.30%* 1.20%*(c)
Ratio of expenses to average net assets:
with expense reductions.................... 2.11% 2.04% 2.40%* 2.40%* 2.40%*(c)
without expense reductions................. 2.12% --%(e) --%(e) --%(e) --%(e)
Portfolio turnover rate +++.................. 125% 155% 112% 159% none
</TABLE>
- ------------------
+ All capital shares issued and outstanding as of March 31, 1993 were
reclassified as Class A shares.
++ Commencing April 1, 1993, the Fund began offering Class B shares.
+++ Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
* Includes reimbursement by the Manager of Fund operating expenses of $0.02,
$0.04 and $0.01 for the years ended October 31, 1993 and 1992 and for the
period from August 13, 1991 (commencement of operations) to October 31,
1991, respectively. Without such reimbursements, the expense ratios would
have been 2.49%, 2.62% and 3.42% and the ratios of net investment income to
average net assets would have been 1.25%, 1.07% and 0.l5% for the years
ended October 31, 1993 and 1992 and for the period from August 13, 1991 to
October 31, 1991, respectively.
(a) These selected per share data were calculated based upon weighted average
shares outstanding during the period.
(b) Not annualized.
(c) Annualized.
(d) Total investment return does not include sales charges.
(e) Calculation of "Ratio of expenses to average net assets" was made without
considering the effect of expense reductions, in any.
Prospectus Page 9
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
<TABLE>
<CAPTION>
CLASS B++
---------------------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------------------------------
1996 1995(A) 1994(A)
------------------- ------------------- -------------------
<S> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.............. $ 25.94 $ 19.75
---------- ---------- ----------
Income from investment operations:
Net investment income (loss)...................... 0.06 (0.22)
Net realized and unrealized gain (loss) on
investments...................................... (9.19) 6.74
---------- ---------- ----------
Net increase (decrease) from investment
operations....................................... (9.13) 6.52
---------- ---------- ----------
Distributions:
Net investment income........................... 0.00 (0.18)
Net realized gain on investments................ (1.60) (0.15)
---------- ---------- ----------
Total distributions........................... (1.60) (0.33)
---------- ---------- ----------
Net asset value, end of period.................... $ 15.21 $ 25.94
---------- ---------- ----------
---------- ---------- ----------
Total investment return (d)....................... (37.42)% 33.33%
---------- ---------- ----------
---------- ---------- ----------
Ratios and supplemental data:
Net assets, end of period (in 000's).............. $134,527 $211,673
Ratio of net investment income (loss) to average
net assets....................................... 0.36% (0.79)%
Ratio of expenses to average net assets:
with expense reductions......................... 2.61% 2.54%
without expense reductions...................... 2.62% --%(e)
Portfolio turnover rate +++....................... 125% 155%
<CAPTION>
APRIL 1, 1993 TO
OCTOBER 31, 1993(A)
-------------------
<S> <C>
Per Share Operating Performance:
Net asset value, beginning of period.............. $ 16.26
--------
Income from investment operations:
Net investment income (loss)...................... (0.07)
Net realized and unrealized gain (loss) on
investments...................................... 3.56
--------
Net increase (decrease) from investment
operations....................................... 3.49
--------
Distributions:
Net investment income........................... 0.00
Net realized gain on investments................ 0.00
--------
Total distributions........................... 0.00
--------
Net asset value, end of period.................... $ 19.75
--------
--------
Total investment return (d)....................... 21.50%(b)
--------
--------
Ratios and supplemental data:
Net assets, end of period (in 000's).............. $13,576
Ratio of net investment income (loss) to average
net assets....................................... (0.70)%(c)
Ratio of expenses to average net assets:
with expense reductions......................... 2.90%(c)
without expense reductions...................... --%(e)
Portfolio turnover rate +++....................... 112%
</TABLE>
- ------------------
+ All capital shares issued and outstanding as of March 31, 1993 were
reclassified as Class A shares.
++ Commencing April 1, 1993, the Fund began offering Class B shares.
+++ Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
* Includes reimbursement by the Manager of Fund operating expenses of $0.02,
$0.04 and $0.01 for the years ended October 31, 1993 and 1992 and for the
period from August 13, 1991 (commencement of operations) to October 31,
1991, respectively. Without such reimbursements, the expense ratios would
have been 2.49%, 2.62% and 3.42% and the ratios of net investment income to
average net assets would have been 1.25%, 1.07% and 0.l5% for the years
ended October 31, 1993 and 1992 and for the period from August 13, 1991 to
October 31, 1991, respectively.
(a) These selected per share data were calculated based upon weighted average
shares outstanding during the period.
(b) Not annualized.
(c) Annualized.
(d) Total investment return does not include sales charges.
(e) Calculation of "Ratio of expenses to average net assets" was made without
considering the effect of expense reductions, in any.
Prospectus Page 10
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
ALTERNATIVE PURCHASE PLAN
- --------------------------------------------------------------------------------
DIFFERENCES BETWEEN THE CLASSES. The primary distinction between the two classes
of each 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 a 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 Exchange Shares." 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 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
Funds 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 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 a 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% 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 a Fund should cause that class to have a higher expense ratio
and to pay lower dividends per share than Class A shares of the same Fund.
FACTORS TO CONSIDER IN CHOOSING A CLASS OF SHARES. In deciding which class 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% annual
service and distribution fees on the Class B shares of a Fund will approximate
or exceed the expense of the applicable 4.75% maximum initial sales charge plus
the 0.50% service and distribution fees for the Funds on that Fund's Class A
shares. 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 a 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 over time the
indirect expense to the shareholder of the accumulated service and distribution
fees on the Class B shares will exceed the initial sales charge paid by the
shareholder plus the indirect expense to the shareholder of the accumulated
service and distribution fees of Class A shares. Class B investors, however,
enjoy the benefit of permitting all their dollars to work from the time the
investments are 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 Funds' future returns cannot be predicted, however,
there can be no assurance that such a positive return will be achieved.
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 a 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 a
Fund is waived for
Prospectus Page 11
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
certain eligible purchasers and these purchasers' entire purchase price would be
immediately invested in that 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 a 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 each 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 comprising or affiliated with Liechtenstein Global Trust; and (e) any
of the companies comprising or affiliated with Liechtenstein Global Trust.
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES
AND POLICIES
- --------------------------------------------------------------------------------
EMERGING MARKETS FUND
The Emerging Markets Fund's investment objective is long-term growth of capital.
Under normal circumstances, the Emerging Markets Fund seeks its objective by
investing at least 65% of its total assets in equity securities of companies in
emerging markets. The Emerging Markets Fund may invest in the following types of
equity securities: common stock, preferred stock, securities convertible into
common stock, rights and warrants to acquire such securities and substantially
similar forms of equity with comparable risk characteristics.
For purposes of the Emerging Markets Fund's operations, "emerging markets" will
consist of all countries determined by the Manager to have developing or
emerging economies and markets. These countries generally include every country
in the world except the United States, Canada, Japan, Australia, New Zealand and
most countries located in Western Europe. See "Investment Objective and
Policies" in the Statement of Additional Information for a complete list of all
the countries which the Emerging Markets Fund does not consider to be emerging
markets.
Prospectus Page 12
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
For purposes of the Emerging Markets Fund's policy of normally investing at
least 65% of its total assets in equity securities of issuers in emerging
markets, the Emerging Markets Fund will consider investment in the following
emerging markets:
<TABLE>
<S> <C>
Argentina Nigeria
Bolivia Oman
Botswana Pakistan
Brazil Panama
Chile Paraguay
China Peru
Colombia Philippines
Cyprus Poland
Czech Republic Portugal
Ecuador Singapore
Egypt Republic of Slovakia
Ghana Russia
Greece Slovenia
Hong Kong South Africa
Hungary South Korea
India Sri Lanka
Indonesia Swaziland
Israel Taiwan
Jamaica Thailand
Jordan Turkey
Kenya Uruguay
Malaysia Venezuela
Mauritius Zambia
Mexico Zimbabwe
Morocco
</TABLE>
Although the Emerging Markets Fund considers each of the above-listed countries
eligible for investment, the Emerging Markets Fund will not be invested in all
such markets at all times. Moreover, investing in some of those markets
currently may not be desirable or feasible, due to the lack of adequate custody
arrangements for the Emerging Markets Fund's assets, overly burdensome
repatriation and similar restrictions, the lack of organized and liquid
securities markets, unacceptable political risks or for other reasons.
As used in this Prospectus, an issuer in an emerging market is an entity: (i)
for which the principal securities trading market is an emerging market, as
defined above; (ii) that (alone or on a consolidated basis) derives 50% or more
of its total revenues from business in emerging markets, provided that, in the
Manager's view, the value of such issuer's securities will tend to reflect
emerging market developments to a greater extent than developments elsewhere; or
(iii) organized under the laws of, or with a principal office in, an emerging
market.
The Emerging Markets Fund may also invest up to 35% of its total assets in (i)
debt securities of government or corporate issuers in emerging markets; (ii)
equity and debt securities of issuers in developed countries, including the
United States; (iii) securities of issuers in emerging markets not included in
the list of emerging markets above, if investing therein becomes feasible and
desirable subsequent to the date of this Prospectus; and (iv) cash and money
market instruments.
The Emerging Markets Fund invests in those emerging markets which the Manager
believes have strongly developing economies and in which the markets are
becoming more sophisticated. In selecting investments, the Manager seeks to
identify those countries and industries where economic and political factors,
including currency movements, are likely to produce above-average growth rates.
The Manager then invests in those companies in such countries and industries
that are best positioned and managed to take advantage of these economic and
political factors. The Emerging Markets Fund ordinarily will be invested in the
securities of issuers in at least three different emerging markets. In
evaluating investments in securities of issuers in developed markets, the
Manager will consider, among other things, the business activities of the issuer
in emerging markets and the impact that developments in emerging markets are
likely to have on the issuer.
The Manager believes that the issuers of securities in emerging markets often
have sales and earnings growth rates which exceed those in developed countries
and that such growth rates may in turn be reflected in more rapid share price
appreciation. Accordingly, the Manager believes that the Emerging Markets Fund's
policy of investing in equity securities of companies in emerging markets may
enable the Emerging Markets Fund to achieve results superior to those produced
by mutual funds with similar objectives to those of the Emerging Markets Fund
that invest solely in equity securities of issuers domiciled in the U.S. and/or
in other developed markets.
INVESTMENTS IN DEBT SECURITIES. The Emerging Markets Fund may invest in debt
securities of governmental and corporate issuers in emerging markets. Emerging
market debt securities often are rated below investment grade or not rated by
U.S. rating agencies. The Emerging Markets Fund may invest up to 20% of its
total assets in debt securities rated below investment grade. Investment in
below investment grade debt securities involves a high degree of risk and can be
speculative. These debt securities are the equivalent of high
Prospectus Page 13
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
yield, high risk bonds, commonly known as "junk bonds." See "Risk Factors --
Risks Associated with Debt Securities."
If the rating of the debt securities held by the Emerging Markets Fund drops
below a minimum rating considered acceptable by the Manager, the Fund will
dispose of any such security as soon as practicable and consistent with the best
interests of the Emerging Markets Fund and its shareholders.
Growth of capital in debt securities may arise as a result of favorable changes
in relative foreign exchange rates, in relative interest rate levels and/ or in
the creditworthiness of issuers. The receipt of income from debt securities
owned by the Emerging Markets Fund is incidental to the Emerging Markets Fund's
objective of long-term growth of capital.
TEMPORARY DEFENSIVE STRATEGIES. In the interest of preserving shareholders'
capital, 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. Pursuant to such a defensive strategy, the Emerging Markets Fund
temporarily may invest up to 100% of its assets in cash (U.S. dollars, foreign
currencies, multinational currency units) and/or high quality debt securities or
money market instruments of U.S. or foreign issuers, and most or all of the
Emerging Markets Fund's investments may be made in the United States and
denominated in U.S. dollars. To the extent the Emerging Markets Fund employs a
temporary defensive strategy, it will not be invested so as to achieve directly
its investment objective.
In addition, pending investment of proceeds from new sales of Emerging Markets
Fund shares or to meet ordinary daily cash needs, the Emerging Markets Fund
temporarily may hold cash (U.S. dollars, foreign currencies or multinational
currency units) and may invest any portion of its assets in money market
instruments.
The Emerging Markets Fund may invest in the following types of money market
instruments (i.e., debt instruments with less than 12 months remaining until
maturity) denominated in U.S. dollars or other currencies: (a) obligations
issued or guaranteed by the U.S. or foreign governments, their agencies,
instrumentalities or municipalities; (b) obligations of international
organizations designed or supported by multiple foreign governmental entities to
promote economic reconstruction or development; (c) finance company obligations,
corporate commercial paper and other short-term commercial obligations; (d) bank
obligations (including certificates of deposit, time deposits, demand deposits
and bankers' acceptances); (e) repurchase agreements with respect to the
foregoing; and (f) other substantially similar short-term debt securities with
comparable characteristics.
The Emerging Markets Fund may invest in commercial paper rated as low as A-3 by
S&P or P-3 by Moody's or, if not rated, determined by the Manager to be of
comparable quality. These securities may be more vulnerable to adverse effects
of changes in circumstances than obligations carrying higher designations.
LATIN AMERICA GROWTH FUND
The Latin America Growth Fund's investment objective is capital appreciation.
The Latin America Growth Fund normally invests at least 65% of its total assets
in the securities of a broad range of Latin American issuers. The Latin America
Growth Fund may invest in common stock, preferred stock, rights, warrants and
securities convertible into common stock, and other substantially similar forms
of equity securities with comparable risk characteristics, as well as bonds,
notes, debentures or other forms of indebtedness that may be developed in the
future. Normally, the Latin America Growth Fund will invest a majority of its
assets in equity securities. The Fund may also invest up to 35% of its total
assets in a combination of equity and debt securities of U.S. issuers.
For purposes of this Prospectus, unless otherwise indicated, the Latin America
Growth Fund defines Latin America to include the following countries: Argentina,
the Bahamas, Barbados, Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica,
Dominican Republic, Ecuador, El Salvador, French Guiana, Guatemala, Guyana,
Haiti, Honduras, Jamaica, Mexico, the Netherlands Antilles, Nicaragua, Panama,
Paraguay, Peru, Suriname, Trinidad and Tobago, Uruguay and Venezuela. Under
current market conditions the Latin America Growth Fund expects to invest
primarily in securities issued by companies and governments in Mexico, Chile,
Brazil and Argentina. The Latin America Growth Fund may invest more than 25% of
its total assets in any of these four countries but does not expect to invest
more than 60% of its total assets in any one country.
The Latin America Growth Fund defines securities of Latin American issuers to
include: (a) securities
Prospectus Page 14
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
of companies organized under the laws of, or having a principal office located
in, a Latin American country; (b) securities of companies that derive 50% or
more of their total revenues from business in Latin America, provided that, in
the Manager's view, the value of such issuers' securities reflect Latin American
developments to a greater extent than developments elsewhere; (c) securities
issued or guaranteed by the government of a country in Latin America, its
agencies or instrumentalities, or municipalities, or the central bank of such
country; (d) U.S. dollar-denominated securities or securities denominated in a
Latin American currency issued by companies to finance operations in Latin
America; and (e) securities of Latin American issuers, as defined herein, in the
form of depositary shares. For purposes of the foregoing definition, the Latin
America Growth Fund's purchases of securities issued by companies outside of
Latin America to finance their Latin American operations will be limited to
securities the performance of which is materially related to such company's
Latin American activities.
In allocating investments among the various Latin American countries, the
Manager looks principally at the stage of industrialization, potential for
productivity gains through economic deregulation, the impact of financial
liberalization and monetary conditions and the political outlook in each
country. In allocating assets between equity and debt securities, the Manager
will consider, among other factors: level and anticipated direction of interest
rates; expected rates of economic growth and corporate profits growth; changes
in Latin American government policy including regulation governing industry,
trade, financial markets, foreign and domestic investment; substance and likely
development of government finances; and the condition of the balance of payments
and changes in the terms of trade. In evaluating investments in securities of
U.S. issuers, the Manager will consider, among other factors, the issuer's Latin
American business activities and the impact that development in Latin America
may have on the issuer's operations and financial condition.
Certain sectors of the economies of certain Latin American countries are closed
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 in certain Latin American countries, the Latin
America Growth Fund may be able to invest in such countries solely or primarily
through governmentally approved investment vehicles or companies. In addition,
the portion of Latin America Growth Fund's assets invested directly in Chile may
be less than the portion invested in other Latin American countries because at
present, capital directly invested in Chile normally cannot be repatriated for
at least one year. As a result, Latin America Growth Fund currently intends to
limit most of its Chilean investments to indirect investments through American
Depositary Receipts ("ADRs") and established Chilean investment companies, the
shares of which are not subject to repatriation restrictions.
INVESTMENTS IN DEBT SECURITIES. Under normal circumstances, the Latin America
Growth Fund may invest up to 50% of its total assets in debt securities. There
is no limitation on the percentage of the Latin America Growth Fund's assets
which may be invested in debt securities which are rated below investment grade.
Investment in below investment grade debt securities involves a high degree of
risk and can be speculative. These debt securities are the equivalent of high
yield, high risk bonds, commonly known as "junk bonds." Most debt securities in
which the Latin America Growth Fund will invest are not rated; if rated, it is
expected that such ratings would be below investment grade. However, the Latin
America Growth Fund will not invest in debt securities that are in default in
payment as to principal or interest. See "Risk Factors -- Risks Associated with
Debt Securities."
During 1990, the Mexican external debt markets experienced significant changes
with the completion of the "Brady Plan" restructurings in those markets. The
restructurings provided for the exchange of loans and cash for newly issued
bonds ("Brady Bonds"). Brady Bonds fall into two categories: collateralized
Brady Bonds and bearer Brady Bonds. Both types of Brady Bonds are issued in
various currencies, primarily the U.S. dollar. Brady Bonds are actively traded
in the OTC secondary market for Latin American debt. U.S. dollar-denominated
collateralized bonds, which may be fixed par bonds or floating rate discount
bonds, are collateralized in full as to principal by U.S. Treasury Zero Coupon
bonds having the same maturity. At least one year of rolling interest payments
are collateralized by cash or other investments. Brady Bonds have been issued
by, among others, Albania, Argentina, Brazil, Bulgaria, Costa Rica, Dominican
Republic, Ecuador, Jordan, Mexico, Nigeria, Philippines, Poland, Uruguay,
Prospectus Page 15
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
Venezuela and are expected to be issued by Panama, Peru and other emerging
market countries. Approximately $139 billion in principal amount of Brady Bonds
are outstanding, the largest proportion having been issued by Brazil, Argentina
and Mexico. Brady Bonds issued by Brazil, Argentina and Mexico currently are
rated below investment grade.
Capital appreciation in debt securities may arise as a result of a favorable
change in relative foreign exchange rates, in relative interest rate levels, or
in the credit-worthiness of issuers. The receipt of income from such debt
securities is incidental to the Latin America Growth Fund's objective of capital
appreciation.
TEMPORARY DEFENSIVE STRATEGIES. The Latin America Growth Fund may invest up to
100% of its assets in cash (U.S. dollars, foreign currencies, multinational
units) and/or high quality debt securities or money market instruments to
generate income to defray Latin America Growth Fund expenses, for temporary
defensive purposes and pending investment in accordance with the Latin America
Growth Fund's investment objective and policies. In addition, the Latin America
Growth Fund reserves the right to be primarily invested in U.S. securities for
temporary defensive purposes or pending investment of the proceeds of sales of
new shares of the Fund. The Latin America Growth Fund may assume a temporary
defensive position when, due to political, market or other factors broadly
affecting Latin American markets, the Manager determines that opportunities for
capital appreciation in those markets would be significantly limited over an
extended period, or that investing in those markets presents undue risk of loss.
The Latin America Growth Fund may invest in the following types of money market
securities (i.e., debt instruments with less than 12 months remaining until
maturity) denominated in U.S. dollars or in the currency of any Latin American
country, which consist of: (a) obligations issued or guaranteed by (i) the U.S.
government or the government of a Latin American country, their agencies or
instrumentalities, or municipalities; (ii) international organizations designed
or supported by multiple foreign governmental entities to promote economic
reconstruction or development ("supranational entities"); (b) finance company
obligations, corporate commercial paper and other short-term commercial
obligations; (c) bank obligations (including certificates of deposit, time
deposits, demand deposits and bankers' acceptances) (d) repurchase agreements
with respect to the foregoing; and (e) other substantially similar short-term
debt securities with comparable risk characteristics.
The Latin America Growth Fund may invest in commercial paper rated as low as A-3
by S&P or P-3 by Moody's or, if not rated, determined by the Manager to be of
comparable quality. These securities may be more vulnerable to adverse effects
or changes in circumstances than obligations carrying higher designations.
ADDITIONAL INVESTMENT POLICIES OF EMERGING MARKETS FUND AND LATIN AMERICA GROWTH
FUND
INVESTMENT IN OTHER INVESTMENT COMPANIES OR VEHICLES. The Funds may be able to
invest in certain countries solely or primarily through governmentally
authorized investment vehicles or companies. Pursuant to the 1940 Act, a Fund
generally may invest up to 10% of its total assets in the aggregate in shares of
other investment companies and up to 5% of its total assets in any one
investment company, as long as each investment does not represent more than 3%
of the outstanding voting stock of the acquired investment company at the time
of investment.
Investment in other investment companies may involve the payment of substantial
premiums above the value of such investment companies' portfolio securities, and
is subject to limitations under the 1940 Act and market availability. The Funds
do not intend to invest in such investment companies unless, in the judgment of
the Manager, the potential benefits of such investment justify the payment of
any applicable premium or sales charge. As a shareholder in an investment
company, the Fund would bear its ratable share of that investment company's
expenses, including its advisory and administration fees. At the same time the
Fund would continue to pay its own management fees and other expenses.
SECURITIES LENDING. The Funds may lend their portfolio securities to
broker/dealers or to other institutional investors. Securities lending allows
the Fund to retain ownership of the securities loaned and, at the same time,
earn additional income that may be used to offset the Fund's custody fees. At
all times a loan is outstanding, the Funds borrower must maintain with the
Funds' custodian collateral consisting of cash, U.S. government securities or
certain irrevocable letters of credit equal to the value of the borrowed
securities, plus any accrued
Prospectus Page 16
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
interest. The Funds limit their loans of portfolio securities to an aggregate of
30% of the value of its total assets, measured at the time any such loan is
made. 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 loaned securities and possible loss of rights in the
collateral should the borrower fail financially.
PRIVATIZATIONS. The governments in some emerging markets and Latin American
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 Funds in privatizations in
appropriate circumstances. In certain emerging markets and Latin American
countries, the ability of foreign entities such as the Funds to participate in
privatizations may be limited by local law and/or the terms on which the Funds
may be permitted to participate may be less advantageous than those afforded
local investors. There can be no assurance that Latin American governments and
governments in emerging markets will continue to sell companies currently owned
or controlled by them or that privatization programs will be successful.
BORROWING. It is a fundamental policy of each Fund that it may borrow an amount
up to 33 1/3% of its total assets in order to meet redemption requests.
Borrowing may cause greater fluctuation in the value of the Funds' shares than
would be the case if the Funds did not borrow, but also may enable the Funds to
retain favorable securities positions rather than liquidating such positions to
meet redemptions. The Emerging Markets Fund will not borrow to leverage its
portfolio. It is a nonfundamental policy of the Emerging Markets Fund and of the
Latin America Growth Fund, that the Funds will not purchase securities during
times when outstanding borrowings represent 5% or more of its total assets.
WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES. The Emerging Markets Fund and the
Latin America Growth Fund may purchase debt securities on a "when-issued" basis
and may purchase or sell such securities on a "forward commitment" basis in
order to hedge against anticipated changes in interest rates and prices. The
price, which is generally expressed in yield terms, is fixed at the time the
commitment is made, but delivery and payment for the securities take place at a
later date. When-issued securities and forward commitments may be sold prior to
the settlement date, but the Funds will purchase or sell when-issued securities
and forward commitments only with the intention of actually receiving or
delivering the securities, as the case may be. No income accrues on securities
which have been purchased pursuant to a forward commitment or on a when-issued
basis prior to delivery to the Funds. If the Funds dispose of the right to
acquire a when-issued security prior to its acquisition or disposes of its right
to deliver or receive against a forward commitment, it may incur a gain or loss.
OPTIONS, FUTURES AND FORWARD CURRENCY TRANSACTIONS. Both Funds may use forward
currency contracts, futures contracts, options on securities, options on
indices, options on currencies, and options on futures contracts to attempt to
hedge its portfolio, i.e., reduce the overall level of investment risk normally
associated with the portfolio. These instruments are often referred to as
"derivatives," which may be defined as financial instruments whose performance
is derived, at least in part, from the performance of another asset (such as a
security, currency or an index of securities). Each Fund may enter into such
instruments up to the full value of its portfolio assets. See "Risk Factors --
Options, Futures and Forward Currency Transactions" herein and "Options, Futures
and Forward Currency Strategies" in the Statement of Additional Information.
Only a limited market, if any, currently exists for options and futures
transactions relating to currencies of most emerging markets and most Latin
American markets, to securities denominated in such currencies or to securities
of issuers domiciled or principally engaged in business in such emerging
markets. To the extent that such a market does not exist, the Manager may not be
able to effectively hedge its investment in such Latin American and emerging
markets.
Each Fund may purchase and sell put and call options on securities to hedge
against the risk of fluctuations in the prices of securities held by the Fund or
that the Manager intends to include in the Fund's portfolio. The Funds also may
purchase and sell put and call options on indices to hedge against overall
fluctuations in the securities markets or market sectors generally.
Further, the Funds may sell index futures contracts and may purchase put options
or write call options on such futures contracts to protect against a
Prospectus Page 17
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
general market or market sector decline that could adversely affect the Fund's
portfolio. The Funds may also purchase index futures contracts and purchase call
options or write put options on such contracts to hedge against a general market
or market sector advance and thereby attempt to lessen the cost of future
securities acquisitions. A Fund may use interest rate futures contracts and
options thereon to hedge against changes in the general level of interest rates.
To attempt to hedge against adverse movements in exchange rates between
currencies, the Funds may enter into forward currency contracts for the purchase
or sale of a specified currency at a specified future date. Such contracts may
involve the purchase or sale of a foreign currency against the U.S. dollar or
may involve two foreign currencies. The Funds may each enter into forward
currency contracts either with respect to specific transactions or with respect
to its portfolio positions. The Funds may also purchase put or call options on
currencies, futures contracts on currencies and options on futures contracts on
currencies to hedge against movements in exchange rates.
Prospectus Page 18
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
RISK FACTORS
- --------------------------------------------------------------------------------
GENERAL. Each Fund's net asset value will fluctuate, reflecting fluctuations in
the market value of its portfolio positions and its net currency exposure. There
is no assurance that either Fund will achieve its investment objective.
Investing in either Fund entails a substantial degree of risk and an investment
in either Fund should be considered speculative. Investors are strongly advised
to consider carefully the special risks involved in emerging markets and Latin
America, which are in addition to the usual risks of investing in developed
markets around the world.
EMERGING MARKETS FUND. Investing in emerging markets involves risks relating to
potential political and economic instability within such markets and the risks
of expropriation, nationalization, confiscation of assets and property or the
imposition of restrictions on foreign investment and on repatriation of capital
invested. In the event of such expropriation, nationalization or other
confiscation, the Emerging Markets Fund could lose its entire investment in that
market.
Economies in individual emerging markets may differ favorably or unfavorably
from the U.S. economy in such respects as growth of gross domestic product,
rates of inflation, currency depreciation, capital reinvestment, resource self-
sufficiency and balance of payments positions. Many emerging market countries
have experienced 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 countries with
emerging markets.
Emerging markets generally are dependent heavily upon international trade and,
accordingly, have been and may continue to be affected adversely by trade
barriers, exchange controls, managed adjustments in relative currency values and
other protectionist measures imposed or negotiated by the countries with which
they trade.
Disclosure and regulatory standards in many respects are less stringent than in
the U.S. and other major markets. There also may be a lower level of monitoring
and regulation of emerging markets and the activities of investors in such
markets, and enforcement of existing regulations has been extremely limited. In
addition, the securities of non-U.S. issuers generally are not registered with
the SEC, nor are the issuers thereof usually subject to the SEC's reporting
requirements. Accordingly, there may be less publicly available information
about foreign securities and issuers than is available with respect to U.S.
securities and issuers. Foreign companies generally are not subject to uniform
accounting, auditing and financial reporting standards, practices and
requirements comparable to those applicable to U.S. companies. The Emerging
Markets Fund's net investment income and/or capital gains from its foreign
investment activities may be subject to non-U.S. withholding taxes.
In addition, brokerage commissions, custodial services and other costs relating
to investment in foreign markets generally are more expensive than in the United
States, particularly with respect to emerging markets. Such markets have
different settlement and clearance procedures. In certain markets there have
been times when settlements have been unable to keep pace with the volume of
securities transactions, making it difficult to conduct such transactions. The
inability of the Emerging Markets Fund to make intended securities purchases due
to settlement problems could cause the Emerging Markets Fund to miss attractive
investment opportunities. Inability to dispose of a portfolio security caused by
settlement problems could result either in losses to the Emerging Markets Fund
due to subsequent declines in value of the portfolio security or, if the
Emerging Markets Fund has entered into a contract to sell the security, could
result in possible liability to the purchaser.
The securities markets of emerging countries are substantially smaller, less
developed, less liquid and more volatile than the securities markets of the
developed countries. The risk also exists that an emergency situation may arise
in one or more emerging markets as a result of which trading of securities may
cease or may be substantially curtailed and prices for the Emerging Markets
Fund's portfolio securities in such markets may not be readily available.
Section 22(e) of the 1940 Act permits a registered investment company, such as
Prospectus Page 19
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
the Emerging Markets Fund, to suspend redemption of its shares for any period
during which an emergency exists, as determined by the SEC. Accordingly, when
the Emerging Markets Fund believes that circumstances dictate, it will promptly
apply to the SEC for a determination that such an emergency exists within the
naming of Section 22(e) of the 1940 Act. During the period commencing from the
Emerging Markets Fund's identification of such conditions until the date of any
SEC action, the Emerging Markets Fund's portfolio securities in the affected
markets will be valued at fair value determined in good faith by or under the
direction of the Company's Board of Directors.
LATIN AMERICA GROWTH FUND. The Latin America Growth Fund's classification as a
non-diversified investment company allows it, with respect to 50% of its assets,
to invest more than 5% of its total assets in the securities of any issuer.
Consequently, as the Latin America Growth Fund may be invested in the securities
of a limited number of Latin American issuers, the performance of any single
issuer may have a more significant effect upon the overall performance of the
Latin America Growth Fund than if the Latin America Growth Fund was a
diversified investment company.
Investing in securities of Latin American issuers involves risks relating to
potential political and economic instability of certain Latin American countries
and the risks of expropriation, nationalization, confiscation of assets and
property or the imposition of restrictions on foreign investment and on
repatriation of capital invested. In the event of such expropriation,
nationalization or other confiscation, the Latin America Growth Fund could lose
its entire investment in any such country.
The securities markets of Latin American countries are substantially smaller,
less developed, less liquid and more volatile than the major securities markets
in the United States. Disclosure and regulatory standards are in many respects
less stringent than U.S. standards. Furthermore, there is a lower level of
monitoring and regulation of the markets and the activities of investors in such
markets, and enforcement of existing regulations has been extremely limited.
The limited size of many Latin American securities markets and limited trading
volume in issuers compared to 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.
Further, there is a risk that an emergency situation may arise in one or more
Latin American markets as a result of which prices for portfolio securities in
such markets may not be readily available. Accordingly, when the Latin America
Growth Fund believes that circumstances dictate, it will follow the procedures
as described above concerning the Emerging Markets Fund.
The economies of individual Latin American countries may differ favorably or
unfavorably from the U.S. economy in such respects as the rate of growth of
gross domestic product, the rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position. 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. Furthermore, certain
Latin American countries may impose withholding taxes on dividends payable to
the Latin America Growth Fund at a higher rate than those imposed by other
foreign countries. This may reduce the Latin America Growth Fund's investment
income available for distribution to shareholders.
Companies in Latin America are subject to accounting, auditing and financial
standards and requirements that differ, in some cases significantly, from those
applicable to U.S. companies. There is substantially less publicly available
information about Latin American companies and the governments of Latin American
countries than there is about U.S. companies and the U.S. Government.
Certain Latin American countries are among the largest debtors to commercial
banks and foreign governments. Currently, Brazil is the largest debtor among
developing countries, Mexico is the second largest and Argentina the third. At
times certain Latin American countries have declared moratoria on the payment of
principal and/or interest on external debt. The Fund may invest in debt
securities, including Brady Bonds, issued as
Prospectus Page 20
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
part of debt restructurings and such debt is to be considered speculative. There
is a history of defaults with respect to commercial bank loans by public and
private entities issuing Brady Bonds.
RISKS ASSOCIATED WITH DEBT SECURITIES. The value of the debt securities held by
the Emerging Markets Fund or by the Latin America Growth Fund generally will
vary inversely with market interest rates. If interest rates in a market fall,
the Funds' debt securities issued by governments or companies in that market
ordinarily will increase in value. If market interest rates increase, however,
the debt securities owned by the Funds in that market will likely decrease in
value.
The Emerging Markets Fund may invest up to 20% of its total assets in debt
securities rated below investment grade and the Latin America Growth Fund may
invest up to 50% of its total assets in debt securities of any rating. Such
investments involve a high degree of risk.
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. 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 are also generally considered to be subject to greater
risk than securities with higher ratings with regard to a deterioration of
general economic conditions. These foreign 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. Similarly, certain emerging market and Latin American governments
that issue lower quality debt securities are among the largest debtors to
commercial banks, foreign governments and supranational organizations such as
the World Bank and may not be able or willing to make principal and/or interest
repayments as they come due. 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 frequently have call or buy-back features which
would permit an issuer to call or repurchase the security from the Funds. In
addition, the Funds 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 either Fund 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 Funds to obtain accurate market quotations for purposes of
valuing the Funds' portfolios. The Funds 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.
Prospectus Page 21
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
In addition to the foregoing, factors that could have an adverse effect on the
market value of lower quality debt securities in which the Funds 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.
A Fund 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 its portfolio
holdings, and a Fund may have limited legal recourse in the event of a default.
Debt securities issued by governments in emerging or Latin American markets can
differ from debt obligations issued by private entities in that remedies from
defaults generally must be pursued in the courts of the defaulting government,
and legal recourse is therefore somewhat diminished. Political conditions, in
terms of a government's willingness to meet the terms of its debt obligations,
also are of considerable significance. There can be no assurance that the
holders of commercial bank debt may not contest payments to the holders of debt
securities issued by governments in emerging or Latin American markets in the
event of default by the governments under commercial bank loan agreements.
ILLIQUID SECURITIES. The Emerging Markets Fund may invest up to 15% of its net
assets, and the Latin America Fund may invest up to 10% of its net assets in
securities for which no readily available market exists, so-called "Illiquid
Securities." The Manager believes that carefully selected investments in joint
ventures, cooperatives, partnerships and state enterprises and other similar
vehicles which are illiquid (collectively, "Special Situations") could enable
each Fund to achieve capital appreciation substantially exceeding the
appreciation each Fund would realize if it did not make such investments.
However, in order to limit investment risk, the Latin America Growth Fund will
invest no more than 5% of it total assets in Special Situations.
Illiquid securities may be more difficult to value than liquid securities and
the sale of illiquid securities generally will require more time and result in
higher brokerage charges or dealer discounts and other selling expenses than the
sale of liquid securities. Moreover, illiquid restricted securities often sell
at a price lower than similar securities that are not subject to restrictions on
resale.
CURRENCY RISK. Since the Emerging Markets Fund and the Latin America Growth Fund
may invest substantially in securities denominated in currencies other than the
U.S. dollar, and since the Funds may hold foreign currencies, each Fund will be
affected favorably or unfavorably by exchange control regulations or changes in
the exchange rates between such currencies and the U.S. dollar. Changes in
currency exchange rates will influence the value of each Fund's shares, and also
may affect the value of dividends and interest earned by the Funds and gains and
losses realized by the Funds. Currencies generally are evaluated on the basis of
fundamental economic criteria (e.g., relative inflation and interest rate levels
and trends, growth rate forecasts, balance of payments status and economic
policies) as well as technical and political data. Exchange rates are determined
by the forces of supply and demand in the foreign exchange markets. These forces
are affected by the international balance of payments and other economic and
financial conditions, government intervention, speculation and other factors. If
the currency in which a security is denominated appreciates against the U.S.
dollar, the dollar value of the security will increase. Conversely, a decline in
the exchange rate of the currency would adversely affect the value of the
security expressed in dollars.
Many of the currencies of emerging market and Latin American countries have
experienced steady devaluations relative to the U.S. dollar, and major
devaluations have historically occurred in certain countries. Any devaluations
in the currencies in which a Fund's portfolio securities are denominated may
have a detrimental impact on the Fund.
Some countries also may have fixed currencies whose values against the U.S.
dollar are not independently determined. In addition, there is a risk that
certain countries may restrict the free conversion of their currencies into
other currencies. Further, certain currencies may not be internationally traded.
Although either Fund is authorized to enter into options, futures and forward
currency transactions, a Fund might not enter into any such transactions.
Options, futures and foreign currency transactions involve certain risks, which
include: (1) dependence on the Manager's ability to predict movements in the
prices of individual securities, fluctuations in the general securities markets
and movements in interest rates and currency markets; (2) imperfect correlation,
or even no correlation, between movements in the price of forward contracts,
options, futures contracts or options thereon and movements in the price of the
currency
Prospectus Page 22
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
or security hedged or used for cover; (3) the fact that skills and techniques
needed to trade options, futures contracts and options thereon or to use forward
currency contracts are different from those needed to select the securities in
which the Funds invest; (4) lack of assurance that a liquid secondary market
will exist for any particular option, futures contract or option thereon at any
particular time; (5) the possible loss of principal under certain conditions;
(6) the possible inability of a Fund to purchase or sell a portfolio security at
a time when it would otherwise be favorable for it to do so, or the possible
need for a Fund to sell a security at a disadvantageous time, due to the need
for the Fund to maintain "cover" or to set aside securities in connection with
hedging transactions; and (7) the possible need of a Fund to defer closing out
of certain options, futures contracts and options thereon and forward currency
contracts in order to qualify or continue to qualify for the beneficial tax
treatment afforded regulated investment companies under the Internal Revenue
Code of 1986, as amended ("Code"). See "Dividends, Other Distributions and
Federal Income Taxation" herein and "Taxes" in the Statement of Additional
Information.
OTHER INFORMATION. The investment objective of the Emerging Markets Fund and of
the Latin America Growth Fund may not be changed without the approval of a
majority of the respective Fund's outstanding voting securities. A "majority of
the Fund's outstanding voting securities" means the lesser of (i) 67% of the
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 Emerging Markets Fund and the Latin America Growth Fund each have adopted
certain investment limitations as fundamental policies which also may not be
changed without shareholder approval. A complete description of these
limitations is included in the Statement of Additional Information. Unless
specifically noted, the Emerging Markets Fund's and the Latin America Growth
Fund's investment policies described in this Prospectus and in the Statement of
Additional Information are not fundamental policies and may be changed by a vote
of a majority of the Company's Board of Directors without shareholder approval.
Prospectus Page 23
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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. 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 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 (with a $25 minimum for IRAs, Code Section
403(b)(7) custodial accounts and other tax-qualified employer-sponsored
retirement accounts, as mentioned above). The Funds and GT Global reserve the
right to reject any purchase order and to suspend the offering of shares for a
period of time.
WHEN PLACING PURCHASE ORDERS, INVESTORS SHOULD SPECIFY WHETHER THE ORDER IS FOR
CLASS A OR CLASS B SHARES OF A 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 Funds 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/dealer, 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, each Fund's distributor, by completing and
signing an Account Application accompanying this Prospectus. Investors should
mail to the Transfer Agent the completed Account Application indicating the
class of shares 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.
Investors also may purchase shares of the Funds 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 a
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 Funds. 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
Prospectus Page 24
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
in the Shareholder Account Manual to obtain an account number and detailed
instructions.
CERTIFICATES. Physical certificates representing a Fund's shares will not be
issued unless an investor submits a written request to the Transfer Agent, or
unless the investor's broker/dealer requests that the Transfer Agent provide
certificates. Shares of a 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 FUNDS AND GT GLOBAL RECOMMEND THAT SHAREHOLDERS DO NOT REQUEST
ISSUANCE OF CERTIFICATES.
PURCHASING CLASS A SHARES
Each Fund's public offering price for Class A shares is the next determined net
asset value per share (see "Calculation of Net Asset Value") including any sales
charge determined in accordance with the following schedule:
<TABLE>
<CAPTION>
SALES CHARGE AS PERCENTAGE OF DEALER
REALLOWANCE AS
AMOUNT OF PURCHASE ------------------------------ PERCENTAGE OF
AT THE PUBLIC OFFERING NET THE OFFERING
OFFERING PRICE PRICE INVESTMENT PRICE
- --------------------- ------------- --------------- -------------------
<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% *
<FN>
- ------------------
* 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.
</TABLE>
All shares purchased pursuant to a sales charge waiver based on the aggregate
purchase amount's equalling at least $500,000 will be subject to a contingent
deferred sales charge for the first year after their purchase equal to 1% of the
lower of the original purchase price or the net asset value of such shares at
the time of redemption. See "Contingent Deferred Sales Charge -- Class A
Shares."
From time to time, GT Global may reallow to broker/ dealers the full amount of
the sales charge on Class A shares. In some instances, GT Global may offer these
reallowances 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 ("1933 Act"). These
commissions may be paid to broker/dealers and other financial institutions that
initiate purchases made pursuant to sales charge waivers (i) and (vii),
described below under "Sales Charge Waivers -- Class A Shares."
The following purchases 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(s) 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);
(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 plans under Code Section 401(k), 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.
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GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
(ii) Current or retired Trustees, Directors and officers of the investment
companies for which the Manager serves as investment manager or administrator;
employees or retired employees of the companies comprising 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 that
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 equals at least $500,000, and
further provided that such money is not eligible to be invested in the Advisor
Class.
(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 Fund 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 Fund 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) An investor purchasing shares of a Fund with redemption proceeds from a
registered management investment company that is not one of the GT Global Mutual
Funds, on which the investor was subject to a front-end sales charge or a
contingent deferred sales charge.
REINSTATEMENT PRIVILEGE. Shareholders who redeem their Class A shares in a Fund
have a one-time 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. For a discussion of the federal income tax
consequences of a reinstatement, see "Dividends, Other Distributions and Federal
Income Taxation -- Taxes."
REDUCED SALES CHARGE PLANS -- CLASS A SHARES. Class A shares of the Funds 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 brokers or the Transfer Agent.
RIGHT OF ACCUMULATION. Pursuant to the Right of Accumulation, investors are
permitted to purchase shares of the Funds at the sales charge applicable to the
total of (a) the dollar amount then being purchased plus (b) the amount equal to
the total purchase price of the investor's concurrent purchases of the other GT
Global Mutual Funds (other than GT Global Dollar Fund) plus (c) the price of all
shares of GT Global Mutual Funds
Prospectus Page 26
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
(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 brokers, 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 FUNDS 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 Class A shares of
the Funds and the Class A shares of other GT Global Mutual Funds (other than 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 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.
Investors should be aware that either Fund may, in the future, suspend the
offering of its shares although not for previously established LOIs. The Latin
America Growth Fund has previously suspended the offering of its shares. If all
ongoing sales of either Fund shares are suspended, however, an LOI executed in
connection with the offering of that Fund's shares may continue to be completed
by the purchase of shares of one or more other GT Global Mutual Funds (other
than GT Global Dollar Fund).
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 qualification for such
treatment. THE FOREGOING LOI APPLIES ONLY TO CLASS A SHARES OF THE FUNDS 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) Class A shares redeemed
more than one year after their purchase. Such shares purchased for at least
$500,000 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
Each Fund's public offering price for Class B shares is the next determined net
asset value per share. See "Calculation of Net Asset Value." No initial sales
charge is imposed. A contingent deferred sales
Prospectus Page 27
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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.
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 other 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.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE AS A PERCENTAGE OF THE
LESSER OF NET ASSET VALUE AT
REDEMPTION
OR THE ORIGINAL
REDEMPTION DURING PURCHASE PRICE
- ------------------------------ -----------------------------
<S> <C>
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%
</TABLE>
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 holding period will be measured from the
date of original purchase.
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.
CONTINGENT DEFERRED SALES
CHARGE WAIVERS
The contingent deferred sales charge will be waived for: (1) exchanges, as
described below; (2) redemptions in connection with each 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 asset) 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 or 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 of 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.
Prospectus Page 28
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
PROGRAMS APPLICABLE TO CLASS A
AND CLASS B SHARES
AUTOMATIC INVESTMENT PLAN. Investors may purchase either Class A or Class B
shares of the Emerging Markets Fund or Latin America Growth Fund through the GT
Global Automatic Investment Plan. Under this Plan, an amount specified by the
shareholder of $100 or more (or $25 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 either the Emerging Markets Fund or Latin
America Growth Fund. Investors should be aware that the Emerging Markets Fund or
Latin America Growth Fund may suspend the offering of its shares in the future,
although not the previously established Automatic Investment Plans. If a
suspension of all sales is made, automatic investments will not be accepted
until the offering is recommenced. Participants in the Automatic Investment Plan
should not elect to receive dividends or other distributions from the Funds in
cash. A sales charge will be applied to each automatic monthly purchase of Class
A Fund 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 broker/dealers or GT Global for more information.
DOLLAR COST AVERAGING PROGRAM. Investors may purchase Class A or Class B shares
of a 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 a Fund's net asset value is relatively low and fewer
shares when a 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 a 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 Fund shares in an amount determined in
accordance with the Right of Accumulation privilege described above. Investors
should be aware that the Emerging Markets Fund or Latin America Growth Fund may
suspend the offering of its shares in the future, although not for shareholders
who are participants in the Dollar Cost Averaging Program at that time. If a
suspension of all sales is made, the Funds will not accept Monthly Investments.
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) 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 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 29
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
The Program will automatically rebalance the shareholder's Personal Portfolio on
the 28th day of the last month of the period chosen (or 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
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 brokers may charge a
fee for establishing accounts relating to the Program.
Prospectus Page 30
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
HOW TO MAKE EXCHANGES
- --------------------------------------------------------------------------------
Shares of the Funds may be exchanged for shares of the same class of any other
GT Global Mutual Funds, based on their respective net asset values, without
imposition of any initial or contingent deferred sales charges, provided that
the registration remains identical. 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."
In addition to the Funds, the GT Global Mutual Funds currently include:
-- GT GLOBAL AMERICA SMALL CAP
GROWTH FUND
-- GT GLOBAL AMERICA MID CAP GROWTH FUND
-- GT GLOBAL AMERICA VALUE FUND
-- GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
-- GT GLOBAL DOLLAR FUND
-- GT GLOBAL EUROPE GROWTH FUND
-- GT GLOBAL FINANCIAL SERVICES FUND
-- GT GLOBAL GOVERNMENT INCOME FUND
-- GT GLOBAL GROWTH & INCOME FUND
-- GT GLOBAL HEALTH CARE FUND
-- GT GLOBAL HIGH INCOME FUND
-- GT GLOBAL INFRASTRUCTURE FUND
-- GT GLOBAL INTERNATIONAL GROWTH FUND
-- GT GLOBAL JAPAN GROWTH FUND
-- GT GLOBAL NATURAL RESOURCES FUND
-- GT GLOBAL NEW PACIFIC GROWTH FUND
-- GT GLOBAL STRATEGIC INCOME FUND
-- GT GLOBAL TELECOMMUNICATIONS FUND
-- GT GLOBAL WORLDWIDE GROWTH 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.
A shareholder interested in making an exchange should contact his broker or the
Transfer Agent to request the prospectus of the other GT Global Mutual Fund(s)
being considered. Certain brokers may charge a fee for handling exchanges.
EXCHANGES BY TELEPHONE. A shareholder may give exchange instructions to the
shareholder's broker/ dealer or to 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 previously have been deposited.
Shareholders automatically have telephone privileges to authorize exchanges. The
Funds, 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 Funds employ reasonable procedures to
confirm that instructions communicated by telephone are genuine, including
requiring some form of personal identification prior to acting upon instructions
received by telephone, providing written confirmation of such transactions,
and/or tape recording of telephone instructions.
EXCHANGES BY MAIL. Exchange orders should be sent by mail to the investor's
broker or to the Transfer Agent at the address set forth in the Shareholder
Account Manual.
OTHER INFORMATION ABOUT EXCHANGES. Purchases, redemptions and exchanges should
be made for investment purposes only. A pattern of frequent exchanges, purchases
and sales is not acceptable and can be limited by a Fund's or GT Global's
refusal to accept further purchase and exchange orders from the investor or
broker. The terms of the exchange offer described above may be modified at any
time, on 60 days' prior written notice to shareholders.
Prospectus Page 31
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
Shares of the Funds 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. If a redeeming shareholder owns
both Class A and Class B shares of a Fund, Class A shares will be redeemed first
unless the shareholder specifically requests otherwise.
REDEMPTIONS THROUGH BROKER/DEALERS. Shareholders with accounts at broker/dealers
that sell shares of the Funds 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 shares' net asset value next determined 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 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 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 uncertain about
the Funds' 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 on each wire redemption sent, but reserves the right to do so
in the future.
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 OF RECORD. THE
TRANSFER AGENT AND THE FUND ARE NOT RESPONSIBLE FOR THE AUTHENTICITY OF
TELEPHONE REDEMPTION REQUESTS.
Prospectus Page 32
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
Shareholders automatically have telephone privileges to authorize redemptions.
The Funds, 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
believed to be genuine. The Funds employ reasonable procedures to confirm that
instructions communicated by telephone are genuine, including requiring some
form of personal identification prior to acting upon instructions received by
telephone, 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 registered account owner(s) 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 preceeding 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 in the Funds 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 certain
redemptions of Class A shares purchased for at least $500,000 without an initial
sales charge and Class B shares made under the Systematic Withdrawal Plan. The
minimum withdrawal amount is $100. The amount or percentage a participating
shareholder specifies 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 brokers 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 of the Fund 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 with questions concerning what documents are required
should contact his 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.
If the Transfer Agent is requested to redeem shares for which a Fund has not yet
received good payment, the Fund may delay payment of redemption proceeds until
it 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.
A Fund may redeem the shares of any shareholder whose account is reduced to less
than $500 in net asset value through redemptions or other action by the
shareholder. 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).
Prospectus Page 33
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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 GT Global 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.
Each Fund's Transfer Agent is GT GLOBAL INVESTOR SERVICES, INC.
INVESTMENTS BY MAIL
Send 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 7345
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. 4023-050701
EXCHANGES BY TELEPHONE
Call GT Global at 1-800-223-2138
EXCHANGES BY MAIL
Send complete instructions, including name of Fund exchanging from, 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, California 94120-7893
REDEMPTIONS BY TELEPHONE
Call GT Global at 1-800-223-2138
REDEMPTIONS BY MAIL
Send complete instructions, including name of Fund, class of shares, amount of
redemption, shareholder's registered name and account number, to:
GT Global
P.O. Box 7893
San Francisco, California 94120-7893
OVERNIGHT MAIL
Overnight mail services do not deliver to post office boxes. To send purchase,
exchange or redemption orders by overnight mail, comply with the above
instructions but send to the following:
GT Global Investor Services
California Plaza
2121 N. California Boulevard
Suite 450
Walnut Creek, California 94596
ADDITIONAL QUESTIONS
Shareholders with additional questions regarding purchase, exchange and
redemption procedures may call GT Global at 1-800-223-2138.
Prospectus Page 34
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
CALCULATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
Each 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), each Business Day. Each
Fund's asset value per share is computed by determining the value of its total
assets (the securities it holds plus any cash or other assets, including
interest and dividends accrued but not yet received), subtracting all of its
liabilities (including accrued expenses), and dividing the result by the total
number of shares outstanding at such time. Net asset value is determined
separately for each class of shares of each Fund.
Equity securities held by a Fund are valued at the last sale price on the
exchange or in the OTC market in which such securities are primarily traded, as
of the close of business on the day the securities are being valued or, lacking
any sales, at the last available bid price. Long-term debt obligations are
valued at the mean of representative quoted bid or asked prices for such
securities, or, if such prices are not available, at prices for securities of
comparable maturity, quality and type; however, when the Manager deems it
appropriate, prices obtained from a bond pricing service will be used.
Short-term debt investments are amortized to maturity based on their cost,
adjusted for foreign exchange translation and market fluctuations, provided that
such valuations represent fair value. When market quotations for futures and
options positions held by a Fund are readily available, those positions are
valued based upon such quotations.
Securities and other assets for which market quotations are not readily
available are valued at fair value determined in good faith by or under
direction of the Company's Board of Directors. Securities and other assets
quoted in foreign currencies are valued in U.S. dollars based on the prevailing
exchange rates on that day.
Each Fund's portfolio securities, from time to time, may be listed primarily on
foreign exchanges or OTC markets which trade on days when the NYSE is closed
(such as Saturday). As a result, the net asset values of the Funds may be
affected significantly by such trading on days when shareholders cannot purchase
or redeem shares of the Fund.
The different expenses borne by each class of shares will result in different
net asset values and dividends. The per share net asset value of the Class B
shares of a Fund generally will be lower than that of the Class A shares of that
Fund because of the higher expenses borne by the Class B shares. The per share
net asset value of the Advisor Class shares of a Fund generally will be higher
than that of the Class A and Class B shares of that Fund because of the lower
expenses borne by the Advisor Class shares. It is expected, however, that the
net asset value per share of Class A and Class B shares of a Fund will tend to
converge immediately after the payment of dividends, which will differ by
approximately the amount of the service and distribution expense accrual
differential between the classes.
- --------------------------------------------------------------------------------
DIVIDENDS, OTHER DISTRIBUTIONS
AND FEDERAL INCOME TAXATION
- --------------------------------------------------------------------------------
DIVIDENDS AND OTHER DISTRIBUTIONS. Each Fund annually declares as a dividend all
its net investment income, if any, which includes dividends, accrued interest
and earned discount (including both original issue and market discounts) less
any applicable expenses. Each 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. Each Fund may make an additional dividend
or other distribution
Prospectus Page 35
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
if necessary to avoid a 4% excise tax on certain undistributed income and gain.
Dividends and other distributions paid by each 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 a Fund will be lower than the per
share income dividends on Class A shares of that 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 a Fund will be lower than the
per share income dividends on the Advisor Class shares of that 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 REINVESTED AUTOMATICALLY 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 STATUS
OF DIVIDENDS AND OTHER DISTRIBUTIONS IS THE SAME WHETHER THEY ARE RECEIVED IN
CASH OR REINVESTED IN ADDITIONAL SHARES.
Any dividend or other distribution paid by a 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. Each Fund intends to continue to qualify for treatment as a regulated
investment company under the Code. In each taxable year that a 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, net gains from certain foreign currency
transactions and net short-term capital gain) and net capital gain that is
distributed to its shareholders.
Dividends from a Fund's investment company taxable income (whether paid in cash
or reinvested in additional shares) are taxable to shareholders as ordinary
income to the extent of the Fund's earnings and profits. Distributions of a
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 Fund
shares.
Each 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, the shareholders' respective
shares of any foreign taxes paid by the Fund, in which event each shareholder
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.
Each 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
Prospectus Page 36
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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 a 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 (including another Fund)
generally will have similar tax consequences. However, special tax rules apply
when a shareholder (1) disposes of Class A shares of a 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 the shares were acquired, and that
amount will increase the adjusted basis of the shares subsequently acquired. In
addition, if shares of a Fund are purchased within 30 days before or after
redeeming shares of that 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 each 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 Company's Board of Directors has overall responsibility for the operation of
the Funds. Pursuant to such responsibility, the Board has approved contracts
with various financial organizations to provide, among other things, day to day
management services required by the Funds.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Services provided by Chancellor LGT
Asset Management, Inc. (the "Manager") as each Fund's investment manager and
administrator include, but are not limited to, determining the composition of
the Fund's portfolio and placing orders to buy, sell or hold particular
securities; furnishing corporate officers and clerical staff; providing office
space, services and equipment; and supervising all matters relating to the
Fund's operation. For these services, each of the Funds pays the Manager
investment management and administration fees, computed daily and paid monthly,
based on its average daily net assets, at the annualized rate of .975% on the
first $500 million, .95% on the next $500 million, .925% on the next $500
million, and .90% on amounts thereafter. These rates are higher than those paid
by most mutual funds. The Manager and GT Global have undertaken to limit each
Fund's expenses (exclusive of brokerage commissions, taxes, interest and
extraordinary expenses) to the annual rate of 2.40% and 2.90% of the average
daily net assets of the Fund's Class A and Class B shares, respectively.
The Manager also serves as each Fund's pricing and accounting agent. For these
services the Manager receives a fee at an annual rate derived by applying 0.03%
to the first $5 billion of assets of all GT Global Mutual Funds and 0.02% to the
assets in excess of $5 billion, and allocating the result according to each
Fund's average daily net assets.
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
U.S. offices of the Manager are located at 50 California Street, 27th Floor, San
Francisco, CA 94111 and 1166 Avenue of the Americas, New York, NY 10036.
The Manager and its worldwide affiliates, including LGT Bank in Liechtenstein,
formerly Bank in
Prospectus Page 37
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
Liechtenstein, comprise 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 a 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
- --------------, 1997, the Manager and its worldwide asset management affiliates
manage approximately $
- -- billion. In the United States, as of October 31, 1997, the Manager manages or
administers approximately $
- -- billion of GT Global Mutual Funds. As of
- --------------, 1997 , assets entrusted to Liechtenstein Global Trust total
approximately $
- -- billion.
On October 31, 1996, Chancellor Capital Management, Inc. ("Chancellor Capital")
merged with LGT Asset Management, Inc. As of September 30, 1996, Chancellor
Capital and its affiliates, based in New York, were the 15th largest independent
investment manager in the United States with approximately $33 billion in assets
under management. Chancellor Capital specialized in public and private U.S.
equity and bond portfolio management for over 300 U.S. institutional clients.
In addition to the investment resources of its San Francisco and New York
offices, the Manager draws upon the expertise, personnel, data and systems of
other offices of Liechtenstein Global Trust, including investment offices in
Frankfurt, Hong Kong, London, Singapore, Sydney, Tokyo, and Toronto. In managing
the GT Global Mutual Funds, the Manager employs a team approach, taking
advantage of its investment resources around the world in seeking to achieve
each Fund's investment objective. Many of the GT Global Mutual Funds' portfolio
managers are natives of the countries in which they invest, speak local
languages and/or live or work in the markets they follow.
The investment professionals primarily responsible for the portfolio management
of the Funds are as follows:
EMERGING MARKETS FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND LAST FIVE YEARS
- --------------------------- --------------------------------- ------------------------------------------------------
<S> <C> <C>
Jonathan Chew Portfolio Manager since Fund Portfolio Manager for the Manager and LGT Asset
Hong Kong inception in 1992 Management Ltd. (Hong Kong).
James M. Bogin Portfolio Manager since 1993 Portfolio Manager for the Manager since 1993; From
San Francisco 1989 to 1993, Mr. Bogin was a Fund Manager at Nomura
Investment Management Co. (Tokyo).
John R. Legat Portfolio Manager since 1995 Portfolio Manager for the Manager and LGT Asset
London Management PLC (London).
</TABLE>
LATIN AMERICA GROWTH FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND LAST FIVE YEARS
- --------------------------- --------------------------------- ------------------------------------------------------
<S> <C> <C>
Soraya M. Betterton Portfolio Manager since Fund Portfolio Manager for the Manager.
San Francisco inception in 1991
</TABLE>
In placing securities orders for the Funds' portfolio transactions, the Manager
seeks to obtain the best net results. Consistent with its obligation to obtain
the best net results, the Manager may consider a broker/dealer's sale of shares
of the GT Global Mutual Funds as a factor in considering through whom portfolio
transactions will be effected. Brokerage transactions may be executed through
any Liechtenstein Global Trust affiliate. High portfolio turnover involves
correspondingly greater transaction costs in the form of brokerage commissions
or dealer spreads and other costs that a Fund will bear directly, and could
result in the realization of net capital gains which would be taxable when
distributed to shareholders.
DISTRIBUTION OF FUND SHARES. GT Global is the distributor of each Fund's Class A
and Class B
Prospectus Page 38
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
shares. Like the Manager, GT Global is a subsidiary of Liechtenstein Global
Trust with offices at 50 California Street, 27th Floor, San Francisco,
California 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.
The Latin America Growth Fund has previously suspended the offering of its
shares upon the advice of the Manager that doing so was in the best interests of
the portfolio management process. As of the date of this Prospectus, the Latin
America Growth Fund has resumed sales of its shares based upon the Manager's
advice that it is consistent with prudent portfolio management to do so.
However, the Latin America Growth Fund reserves the right to suspend sales again
and Emerging Markets Fund reserves the right to suspend sales in the future
based upon the foregoing portfolio considerations.
GT Global, at its own expense, may provide additional promotional incentives to
broker/dealers that sell shares of the Funds and/or shares of the other GT
Global Mutual Funds. In some instances additional compensation or promotional
incentives may be offered to brokers/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 broker/dealers 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. 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 Company's Board of Directors
pursuant to Rule 12b-1 under the 1940 Act, with respect to the Fund's Class A
shares ("Class A Plan"), the Funds may each 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 each 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 each Class A Plan will have
been incurred within one year of such reimbursement.
Pursuant to a separate plan of distribution adopted by the Company's Board of
Directors with respect to the Fund's Class B shares ("Class B Plan"), each 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 that Plan continues in effect.
GT Global's service and distribution expenses under the Plans include the
payment of ongoing commissions; the cost of any additional compensation paid by
GT Global to brokers and dealers; the costs of printing and mailing to
prospective investors 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 service
and distribution activities, including, among other things, employee salaries,
bonuses and other overhead expenses. In addition, its expenses under each Class
B Plan include payment of initial sales commissions to broker/ dealers and
interest on any unreimbursed amounts carried forward thereunder. GT Global
expects that it will continue to incur certain of such service and distribution
expenses, including trail commission payments and other account servicing
Prospectus Page 39
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
costs, during any suspension of the offering of the Funds shares.
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. Banks and broker/ dealer affiliates of banks also may
execute dealer agreements with GT Global for the purpose of selling shares of
the Funds. While the matter is not free from doubt, the Board of Directors
believes that such laws should not preclude a bank from providing administration
or shareholder servicing support or preclude a bank's affiliates from acting as
a broker/dealer. However, judicial or administrative decisions or
interpretations of such laws, as well as changes in either federal or state
statutes or regulations relating to the permissible activities of banks or their
subsidiaries or affiliates, could prevent a bank and its affiliates from
continuing to perform all or part of its servicing or broker/dealer activities.
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.
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
CONFIRMATIONS AND REPORTS TO SHAREHOLDERS. Each time a transaction is made that
affects a shareholder's account in a Fund, the shareholder will receive from the
Transfer Agent a confirmation statement reflecting the transaction.
Confirmations for transactions effected pursuant to a Fund's Automatic
Investment Plan, Systematic Withdrawal Plan and automatic dividend reinvestment
program may be provided quarterly. Shortly after the end of the Funds' fiscal
year on October 31 and fiscal half-year on April 30 of each year, shareholders
will receive an annual and semiannual report, respectively. In addition, the
federal income tax status of distributions made by the relevant Fund(s) to
shareholders will be reported after the end of the fiscal year on Form 1099-DIV.
Under certain circumstances, duplicative mailings of the foregoing reports to
the same household may be consolidated.
ORGANIZATION OF THE COMPANY. The Company was organized as a Maryland corporation
on October 29, 1987. From time to time, the Company has and may continue to
establish other funds, each corresponding to a distinct investment portfolio and
a distinct series of the Company's common stock. Shares of the Emerging Markets
Fund and the Latin America Growth Fund 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 each Fund will be
voted by that Fund's shareholders individually when the matter affects the
specific interest of that Fund only, such as approval of that Fund's investment
management arrangements. In addition, each class of shares of a Fund has
exclusive voting rights with respect to its distribution plan. The shares of all
the Company's Funds will be voted in the aggregate on other matters, such as the
election of Directors and ratification of the Board of Directors' selection of
the Company's independent accountants.
The Company normally will not hold annual meetings of shareholders, except as
required under the 1940 Act. The Company would be required to hold a
shareholders meeting in the event that at any time less than a majority of the
Directors holding office had been elected by shareholders. Directors shall
continue to hold office until their successors are elected and have qualified.
Shares of the Company's Funds do not have cumulative voting rights, which means
that the holders of a majority of the shares voting for the election of
Directors can elect all the Directors. A Director may be removed upon a majority
vote of the shareholders qualified to vote in the election. Shareholders holding
10% of the Company's outstanding voting securities may call a meeting of
shareholders for the purpose of voting upon the question of removal of any
Director or for any
Prospectus Page 40
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
other purpose. The 1940 Act requires the Company to assist shareholders in
calling such a meeting.
Pursuant to the Company's Articles of Incorporation, it may issue six billion
shares. Of this number, 300 million shares have been classified as shares of
each Fund. One hundred million shares have been classified as Class A shares of
each Fund, one hundred million shares as Class B shares of each Fund, and one
hundred million shares have been classified as Advisor Class shares of each
Fund. This amount may be increased from time to time in the discretion of the
Board of Directors. Each share of the Fund represents an interest in that Fund
only, has a par value of $0.0001 per share, represents an equal proportionate
interest 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 Directors. Each Class A, Class B and Advisor Class share of the Fund is
equal as to earnings, assets and voting privileges, 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.
Emerging Markets Fund is classified as a "diversified" fund under the 1940 Act
which means that, with respect to 75% of the Fund's total assets, no more than
5% will be invested in the securities of any one issuer, and the Fund will
purchase no more than 10% of the outstanding voting securities of any one
issuer.
The Latin America Growth Fund is classified as a "non-diversified" fund under
the 1940 Act which means that with respect to 50% of its total assets, no more
than 50% will be invested in the securities of any one issuer, and the Fund will
purchase no more than 10% of the outstanding voting securities of any one
issuer.
Because the Funds employ a Combined Prospectus, it is possible that a Fund might
become liable for a misstatement with respect to the other Fund in this Combined
Prospectus. The Board of Directors of the Company have considered this in
approving the use of a Combined Prospectus.
SHAREHOLDER INQUIRIES. Shareholder inquiries may be made by calling the Funds
toll free at (800) 223-2138 or by writing to the Funds at 50 California Street,
27th Floor, San Francisco, California 94111.
PERFORMANCE INFORMATION. Each Fund, from time to time, may include information
on its investment results and/or comparisons of their 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, a Fund may quote its average annual total return
("Standardized Return"). Standardized Return is calculated separately for each
class of shares of each 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 one-, 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 at net asset
value on the reinvestment date established by the Board of Directors.
In addition, in order to more completely represent a Fund's performance or more
accurately compare such performance to other measures of investment return, a
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); it
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.
Each Fund's performance data reflects past performance and is not necessarily
indicative of future results. A Fund's investment results will vary from time to
time depending upon market conditions, the composition of its portfolio and its
operating expenses. These factors and possible differences in calculation
methods should be considered when comparing a Fund's investment results
Prospectus Page 41
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
with those published for other investment companies, other investment vehicles
and unmanaged indices. A 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.
Each Fund's annual report contains additional information with respect to its
performance. The annual report is available to investors upon request and free
of charge.
TRANSFER AGENT. Shareholder servicing, reporting and general transfer agent
functions for the Funds are performed by GT Global Investor Services, Inc. The
Transfer Agent is an affiliate of the Manager and GT Global and a subsidiary of
Liechtenstein Global Trust, and maintains its offices at California Plaza, 2121
N. California Boulevard, Suite 450, Walnut Creek, California 94596.
CUSTODIAN. State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110 is custodian of each Fund's assets.
COUNSEL. The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue,
N.W., Washington, D.C. 20036-1800, acts as counsel to the Company and the Funds.
Kirkpatrick & Lockhart, LLP also acts as counsel to the Manager, GT Global and
GT Global Investor Services, Inc. in connection with other matters.
INDEPENDENT ACCOUNTANTS. The Company's and each Fund's independent accountants
are Coopers & Lybrand L.L.P., One Post Office Square, Boston, Massachusetts
02109. Coopers & Lybrand L.L.P. will conduct an annual audit of each Fund,
assist in the preparation of each Fund's federal and state income tax returns
and consult with the Company, or Trust, as applicable, and each 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 42
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
NOTES
- --------------------------------------------------------------------------------
Prospectus Page 43
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
NOTES
- --------------------------------------------------------------------------------
Prospectus Page 44
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
NOTES
- --------------------------------------------------------------------------------
Prospectus Page 45
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
GT GLOBAL MUTUAL FUNDS
GT GLOBAL OFFERS A BROAD RANGE OF MUTUAL FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY GT GLOBAL MUTUAL
FUND, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR CALL GT GLOBAL DIRECTLY AT
1-800-824-1580.
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL WORLDWIDE GROWTH FUND
Invests around the world, including the U.S.
GT GLOBAL INTERNATIONAL GROWTH FUND
Provides portfolio diversity by investing outside
the U.S.
GT GLOBAL EMERGING MARKETS FUND
Gives access to the growth potential of developing economies
/ / GLOBAL THEME FUNDS
GT GLOBAL CONSUMER PRODUCTS AND
SERVICES FUND
Invests in companies that manufacture, market, retail, or distribute consumer
products or services
GT GLOBAL FINANCIAL SERVICES FUND
Focuses on the worldwide opportunities from the demand for financial services
and products
GT GLOBAL HEALTH CARE FUND
Invests in growing health care industries worldwide
GT GLOBAL INFRASTRUCTURE FUND
Seeks companies that build, improve or maintain a country's infrastructure
GT GLOBAL NATURAL RESOURCES FUND
Concentrates on companies that own, explore or develop natural resources
GT GLOBAL TELECOMMUNICATIONS FUND
Invests in companies worldwide that develop, manufacture or sell
telecommunications services or equipment
/ / REGIONALLY DIVERSIFIED FUNDS
GT GLOBAL NEW PACIFIC GROWTH FUND
Offers access to the emerging and established markets of the Pacific Rim,
excluding Japan
GT GLOBAL EUROPE GROWTH FUND
Focuses on investment opportunities in the new, unified Europe
GT GLOBAL LATIN AMERICA GROWTH FUND
Invests in the emerging markets of Latin America
/ / SINGLE COUNTRY FUNDS
GT GLOBAL AMERICA SMALL CAP GROWTH FUND
Invests in equity securities of small U.S. companies
G.T. GLOBAL AMERICA MID CAP GROWTH FUND
Concentrates on medium-sized companies in the U.S.
GT GLOBAL AMERICA VALUE FUND
Concentrates on equity securities of large cap U.S. companies believed to be
undervalued
GT GLOBAL JAPAN GROWTH FUND
Provides U.S. investors with direct access to the Japanese market
GROWTH AND INCOME FUND
GT GLOBAL GROWTH & INCOME FUND
Invests in blue-chip stocks and government bonds from around the world
INCOME FUNDS
GT GLOBAL GOVERNMENT INCOME FUND
Earns monthly income from global government securities
GT GLOBAL STRATEGIC INCOME FUND
Allocates its assets among debt securities from the U.S., developed foreign
countries and emerging markets
GT GLOBAL HIGH INCOME FUND
Invests in debt securities in emerging markets
MONEY MARKET FUND
GT GLOBAL DOLLAR FUND
Invests in high quality, U.S. dollar-denominated money market securities
worldwide for stability and preservation of capital
[LOGO]
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY G.T. GLOBAL GROWTH SERIES,
G.T. INVESTMENT FUNDS, INC., GT GLOBAL EMERGING MARKETS FUND, GT GLOBAL
LATIN AMERICA GROWTH FUND, CHANCELLOR LGT ASSET MANAGEMENT, INC. OR GT
GLOBAL, INC. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION.
LEMPR610008MC
<PAGE>
GT GLOBAL THEME FUNDS:
ADVISOR CLASS
PROSPECTUS -- MARCH 1, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
GT GLOBAL FINANCIAL SERVICES FUND GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
GT GLOBAL INFRASTRUCTURE FUND GT GLOBAL HEALTH CARE FUND
GT GLOBAL NATURAL RESOURCES FUND GT GLOBAL TELECOMMUNICATIONS FUND
</TABLE>
GT GLOBAL FINANCIAL SERVICES FUND ("FINANCIAL SERVICES FUND") seeks long-term
capital growth by investing all of its investable assets in the Global Financial
Services Portfolio ("Financial Services Portfolio"), that, in turn, invests
primarily in equity securities throughout the world that operate in the
financial services industries.
GT GLOBAL INFRASTRUCTURE FUND ("INFRASTRUCTURE FUND") seeks long-term growth of
capital by investing all of its investable assets in the Global Infrastructure
Portfolio.
GT GLOBAL NATURAL RESOURCES FUND ("NATURAL RESOURCES FUND") seeks long-term
growth of capital by investing all of its investable assets in the Global
Natural Resources Portfolio ("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.
GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND ("CONSUMER PRODUCTS AND SERVICES
FUND") seeks long-term growth of capital by investing all of its investable
assets in the Global Consumer Products and Services Portfolio ("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 GT GLOBAL HEALTH CARE FUND ("HEALTH CARE FUND") seeks long-term capital
appreciation by investing primarily in equity securities of health care
companies throughout the world.
The GT GLOBAL TELECOMMUNICATIONS FUND ("TELECOMMUNICATIONS FUND") seeks
long-term growth of capital by investing primarily in equity securities of
companies throughout the world engaged in the development, manufacture or sale
of telecommunications services or equipment.
Each Portfolio's investment objective is identical to that of its corresponding
Fund. There can be no assurance that any Fund or Portfolio will achieve its
investment objective. The investment experience of the Financial Services Fund,
the Infrastructure Fund, the Natural Resources Fund and the Consumer Products
and Services Fund will correspond directly with the investment experience of
their corresponding Portfolio.
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 Funds and the Portfolios are managed and/or administered 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 March 1, 1997, has been filed with
the Securities and Exchange Commission 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 Funds at 50 California Street,
27th Floor, San Francisco 94111, or by calling (800) 824-1580.
FOR FURTHER INFORMATION, CALL (800) 824-1580 OR CONTACT YOUR FINANCIAL ADVISOR.
[LOGO]
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus Page 1
<PAGE>
GT GLOBAL THEME FUNDS
TABLE OF CONTENTS
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Page
---------
<S> <C>
Prospectus Summary........................................................................ 3
Financial Highlights...................................................................... 8
Investment Objectives and Policies........................................................ 16
Risk Factors.............................................................................. 23
How to Invest............................................................................. 29
How to Make Exchanges..................................................................... 31
How to Redeem Shares...................................................................... 32
Shareholder Account Manual................................................................ 34
Calculation of Net Asset Value............................................................ 35
Dividends, Other Distributions and Federal Income Taxation................................ 35
Management................................................................................ 37
Other Information......................................................................... 42
</TABLE>
Prospectus Page 2
<PAGE>
GT GLOBAL THEME FUNDS
PROSPECTUS SUMMARY
- ------------------------------------------------------------
The following summary is qualified in its entirety by the more detailed
information appearing in the body of this Prospectus.
<TABLE>
<S> <C> <C>
The Funds and the Portfolios: Financial Services Fund, Infrastructure Fund, Natural Resources
Fund, Consumer Products and Services Fund, Health Care Fund and
Telecommunications Fund (each a "Fund," and collectively, the
"Funds") is each a diversified series of G.T. Investment Funds,
Inc. (the "Company"), a Maryland corporation. Each Portfolio is a
diversified series of Global Investment Portfolio, a New York
common law trust. The Portfolios, the Health Care Fund and the
Telecommunications Fund are referred to herein as the "Theme
Portfolios."
Investment Objectives: Financial Services Fund, Infrastructure Fund, Natural Resources
Fund and Consumer Products and Services Fund seek long-term
capital growth. The Health Care Fund seeks long-term capital
appreciation. The Telecommunications Fund seeks long-term growth
of capital.
Principal Investments: Financial Services Fund invests 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 industry.
Infrastructure Fund invests 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.
Natural Resources Fund invests 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.
Consumer Products and Services Fund invests 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.
Health Care Fund invests primarily in equity securities of health
care companies throughout the world.
Telecommunications Fund invests primarily in equity securities of
companies throughout the world engaged in the development,
manufacture or sale of telecommunications services or equipment.
There is no assurance that any Fund or the Portfolio will achieve
Principal Risk Factors: its investment objective. Each Fund's net asset value will
fluctuate, reflecting fluctuations in the market value of its
securities holdings. Each Theme Portfolio's policy of
concentrating its investments in companies in its particular
industries may cause a Fund's net asset value to fluctuate more
than if it invested in a greater number of industries.
</TABLE>
Prospectus Page 3
<PAGE>
GT GLOBAL THEME FUNDS
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investments in foreign securities involve risks relating to
political and economic developments abroad and the differences
between the regulations to which U.S. and foreign issuers are
subject. Individual foreign economies also may differ favorably or
unfavorably from the U.S. economy. Changes in foreign currency
exchange rates will affect a Fund's net asset value, earnings and
gains and losses realized on sales of securities. Securities of
foreign companies may be less liquid and their prices more
volatile than those of securities of comparable U.S. companies.
Each Theme Portfolio may engage in certain foreign currency,
options and futures transactions to attempt to hedge against the
overall level of investment and currency risk associated with its
present or planned investments. Such transactions involve certain
risks and transaction costs.
The Financial Services Portfolio, Health Care Fund and
Telecommunications Fund may each invest up to 5%, and the
Infrastructure Portfolio, Natural Resources Portfolio and Consumer
Products and Services Portfolio may each invest up to 20% of its
total assets in below investment grade debt securities.
Investments of this type are subject to a greater risk of loss of
principal and interest.
See "Investment Objectives and Policies" and "Risk Factors."
Investment Manager: Chancellor LGT Asset Management, Inc. (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 , 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."
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
Advisor Class Shares: 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 a 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 comprising or affiliated with Liechtenstein Global
Trust; and (e) any of the companies comprising or affiliated with
Liechtenstein Global Trust.
Shares Available Through: Advisor Class shares of each Fund's common stock 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."
</TABLE>
Prospectus Page 4
<PAGE>
GT GLOBAL THEME FUNDS
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Exchange Privileges: Advisor Class shares of a Fund may only 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 Funds' transfer agent, GT
Global Investor Services, Inc. ("Transfer Agent"). See "How to
Redeem Shares" and "Shareholder Account Manual."
Dividends and Other
Distributions: Dividends paid annually from net investment income and realized
net short-term capital gains; other distributions paid annually
from net capital gain and net gains from foreign currency
transactions, if any.
Reinvestment: Dividends and other distributions may be reinvested automatically
in Advisor Class shares of the distributing Fund or in Advisor
Class shares of other GT Global Mutual Funds.
Net Asset Values: Advisor Class shares of the Health Care Fund, Telecommunications
Fund, Infrastructure Fund, Financial Services Fund, Natural
Resources Fund and Consumer Products and Services Fund are
expected to be quoted daily in the financial section of most
newspapers.
</TABLE>
Prospectus Page 5
<PAGE>
GT GLOBAL THEME FUNDS
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
SUMMARY OF INVESTOR COSTS. The expenses and maximum transaction costs associated
with investing in the Advisor Class shares of the Funds are reflected in the
following tables*:
<TABLE>
<CAPTION>
GT GLOBAL GT GLOBAL GT GLOBAL
HEALTH CARE TELECOMMUNICATIONS FINANCIAL SERVICES
FUND FUND FUND
--------------- --------------------- -------------------
ADVISOR CLASS ADVISOR CLASS ADVISOR CLASS
--------------- --------------------- -------------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION COSTS:
Maximum sales charge on purchases of shares
(% of offering price)................................ None None None
Sales charges on reinvested distributions to
shareholders......................................... None None None
Maximum deferred sales charge as a % of net asset value
at time of purchase or sale, whichever is less....... None None None
Redemption charges..................................... None None None
Exchange fees:
-- On first four exchanges each year............... None None None
-- On each additional exchange..................... $7.50 $7.50 $7.50
ANNUAL FUND OPERATING EXPENSES:
(AS A % OF AVERAGE NET ASSETS)
Investment management and administration fees.......... 0.98% 0.93% 0.98%
12b-1 distribution and service expenses................ None None None
Other expenses (after reimbursements).................. % % %
------- ------- -------
Total Fund Operating Expenses.......................... % % %
------- ------- -------
------- ------- -------
<CAPTION>
GT GLOBAL GT GLOBAL GT GLOBAL
INFRASTRUCTURE NATURAL RESOURCES CONSUMER PRODUCTS
FUND FUND AND SERVICES FUND
--------------- --------------------- -------------------
ADVISOR CLASS ADVISOR CLASS ADVISOR CLASS
--------------- --------------------- -------------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION COSTS:
Maximum sales charge on purchases of shares
(% of offering price)................................ None None None
Sales charges on reinvested distributions to
shareholders......................................... None None None
Maximum deferred sales charge as a % of net asset value
at time of purchase or sale, whichever is less....... None None None
Redemption charges..................................... None None None
Exchange fees:
-- On first four exchanges each year............... None None None
-- On each additional exchange..................... $7.50 $7.50 $7.50
ANNUAL FUND OPERATING EXPENSES:
(AS A % OF AVERAGE NET ASSETS)
Investment management and administration fees.......... 0.98% 0.98% 0.98%
12b-1 distribution and service expenses................ None None None
Other expenses (after reimbursements).................. % % %
------- ------- -------
Total Fund Operating Expenses.......................... % % %
------- ------- -------
------- ------- -------
</TABLE>
Prospectus Page 6
<PAGE>
GT GLOBAL THEME FUNDS
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
HYPOTHETICAL EXAMPLE OF EFFECT OF EXPENSES:
An investor would have directly or indirectly paid the following expenses at the
end of the periods shown on a $1,000 investment in the Funds, assuming a 5%
annual return:
<TABLE>
<CAPTION>
GT GLOBAL GT GLOBAL GT GLOBAL
HEALTH CARE TELECOMMUNICATIONS FINANCIAL SERVICES
FUND FUND FUND
--------------------------- ---------------------------- -----------------------------
ONE THREE FIVE TEN ONE THREE FIVE TEN ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS YEAR YEARS YEARS YEARS YEAR YEARS YEARS YEARS
---- ---- ----- ----- ---- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Advisor Class Shares............... $ $ $ $ $ $ $ $ $ $ $ $
</TABLE>
<TABLE>
<CAPTION>
GT GLOBAL
GT GLOBAL GT GLOBAL CONSUMER PRODUCTS
INFRASTRUCTURE NATURAL RESOURCES AND
FUND FUND SERVICES FUND
--------------------------- ---------------------------- -----------------------------
ONE THREE FIVE TEN ONE THREE FIVE TEN ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS YEAR YEARS YEARS YEARS YEAR YEARS YEARS YEARS
---- ---- ----- ----- ---- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Advisor Class Shares............... $ $ $ $ $ $ $ $ $ $ $ $
</TABLE>
- --------------
* THESE TABLES ARE INTENDED TO ASSIST INVESTORS IN UNDERSTANDING THE VARIOUS
COSTS AND EXPENSES ASSOCIATED WITH INVESTING IN THE FUNDS. THE "HYPOTHETICAL
EXAMPLE" IS NOT A REPRESENTATION OF PAST OR FUTURE EXPENSES. THE FUNDS' AND
THE PORTFOLIOS' ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN. The
above tables and the assumption in the Hypothetical Example of a 5% annual
return are required by regulation of the Securities and Exchange Commission
applicable to all mutual funds. The 5% annual return is not a prediction of
and does not represent the Funds' or the Portfolios' projected or actual
performance. With respect to Advisor Class shares, without reimbursements,
"Other expenses" and "Total Fund Operating Expenses" would have been (1)
___% and ___%, respectively, for the Financial Services Fund and its
Portfolio, (2) ___% and ___%, respectively, for the Infrastructure Fund and
its Portfolio; (3) ___% and ___%, respectively, for the Natural Resources
Fund and its Portfolio; and (4) ___% and ___%, respectively, for the
Consumer Products and Services Fund and its Portfolio. 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 comprising or affiliated with Liechtenstein Global Trust invests
in Advisor Class shares of a Fund, such account shall not be subject to
duplicative advisory fees.
The Board of Directors of the Company believes that the aggregate per share
expenses of the Financial Services Fund, Infrastructure Fund, Natural
Resources Fund and Consumer Products and Services Fund and each of their
corresponding Portfolios will be approximately equal to the expenses such
Fund would incur if its assets were invested directly in the type of
securities being held by its corresponding Portfolio.
Prospectus Page 7
<PAGE>
GT GLOBAL THEME FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The tables below provide condensed financial information concerning income and
capital changes for one share of each class of shares of each Fund for the
periods shown. This information is supplemented by the financial statements and
accompanying notes appearing in the Statement of Additional Information. The
financial statements and notes for the fiscal year ended October 31, 1996, have
been audited by Coopers & Lybrand, L.L.P., independent accountants, whose report
thereon is also included in the Statement of Additional Information.
GT GLOBAL HEALTH CARE FUND
<TABLE>
<CAPTION>
CLASS A+
----------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
----------------------------------------------------------------------------------------------
1996 1995* 1994* 1993* 1992 1991 1990
------- ---------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value, beginning of
period....................... $ 19.60 $ 17.86 $ 17.44 $ 19.29 $ 12.83 $ 11.83
------- ---------- ------------ ------------ ------------ ------------ ------------
Income from investment
operations:
Net investment income
(loss)..................... (0.15) (0.22) (0.15) (0.18) 0.03 0.06
Net realized and unrealized
gain (loss) on
investments................ 3.73 2.02 0.57 (1.53) 6.78 0.97
------- ---------- ------------ ------------ ------------ ------------ ------------
Net increase (decrease) from
investment operations...... 3.58 1.80 0.42 (1.71) 6.81 1.03
------- ---------- ------------ ------------ ------------ ------------ ------------
Distributions:
Net investment income....... (0.00) (0.00) (0.00) (0.00) (0.07) (0.03)
Net realized gain on
investments................ (1.34) (0.00) (0.00) (0.14) (0.28) (0.00)
In excess of net realized
gain on investments........ (0.00) (0.06) (0.00) (0.00) (0.00) (0.00)
------- ---------- ------------ ------------ ------------ ------------ ------------
Total distributions....... (1.34) (0.06) (0.00) (0.14) (0.35) (0.03)
------- ---------- ------------ ------------ ------------ ------------ ------------
Net asset value, end of
period....................... $ 21.84 $ 19.60 $ 17.86 $ 17.44 $ 19.29 $ 12.83
------- ---------- ------------ ------------ ------------ ------------ ------------
Total investment return (c)... 19.79% 10.11% 2.4% (8.9)% 54.2% 8.7%
Ratios and supplemental data:
Net assets, end of period
(in 000's)................... $ 426,380 $ 438,940 $ 461,113 $ 655,867 $ 552,897 $ 145,544
Ratio of net investment income
(loss) to average net
assets....................... (0.72)% (1.23)% (0.90)% (0.97)% 0.19% 0.66%
Ratio of expenses to average
net assets:
With expense reduction...... 1.85% 1.98% 2.0% 2.05% 2.01% 2.39%
Without expense reduction... 1.91% (d-%) (d-%) (d-%) (d-%) (d-%)
Portfolio turnover rate +++... 99% 64% 61% 30% 23% 34%
<CAPTION>
AUGUST 7, 1989
(COMMENCEMENT
OF OPERATIONS)
TO OCTOBER 31,
1989
--------------
<S> <C>
Per Share Operating
Performance:
Net asset value, beginning of
period....................... $ 11.43
--------------
Income from investment
operations:
Net investment income
(loss)..................... 0.01
Net realized and unrealized
gain (loss) on
investments................ 0.39
--------------
Net increase (decrease) from
investment operations...... 0.40
--------------
Distributions:
Net investment income....... (0.00)
Net realized gain on
investments................ (0.00)
In excess of net realized
gain on investments........ (0.00)
--------------
Total distributions....... (0.00)
--------------
Net asset value, end of
period....................... $ 11.83
--------------
Total investment return (c)... 3.5%(a)
Ratios and supplemental data:
Net assets, end of period
(in 000's)................... $ 49,903
Ratio of net investment income
(loss) to average net
assets....................... 3.2%(b)
Ratio of expenses to average
net assets:
With expense reduction...... 2.5%(b)
Without expense reduction... -%(d)
Portfolio turnover rate +++... 183%(b)
</TABLE>
- ------------------
+ All capital shares issued and outstanding as of March 31, 1993, were
reclassified as Class A shares.
++ Commencing April 1, 1993, the Fund began offering Class B shares.
+++ Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
* These selected per share data were calculated based upon weighted average
shares outstanding during the period.
** Commencing June 1, 1995, the Fund began offering Advisor Class shares.
(a) Not annualized.
(b) Annualized.
(c) Total investment return does not include sales charges.
(d) Calculation of "Ratios of expenses to average net assets" was made without
considering the effect of expense reduction, if any.
Prospectus Page 8
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL HEALTH CARE FUND
(CONTINUED)
<TABLE>
<CAPTION>
CLASS B++
-----------------------------------------
APRIL 1, ADVISOR CLASS**
1993 ------------------------------
YEAR ENDED OCTOBER 31, TO YEAR ENDED JUNE 1, 1995
---------------------------- OCTOBER 31, OCTOBER 31, TO OCTOBER 31,
1996 1995* 1994* 1993* 1996 1995
---------- ------- ------- ----------- ----------- ----------------
Per Share Operating Performance:
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period........................................... $ 19.46 $ 17.80 $ 15.59 $ 18.66
---------- ------- ------- ----------- ----------- ----------------
Income from investment operations:
Net investment income (loss).................... (0.25) (0.32) (0.14) (0.02)
Net realized and unrealized gain (loss) on
investments.................................... 3.69 2.02 2.35 3.24
---------- ------- ------- ----------- ----------- ----------------
Net increase (decrease) from investment
operations..................................... 3.44 1.70 2.21 3.22
---------- ------- ------- ----------- ----------- ----------------
Distributions:
Net investment income........................... (0.00) (0.00) (0.00) 0.00
Net realized gain on
investments.................................... (1.34) (0.00) (0.00) 0.00
In excess of net realized gain on investments... (0.00) (0.04) (0.00) 0.00
---------- ------- ------- ----------- ----------- ----------------
Total distributions........................... (1.34) (0.04) (0.00) 0.00
---------- ------- ------- ----------- ----------- ----------------
Net asset value, end of period.................... $ 21.56 $ 19.46 $ 17.80 $ 21.88
---------- ------- ------- ----------- ----------- ----------------
---------- ------- ------- ----------- ----------- ----------------
Total investment return (c)....................... 19.17% 9.55% 14.2%(a) 17.10%(a)
Ratios and supplemental data:
Net assets, end of period
(in 000's)....................................... $70,740 $39,100 $ 8,604 $ 539
Ratio of net investment income (loss) to average
net assets....................................... (1.22)% (1.73)% (1.40)%(b) (0.22)%(b)
Ratio of expenses to average net assets:
With expense reduction.......................... 2.35% 2.48% 2.54%(b) 1.35%(b)
Without expense reduction....................... 2.41% -%(d) -%(d) 1.41%(b)
Portfolio turnover rate +++....................... 99% 64% 61% 99%
</TABLE>
- ------------------
+ All capital shares issued and outstanding as of March 31, 1993, were
reclassified as Class A shares.
++ Commencing April 1, 1993, the Fund began offering Class B shares.
+++ Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
* These selected per share data were calculated based upon weighted average
shares outstanding during the period.
** Commencing June 1, 1995, the Fund began offering Advisor Class shares.
(a) Not annualized.
(b) Annualized.
(c) Total investment return does not include sales charges.
(d) Calculation of "Ratios of expenses to average net assets" was made without
considering the effect of expense reduction, if any.
Prospectus Page 9
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL TELECOMMUNICATIONS FUND
<TABLE>
<CAPTION>
CLASS A+
----------------------------------------------------------------
JANUARY 27, 1992
YEAR ENDED OCTOBER 31, (COMMENCEMENT OF
---------------------------------------------- OPERATIONS) TO
1996 1995 1994(C) 1993 OCTOBER 31, 1992
---------- ---------- ---------- ---------- ----------------
Per Share Operating Performance:
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........................ $ 17.80 $ 16.92 $ 11.16 $ 11.43
---------- ---------- ---------- ---------- ----------------
Income from investment operations:
Net investment income (loss).............................. (0.09) (0.01) 0.08 0.14*
Net realized and unrealized gain (loss) on investments.... (0.43) 1.17 5.83 (0.41)
---------- ---------- ---------- ---------- ----------------
Net increase (decrease) from investment operations........ (0.52) 1.16 5.91 (0.27)
---------- ---------- ---------- ---------- ----------------
Distributions:
Net investment income..................................... (0.00) (0.01) (0.15) (0.00)
Net realized gain on investments.......................... (0.86) (0.27) (0.00) (0.00)
---------- ---------- ---------- ---------- ----------------
Total distributions..................................... (0.86) (0.28) (0.15) (0.00)
---------- ---------- ---------- ---------- ----------------
Net asset value, end of period.............................. $ 16.42 $ 17.80 $ 16.92 $ 11.16
---------- ---------- ---------- ---------- ----------------
---------- ---------- ---------- ---------- ----------------
Total investment return (d)................................. (2.88)% 7.02% 53.6% (2.4)%(a)
Ratios and supplemental data:
Net assets, end of period (in 000's)........................ $1,353,722 $1,644,402 $1,223,340 $ 442,862
Ratio of net investment income to average net assets........ (0.49)% (0.02)% 0.8% 2.1%*(b)
Ratio of expenses to average net assets:
With expense reductions................................... 1.77% 1.8% 2.0%(b) 2.3%*(b)
Without expense reductions................................ 1.83% -%(e) -%(e) -%(e)
Portfolio turnover rate+++.................................. 62% 57% 41% 4%(b)
</TABLE>
- ------------------
+ All capital shares issued and outstanding as of March 31, 1993, were
reclassified as Class A shares.
++ Commencing April 1, 1993, the Fund began offering Class B shares.
+++ Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
* Includes reimbursement by the Manager of Fund operating expenses of less
than $0.01. Without such reimbursement, the annualized expense ratio would
have been 2.30% and the annualized ratio of net investment income to average
net assets would have been 2.04%.
** Commencing June 1, 1995, the Fund began offering Advisor Class shares.
(a) Not annualized.
(b) Annualized.
(c) These per share operating performance data were calculated based upon
weighted average shares outstanding during the year.
(d) Total investment return does not include sales charges.
(e) Calculation of "Ratio of expenses to average net assets" was made without
considering the effect of expense reductions, if any.
Prospectus Page 10
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL TELECOMMUNICATIONS FUND
(CONTINUED)
<TABLE>
<CAPTION>
APRIL 1, JUNE 1, 1995
YEAR ENDED OCTOBER 31, 1993 TO YEAR ENDED TO
-------------------------------- OCTOBER 31, OCTOBER 31, OCTOBER 31,
1996 1995 1994(C) 1993 1996 1995
-------- ---------- ---------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
CLASS B++ ADVISOR CLASS**
--------------------------------------------- ---------------------------
Per Share Operating Performance:
Net asset value, beginning of period.............. $ 17.66 $ 16.87 $ 12.68 $ 15.24
-------- ---------- ---------- ----------- ----------- -------------
Income from investment operations:
Net investment income (loss).................... (0.17) (0.10) 0.01 0.00
Net realized and unrealized gain (loss) on
investments.................................... (0.43) 1.17 4.18 1.22
-------- ---------- ---------- ----------- ----------- -------------
Net increase (decrease) from investment
operations..................................... (0.60) 1.07 4.19 1.22
-------- ---------- ---------- ----------- ----------- -------------
Distributions:
Net investment income........................... (0.00) (0.01) (0.00) 0.00
Net realized gain on investments................ (0.86) (0.27) (0.00) 0.00
-------- ---------- ---------- ----------- ----------- -------------
Total distributions........................... (0.86) (0.28) (0.00) 0.00
-------- ---------- ---------- ----------- ----------- -------------
Net asset value, end of period.................... $ 16.20 $ 17.66 $ 16.87 $ 16.46
-------- ---------- ---------- ----------- ----------- -------------
-------- ---------- ---------- ----------- ----------- -------------
Total investment return (d)....................... (3.37)% 6.50% 33.0%(a) 7.94%(a)
Ratios and supplemental data: $1,111,520 $1,184,081 455,335 $ 681
Ratio of net investment income to average net
assets........................................... (0.99)% (0.52)% 0.3%(b) 0.01%(b)
Ratio of expenses to average net assets:
With expense reductions......................... 2.27% 2.3% 2.5%(b) 1.27%(b)
Without expense reductions...................... 2.33% -%(e) -%(e) 1.33%(b)
Portfolio turnover rate+++........................ 62% 57% 41% 62%
</TABLE>
- --------------
+ All capital shares issued and outstanding as of March 31, 1993, were
reclassified as Class A shares.
++ Commencing April 1, 1993, the Fund began offering Class B shares.
+++ Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
* Includes reimbursement by the Manager of Fund operating expenses of less
than $0.01. Without such reimbursement, the annualized expense ratio would
have been 2.30% and the annualized ratio of net investment income to average
net assets would have been 2.04%.
** Commencing June 1, 1995, the Fund began offering Advisor Class shares.
(a) Not annualized.
(b) Annualized.
(c) These per share operating performance data were calculated based upon
weighted average shares outstanding during the year.
(d) Total investment return does not include sales charges.
(e) Calculation of "Ratio of expenses to average net assets" was made without
considering the effect of expense reductions, if any.
Prospectus Page 11
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL FINANCIAL SERVICES FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
-------------------------------------- --------------------------------------
MAY 31, MAY 31,
1994 1994
(COMMENCEMENT COMMENCEMENT
OF OF
YEAR ENDED OPERATIONS) YEAR ENDED OPERATIONS)
OCTOBER 31, TO OCTOBER 31, TO
------------------------- OCTOBER ------------------------- OCTOBER
1996 1995(D) 31, 1994 1996 1995(D) 31, 1994
----------- ----------- ---------- ----------- ----------- ----------
Per Share Operating Performance:
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 11.62 $ 11.43 $ 11.60 $ 11.43
----------- ----------- ---------- ----------- ----------- ----------
Income from investment operations:
Net investment income................. 0.17* 0.02* 0.11* 0.00*
Net realized and unrealized gain on
investments.......................... 0.13 0.17 0.12 0.17
----------- ----------- ---------- ----------- ----------- ----------
Net increase from investment
operations............................. 0.30 0.19 0.23 0.17
----------- ----------- ---------- ----------- ----------- ----------
Net asset value, end of period.......... $ 11.92 $ 11.62 $ 11.83 $ 11.60
----------- ----------- ---------- ----------- ----------- ----------
----------- ----------- ---------- ----------- ----------- ----------
Total investment return (b)............. 2.58% 1.66%(c) 1.98% 1.49%(c)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 5,687 $ 3,175 $ 4,548 $ 2,235
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement from the Manager....... 1.46% 0.66%(a) 0.96% 0.16%(a)
Without expense reductions and
reimbursement from the Manager....... (5.34)% (7.26)%(a) (5.84)% (7.76)%(a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement from the Manager....... 2.34% 2.40%(a) 2.84% 2.90%(a)
Without expense reductions and
reimbursement from the Manager....... 9.14% 10.32%(a) 9.64% 10.82%(a)
Portfolio Turnover Rate (e).............
<CAPTION>
ADVISOR CLASS+
-------------------------
YEAR ENDED JUNE 1, 1995
OCTOBER TO
31, OCTOBER 31,
1996 1995
---------- ------------
Per Share Operating Performance:
<S> <C> <C>
Net asset value, beginning of period.... $ 11.09
---------- ------------
Income from investment operations:
Net investment income................. 0.09*
Net realized and unrealized gain on
investments.......................... 0.77
---------- ------------
Net increase from investment
operations............................. 0.86
---------- ------------
Net asset value, end of period.......... $ 11.95
---------- ------------
---------- ------------
Total investment return (b)............. 7.75%(c)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 31
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement from the Manager....... 1.96%(a)
Without expense reductions and
reimbursement from the Manager....... (4.84)%(a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement from the Manager....... 1.84%(a)
Without expense reductions and
reimbursement from the Manager....... 8.64%(a)
Portfolio Turnover Rate (e).............
</TABLE>
- ------------------
(a) Annualized.
(b) Total investment return does not include sales charges.
(c) Not annualized.
(d) These selected per share data were calculated based upon weighted average
shares outstanding during the period.
(e) GT Global Financial Services Fund invests only in the GT Global Financial
Services Portfolio and does not engage in securities transactions.
Accordingly, the portfolio turnover rates presented are for the GT Global
Financial Services Portfolio.
* Before reimbursement by the Manager, the net investment income per share
would have been reduced by $0.59, $0.59 and $0.30 for Class A, Class B, and
Advisor Class, respectively, for the period ended October 31, 1995, and
$0.23 and $0.23 for Class A and Class B from May 31, 1994 to October 31,
1994.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
Prospectus Page 12
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL INFRASTRUCTURE FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
-------------------------------------------- ------------------------------------------
YEAR ENDED MAY 31, 1994 YEAR ENDED MAY 31, 1994
OCTOBER 31, (COMMENCEMENT OF OCTOBER 31, (COMMENCEMENT OF
------------------------- OPERATIONS) TO ----------------------- OPERATIONS) TO
1996 1995 OCTOBER 31, 1994 1996 1995 OCTOBER 31, 1994
----------- ----------- ---------------- ---------- ---------- ----------------
Per Share Operating Performance:
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period.... $ 12.47 $ 11.43 $ 12.45 $ 11.43
----------- ----------- -------- ---------- ---------- --------
Income from investment operations:
Net investment income (loss).......... (0.03)* 0.01* (0.09)* (0.01)*
Net realized and unrealized gain
(loss) on investments................ (0.33) 1.03 (0.33) 1.03
----------- ----------- -------- ---------- ---------- --------
Net increase (decrease) from
investment operations................ (0.36) 1.04 (0.42) 1.02
----------- ----------- -------- ---------- ---------- --------
Net asset value, end of period.......... $ 12.11 $ 12.47 $ 12.03 $ 12.45
----------- ----------- -------- ---------- ---------- --------
----------- ----------- -------- ---------- ---------- --------
Total investment return (c)............. (2.89)% 9.10%(b) (3.37)% 8.92%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 36,241 $23,615 $ 50,181 $30,954
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by the Manager......... (0.32)% 0.41%(a) (0.82)% (0.09)%(a)
Without expense reductions and
reimbursement by the Manager......... (0.58)% (0.47)%(a) (1.08)% (0.97)%(a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by the Manager......... 2.36% 2.40%(a) 2.86% 2.90%(a)
Without expense reductions and
reimbursement by the Manager......... 2.62% 3.28%(a) 3.12% 3.78%(a)
Portfolio Turnover Rate (d).............
<CAPTION>
ADVISOR CLASS+
------------------------------
JUNE 1, 1995
YEAR ENDED TO
OCTOBER 31, OCTOBER 31,
1996 1995
----------- ----------------
Per Share Operating Performance:
<S> <C> <C>
Net asset value, beginning of period.... $ 12.00
----------- --------
Income from investment operations:
Net investment income (loss).......... 0.02*
Net realized and unrealized gain
(loss) on investments................ 0.12
----------- --------
Net increase (decrease) from
investment operations................ 0.14
----------- --------
Net asset value, end of period.......... $ 12.14
----------- --------
----------- --------
Total investment return (c)............. 1.17%(b)
Ratios and supplemental data:
Net assets, end of period (in 000's).... $ 216
Ratio of net investment income (loss) to
average net assets:
With expense reductions and
reimbursement by the Manager......... 0.18%(a)
Without expense reductions and
reimbursement by the Manager......... (0.08)%(a)
Ratio of expenses to average net assets:
With expense reductions and
reimbursement by the Manager......... 1.86%(a)
Without expense reductions and
reimbursement by the Manager......... 2.12%(a)
Portfolio Turnover Rate (d).............
</TABLE>
- ------------------
(a) Annualized.
(b) Not annualized.
(c) Total investment return does not include sales charges.
(d) GT Global Infrastructure Fund invests only in the GT Global Infrastructure
Portfolio and does not engage in securities transactions. Accordingly, the
portfolio turnover rates presented are for the GT Global Infrastructure
Portfolio.
* Before reimbursement by the Manager, the net investment income per share
would have been reduced by $0.03 for Class A shares, $0.03 for Class B
shares, and $0.02 for Advisor Class for the period ended October 31, 1995.
Net investment income per share would have been reduced by $0.02 for Class A
and Class B from May 31, 1994 to October 31, 1994.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
Prospectus Page 13
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL NATURAL RESOURCES FUND
<TABLE>
<CAPTION>
CLASS A CLASS B
----------------------------------- ---------------------------------- ADVISOR CLASS+
--------------------------
YEAR ENDED MAY 31, 1994 YEAR ENDED MAY 31, 1994 JUNE 1, 1995
OCTOBER 31, COMMENCEMENT OF OCTOBER 31, COMMENCEMENT OF TO
----------------- OPERATIONS) TO ---------------- OPERATIONS) TO OCTOBER 31,
1996 1995 OCTOBER 31, 1994 1996 1995 OCTOBER 31, 1994 1996 1995
-------- ------- ---------------- ------- ------- ---------------- ----------- ------------
Per Share Operating
Performance:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 12.41 $ 11.43 $ 12.38 $ 11.43 $ 11.45
-------- ------- -------- ------- ------- -------- ----------- ------------
Income from investment
operations:
Net investment income
(loss)............... 0.04* 0.06* (0.02)* 0.03* 0.11*
Net realized and
unrealized gain
(loss) on
investments.......... (0.98) 0.92 (0.98) 0.92 (0.09)
-------- ------- -------- ------- ------- -------- ----------- ------------
Net increase (decrease)
from investment
operations............. (0.94) 0.98 (1.00) 0.95 0.02
-------- ------- -------- ------- ------- -------- ----------- ------------
Distributions to
shareholders:
From net investment
income............... (0.03) 0.00 (0.02) 0.00 0.00
-------- ------- -------- ------- ------- -------- ----------- ------------
Total
distributions...... (0.03) 0.00 (0.02) 0.00 0.00
Net asset value, end of
period................. $ 11.44 $ 12.41 $ 11.36 $ 12.38 $ 11.47
-------- ------- -------- ------- ------- -------- ----------- ------------
-------- ------- -------- ------- ------- -------- ----------- ------------
Total investment return
(c).................... (7.58)% 8.57%(b) (8.05)% 8.31%(b) 0.17%(b)
Ratios and supplemental
data:
Net assets, end of
period (in 000's)...... $12,598 $14,797 $13,978 $13,404 $95
Ratio of net investment
income (loss) to
average net assets:
With expense
reductions and
reimbursement from
the Manager.......... 0.41% 2.63%(a) (0.09)% 2.13%(a) 0.91%(a)
Without expense
reductions and
reimbursement from
the Manager.......... (0.69)% 0.65%(a) (1.19)% 0.15%(a) (0.19)%(a)
Ratio of expenses to
average net assets:
With expense
reductions and
reimbursement from
the Manager.......... 2.37% 2.40%(a) 2.87% 2.90%(a) 1.87%(a)
Without expense
reductions and
reimbursement from
the Manager.......... 3.47% 4.38%(a) 3.97% 4.88%(a) 2.97%(a)
Portfolio Turnover Rate
(d)....................
</TABLE>
- ------------------
(a) Annualized.
(b) Not annualized.
(c) Total investment return does not include sales charges.
(d) GT Global Natural Resources Fund invests only in the GT Global Natural
Resources Portfolio and does not engage in securities transactions.
Accordingly, the portfolio turnover rates presented are for the GT Global
Natural Resources Portfolio.
* Before reimbursement by the Manager, the net investment income per share
would have been reduced by $0.14, $0.13 and $0.12 for Class A, Class B, and
Advisor Class, respectively, for the period ended October 31, 1995, and
$0.04 and $0.04 for Class A and Class B, respectively from May 31, 1994 to
October 31, 1994.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
Prospectus Page 14
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
<TABLE>
<CAPTION>
CLASS A CLASS B ADVISOR CLASS+
--------------------------- --------------------------- --------------------------
DECEMBER 30, DECEMBER 30,
1994 1994
(COMMENCEMENT (COMMENCEMENT
OF OF JUNE 1, 1995
YEAR ENDED OPERATIONS) YEAR ENDED OPERATIONS) YEAR ENDED TO
OCTOBER 31, TO OCTOBER OCTOBER 31, TO OCTOBER OCTOBER 31, OCTOBER 31,
1996 31, 1995* 1996 31, 1995* 1996 1995*
----------- ------------- ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of
period............................ $ 11.43 $ 11.43 $ 11.84
----------- ------------- ----------- ------------- ----------- ------------
Income from investment operations:
Net investment income............ 0.02** (0.04)** 0.04**
Net realized and unrealized gain
on investments.................. 3.14 3.14 2.76
----------- ------------- ----------- ------------- ----------- ------------
Net increase from investment
operations...................... 3.16 3.10 2.80
----------- ------------- ----------- ------------- ----------- ------------
Net asset value, end of period..... $ 14.59 $ 14.53 $ 14.64
----------- ------------- ----------- ------------- ----------- ------------
----------- ------------- ----------- ------------- ----------- ------------
Total investment return (c)........ 27.65%(b) 27.12%(b) 23.65%(b)
Ratios and supplemental data:
Net assets, end of period (in
000's)............................ $ 4,082 $ 2,959 $ 164
Ratio of net investment income
(loss) to average net assets:
With expense reductions and
reimbursement by the Manager.... 0.20%(a) (0.30)%(a) 0.70%(a)
Without expense reductions and
reimbursement by the Manager.... (11.11)%(a) (11.61)%(a) (10.61)%(a)
Ratio of expenses to average net
assets:
With expense reductions and
reimbursement by the Manager.... 2.32%(a) 2.82%(a) 1.82%(a)
Without expense reductions and
reimbursement by the Manager.... 13.63%(a) 14.13%(a) 13.13%(a)
Portfolio Turnover Rate (d)........
</TABLE>
- ------------------
(a) Annualized.
(b) Not annualized.
(c) Total investment return does not include sales charges.
(d) GT Global Consumer Products and Services Fund invests only in the GT Global
Consumer Products and Services Portfolio and does not engage in securities
transactions. Accordingly, the portfolio turnover rates presented are for
the GT Global Consumer Products and Services Portfolio.
+ Commencing June 1, 1995, the Fund began offering Advisor Class shares.
* These selected per share data were calculated based upon weighted average
shares outstanding during the period.
** Before reimbursement by the Manager, net investment income per share would
have been reduced by $1.12, $1.04 and $0.61, for Class A, Class B, and
Advisor Class, respectively.
Prospectus Page 15
<PAGE>
GT GLOBAL THEME FUNDS
INVESTMENT OBJECTIVES
AND POLICIES
- --------------------------------------------------------------------------------
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.
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.
GLOBAL FINANCIAL SERVICES INDUSTRIES INVESTMENT. Examples of financial services
companies include commercial banks and savings institutions and loan
associations and their holding companies; consumer and industrial finance
companies; diversified financial services companies; investment banks; insurance
brokerages; securities brokerage and investment advisory companies; real
estate-related companies; leasing companies; and a variety of firms in all
segments of the insurance field such as multi-line, property and casualty and
life insurance and insurance holding companies.
The Manager believes an accelerating rate of global economic interdependence
will lead to significant growth in the demand for financial services. In
addition, in the Manager's view, as the industries evolve, opportunities will
emerge for those companies positioned for the future. Thus, 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.
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.
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.
GLOBAL INFRASTRUCTURE INDUSTRIES INVESTMENT. Examples of infrastructure
companies include those engaged in designing, developing or providing the
following products and services: electricity production; oil, gas, and coal
exploration, development, production and distribution; water supply, including
water treatment facilities; nuclear power and other alternative energy sources;
transportation, including the construction or operation of transportation
systems; steel, concrete, or similar types of products; communications equipment
and services (including
Prospectus Page 16
<PAGE>
GT GLOBAL THEME FUNDS
equipment and services for both data and voice transmission); mobile
communications and cellular radio/paging; emerging technologies combining
telephone, television and/or computer systems; and other products and services,
which, in the Manager's judgment, constitute services significant to the
development of a country's infrastructure.
The Manager believes that a country's infrastructure is one key to the long-term
success of that country's economy. The Manager believes that adequate energy,
transportation, water, and communications systems are essential elements for
long-term economic growth. The Manager believes that many developing nations,
especially in Asia and Latin America, plan to make significant expenditures to
the development of their infrastructure in the coming years, which is expected
to facilitate increased levels of services and manufactured goods.
In the developed countries of North America, Europe, Japan and the south
Pacific, the Manager expects that the replacement and upgrade of transportation
and communications systems should stimulate growth in the infrastructure
industries of those countries. In addition, in the Manager's view, deregulation
of telecommunications and electric and gas utilities in many countries is
promoting significant changes in these 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. In addition, the long-term growth rates of
certain foreign countries' economies may be substantially higher than the
long-term growth rate of the U.S. economy. An integral aspect of certain foreign
countries' economies may be the development or improvement of their
infrastructure.
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
the opinion of the Manager, stand to benefit from developments in the natural
resource industries.
GLOBAL NATURAL RESOURCE INDUSTRIES INVESTMENT. Examples of natural resource
companies include those which own, explore or develop: energy sources (such as
oil, gas and coal); ferrous and non-ferrous metals (such as iron, aluminum,
copper, nickel, zinc and lead), strategic metals (such as uranium and titanium)
and precious metals (such as gold, silver and platinum); chemicals; forest
products (such as timber, coated and uncoated tree sheet, pulp and newsprint);
other basic commodities (such as foodstuffs); refined products (such as
chemicals and steel) and service companies that sell to these producers and
refiners; and other products and services, which, in the Manager's opinion are
significant to the ownership and development of natural resources and other
basic commodities.
The Manager believes that the liberalization of formerly socialist economies
will bring about dramatic changes in both the supply and demand for natural
resources. In addition, rapid industrialization in developing countries of Asia
and Latin America is generating new demands for industrial materials that are
affecting world commodities markets. The Manager believes these changes are
likely to create investment opportunities that benefit from new sources of
supply and/or from changes in commodities prices.
The Manager believes that investments in natural resource industries offer an
opportunity to protect wealth against the capital-eroding effects of inflation.
During periods of accelerating inflation or currency uncertainty, worldwide
investment demand for natural resources, particularly precious
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metals, tends to increase, and during periods of disinflation or currency
stability, it tends to decrease. The Manager believes that rising commodity
prices and increasing worldwide industrial production may favorably affect share
prices of natural resource companies, and investments in such companies can
offer excellent opportunities to offset the effects of inflation.
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.
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.
GLOBAL CONSUMER PRODUCTS AND SERVICES INDUSTRIES INVESTMENT. Examples of
consumer products and services companies include those that manufacture, market,
retail, or distribute: (i) durable goods, such as homes, household goods,
automobiles, boats, furniture and appliances, and computers; (ii) non-durable
goods, such as food and beverages and apparel; (iii) media, entertainment,
broadcasting, publishing and sports-related goods and services, such as
television and radio broadcast, motion pictures, wireless communications, gaming
casinos, theme parks, restaurants and lodging; and (iv) goods and services to
companies in the foregoing industries such as advertisers, textile companies and
distribution and shipping companies.
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. Emerging economies, such as those in China, Southeast
Asia, the Eastern Europe and Latin America, offer opportunities for the growth
and expansion of consumer markets. These regions currently comprise a growing
source of inexpensive consumer products for export and a growing source of
demand for consumer products and services as the disposable incomes of their
populations increase. In the Manager's view, these changes are likely to create
investment opportunities in companies, both local and multinational, that are
able to employ innovative manufacturing, marketing, retailing and distribution
methods to open new markets and/or expand existing markets.
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.
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
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outside of the health care industry, which, in the opinion of the Manager, stand
to benefit from developments in the health care industries.
GLOBAL HEALTH CARE INDUSTRIES INVESTMENT. Examples of health care companies
include those that are substantially engaged in the design, manufacture or sale
of products or services used for or in connection with health care or medicine.
Such firms may include pharmaceutical companies; firms that design, manufacture,
sell or supply medical, dental and optical products, hardware or services;
companies involved in biotechnology, medical diagnostic, and biochemical
research and development; and companies involved in the ownership and/or
operation of health care facilities.
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.
The Manager believes that the global health care industries offer attractive
long-term supply/demand dynamics. While the U.S., Western Europe, and Japan
presently account for over 90% of health care expenditures, this should change
dramatically in the coming decade if the populations of developing countries
devote an increasing percentage of income to health care. Additionally, the
Manager believes demographics on aging point to a significant increase in demand
from the industrialized nations, as the elderly account for a growing proportion
of worldwide health care spending. Finally, in the Manager's view, technology
will continue to expand the range of products and services offered, with new
drugs, medical devices and surgical procedures addressing medical conditions
previously considered untreatable.
In addition to these underlying trends, the United States is presently
experiencing a period of rapid and profound change in its own health care
system, marked by the rise of managed care, the formation of health care
delivery networks, and widespread consolidation across all segments of the
industry. The Manager believes that this transition offers investment
opportunities in those companies acting as consolidators or otherwise gaining
market share at the expense of less efficient competitors.
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.
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.
GLOBAL TELECOMMUNICATIONS INDUSTRIES INVESTMENT. The telecommunications industry
is composed of a variety of sectors, ranging from companies concentrating on
established technologies to those primarily engaged in emerging or developing
technologies. The characteristics of companies focusing on the same technology
will vary among countries depending upon the extent to which the technology is
established in the particular country. The Manager will allocate the Fund's
investments among these sectors depending upon its assessment of their relative
long-term growth potentials.
Examples of telecommunications companies include those engaged in designing,
developing or providing the following products and services: communications
equipment and services (including equipment and services for both data and voice
transmission); electronic components and equipment; broadcasting (including
television and radio, satellite, microwave and cable television and
narrowcasting); computer equipment, mobile communications and cellular
radio/paging; electronic mail; local and wide area networking and linkage of
word and data processing systems; publishing and information systems; videotext
and
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teletext; and emerging technologies combining telephone, television and/or
computer systems.
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.
SELECTION OF INVESTMENTS AND ASSET ALLOCATION. Each Theme Portfolio expects
that, from time to time, a significant portion of its assets may be invested in
the securities of domestic issuers. Each industry represented in the Theme
Portfolios, however, is a global industry with significant, growing markets
outside of the United States. A sizeable proportion of the companies which
comprise such industries are headquartered outside of the United States.
For these reasons, the Manager believes that a portfolio composed only of
securities of U.S. issuers does not provide the greatest potential for return
from a Theme Portfolio investment. The Manager uses its financial expertise in
markets located throughout the world and the substantial global resources of
Liechtenstein Global Trust in attempting to identify those countries and
companies then providing the greatest potential for long-term capital
appreciation. In this fashion, the Manager seeks to enable shareholders to
capitalize on the substantial investment opportunities and the potential for
long-term growth of capital presented by the global industries represented in
the Theme Portfolios.
The Manager allocates each Theme Portfolio's assets among securities of
countries and in currency denominations where opportunities for meeting each
Theme Portfolio's investment objective are expected to be the most attractive.
Each Theme Portfolio may invest substantially in securities denominated in one
or more currencies. Under normal conditions, each Theme Portfolio invests in the
securities of issuers located in at least three countries, including the United
States; investments in securities of issuers in any one country, other than the
United States, will represent no more than 40% of the Financial Services
Portfolio's and the Telecommunication Fund's total assets, and no more than 50%
of the Infrastructure Portfolio's, the Natural Resources Portfolio's, the Health
Care Fund's and the Consumer Products and Services Portfolio's total assets.
In analyzing specific companies for possible investment, the Manager ordinarily
looks for several of the following characteristics: above-average per share
earnings growth; high return on invested capital; a healthy balance sheet; sound
financial and accounting policies and overall financial strength; strong
competitive advantages; effective research and product development and
marketing; development of new technologies; efficient service; pricing
flexibility; strong management; and general operating characteristics that will
enable the companies to compete successfully in their respective markets.
In assessing companies for the Natural Resources Portfolio, the Manager will
also 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.
TEMPORARY DEFENSIVE STRATEGIES. In the interest of preserving shareholders'
capital, 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 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, most or all of each Theme
Portfolio's investments may be made in the United States and denominated in U.S.
dollars. To the extent any 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 Fund shares or to
meet its ordinary daily cash needs, each 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.
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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 Theme Portfolios in privatizations in
appropriate circumstances. In certain foreign countries, the ability of foreign
entities such as the Theme Portfolios to participate in privatizations may be
limited by local law, or the terms on which the Theme Portfolios 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.
INVESTMENTS IN OTHER INVESTMENT COMPANIES. Each Theme Portfolio may invest up to
10% of its total assets in other investment companies. As a shareholder in an
investment company, that Theme Portfolio would bear its ratable share of that
investment company's expenses, including its advisory and administration fees.
At the same time, the Theme Portfolio would continue to pay its own management
fees and other expenses.
BORROWING, REVERSE REPURCHASE AGREEMENTS AND ROLL TRANSACTIONS. A Theme
Portfolio may borrow from banks or may borrow through reverse repurchase
agreements and "roll" transactions in connection with meeting requests for the
redemptions of a Theme Portfolio's shares. A Theme Portfolio also may borrow up
to 5% of its total assets for temporary or emergency purposes other than to meet
redemptions. A Theme Portfolio may borrow up to 33 1/3% of total assets.
However, no additional investments will be made if a Theme Portfolio's
borrowings exceed 5% of its total assets. Any borrowing by a Theme Portfolio may
cause greater fluctuation in the value of its shares than would be the case if a
Theme Portfolio did not borrow.
A reverse repurchase agreement is a borrowing transaction in which a 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. A "roll"
borrowing transaction involves a Theme Portfolio's sale of securities together
with its commitment (for which that Theme Portfolio may receive a fee) to
purchase similar, but not identical, securities at a future date.
SECURITIES LENDING. Each Theme Portfolio may lend its portfolio securities to
broker/dealers or to other institutional investors. Securities Lending allows
the Theme Portfolios to retain ownership of the securities loaned and, at the
same time earn additional income that may be used to offset a Theme Portfolio's
custody fees. Each Theme Portfolio limits its loans of portfolio securities to
an aggregate of 30% of the value of its total assets, measured at the time any
such loan is made. While a loan is outstanding, the borrower must maintain with
the Theme Portfolio's custodian collateral consisting of cash, U.S. government
securities equal to at least the value of the borrowed securities, plus any
accrued interest. 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.
WHEN-ISSUED OR FORWARD COMMITMENT SECURITIES. The Theme Portfolios may purchase
debt securities on a "when-issued" basis and may purchase or sell such
securities on a "forward commitment" basis in order to hedge against anticipated
changes in interest rates and prices. The price, which is generally expressed in
yield terms, is fixed at the time the commitment is made, but delivery and
payment for the securities take place at a later date. When-issued securities
and forward commitments may be sold prior to the settlement date, but a Theme
Portfolio will purchase or sell when-issued securities or enter into forward
commitments only with the intention of actually receiving or delivering the
securities, as the case may be. No income accrues on securities which have been
purchased pursuant to a forward commitment or on a when-issued basis prior to
delivery to the Theme Portfolio. If the Theme Portfolio disposes of the right to
acquire a when-issued security prior to its acquisition or disposes of its right
to deliver or receive against a forward commitment, it may incur a gain or loss.
At the time a Theme Portfolio enters into a transaction on a when-issued or
forward commitment basis, a segregated account consisting of cash or liquid
securities equal to the value of the when-issued or forward commitment
securities will be established and maintained with its custodian and will be
marked to market daily. There is a risk that the securities may not be delivered
and that the Theme Portfolio may incur a loss.
OPTIONS, FUTURES AND FORWARD CURRENCY TRANSACTIONS. Each Theme Portfolio may use
forward currency contracts, futures contracts, options on
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GT GLOBAL THEME FUNDS
securities, options on indices, options on currencies and options on futures
contracts to attempt to hedge against the overall level of investment and
currency risk normally associated with the portfolio. These instruments are
often referred to as "derivatives," which may be defined as financial
instruments whose performance is derived, at least in part, from the performance
of another asset (such as a security, currency or an index of securities). Each
Theme Portfolio may enter into such instruments up to the full value of its
portfolio assets. See "Risk Factors -- Options, Futures and Forward Currency
Transactions" herein and "Options, Futures and Forward Currency Strategies" in
the Statement of Additional Information.
To attempt to hedge against adverse movements in exchange rates between
currencies, each Theme Portfolio may enter into forward currency contracts for
the purchase or sale of a specified currency at a specified future date. Such
contracts may involve the purchase or sale of a foreign currency against the
U.S. dollar or may involve two foreign currencies. The Theme Portfolios may
enter into forward currency contracts either with respect to specific
transactions or with respect to that Theme Portfolio's portfolio positions. Each
Theme Portfolio also may purchase and sell put and call options on currencies,
futures contracts on currencies and options on such futures contracts to hedge
against movements in exchange rates.
In addition, a Theme Portfolio may purchase and sell put and call options on
equity and debt securities to hedge against the risk of fluctuations in the
prices of securities held by that Theme Portfolio or that the Manager intends to
include in the Theme Portfolio's portfolio. The Theme Portfolio also may
purchase and sell put and call options on stock indexes to hedge against overall
fluctuations in the securities markets generally or in a specific market sector.
Further, a Theme Portfolio may sell stock index futures contracts and may
purchase put options or write call options on such futures contracts to protect
against a general stock market decline or a decline in a specific market sector
that could affect adversely a Theme Portfolio's holdings. A Theme Portfolio also
may purchase stock index futures contracts and purchase call options or write
put options on such contracts to hedge against a general stock market or market
sector advance and thereby attempt to lessen the cost of future securities
acquisitions. A Theme Portfolio may use interest rate futures contracts and
options thereon to hedge the debt portion of its portfolio against changes in
the general level of interest rates.
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GT GLOBAL THEME FUNDS
RISK FACTORS
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GENERAL. There is no assurance that any Fund or Portfolio will achieve its
investment objective. The Funds' net asset values will fluctuate reflecting
fluctuations in the market value of the Theme Portfolios' portfolio positions.
Equity Securities, particularly common stocks, generally represent the most
junior position in an issuer's capital structure, and entitle holders to an
interest in the assets of an issuer, if any, remaining after all more senior
claims have been satisfied. In addition, the value of debt securities held by a
Theme Portfolio generally will fluctuate with changes in the perceived
creditworthiness of the issuers of such securities and interest rates.
Because of the focus of each Theme Portfolio on its 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 Fund will be especially susceptible to factors affecting the
industries in which it focuses. Accordingly, no Fund should be considered as a
complete investment program.
FINANCIAL SERVICES FUND AND FINANCIAL SERVICES PORTFOLIO. Financial services
industries may be subject to greater governmental regulation than many other
industries and changes in governmental policies and the need for regulatory
approvals may have a material effect on the services of this industry.
Governmental regulation may limit both the financial commitments banks can make,
including the amounts and types of loans, and the interest rates and fees they
can charge. In addition, government regulation in certain foreign countries may
impose interest rate controls, credit controls and price controls.
Companies in the financial services sector are subject to rapid business
changes, significant competition, value fluctuations due to the concentration of
loans in particular industries significantly affected by economic conditions
(such as real estate or energy) and volatile performance dependent upon the
availability and cost of capital and prevailing interest rates. In addition,
general economic conditions significantly affect these companies. Credit and
other losses resulting from the financial difficulty of borrowers or other third
parties potentially may have an adverse effect on companies in these industries.
Foreign banks, particularly those of Japan, have reported financial difficulties
attributed to increased competition, regulatory changes, and general economic
difficulties.
The financial services area in the United States currently is changing
relatively rapidly as existing distinctions between various financial service
segments become less clear. For instance, recent business combinations have
included insurance, finance, and securities brokerage under single ownership.
Some primarily retail corporations have expanded into securities and insurance
fields. Investment banking, securities brokerage and investment advisory
companies are subject to government regulation and risk due to securities
trading and underwriting activities.
Many of the investment considerations discussed in connection with banks,
savings institutions and loan associations, and finance companies also apply to
insurance companies. The performance of insurance company investments will be
subject to risk from several factors. The earnings of insurance companies will
be affected by interest rates, pricing (including severe pricing competition,
from time to time), claims activity, marketing competition and general economic
conditions. Particular insurance lines also will be influenced by specific
matters. Property and casualty insurer profits may be affected by certain
weather catastrophes and other disasters. Life and health insurer profits may be
affected by mortality and morbidity rates. Individual companies may be exposed
to material risks, including reserve inadequacy, problems in investment
portfolios (due to real estate or "junk" bond holdings, for example), and the
inability to collect from reinsurance carriers. Insurance companies are subject
to extensive governmental regulation, including the imposition of maximum rate
levels, which may not be adequate for some lines of business. Proposed or
potential anti-trust or tax law changes also may affect adversely insurance
companies' policy sales, tax obligations and profitability.
INFRASTRUCTURE FUND AND INFRASTRUCTURE PORTFOLIO. Infrastructure industries may
be subject to greater
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GT GLOBAL THEME FUNDS
political, environmental and other governmental regulation than many other
industries. The nature of such regulation continues to evolve in both the United
States and foreign countries, and changes in governmental policy and the need
for regulatory approvals may have a material effect on the products and services
of this industry. Electric, gas, water and most telecommunications companies in
the United States, for example, are subject to both federal and state regulation
affecting permitted rates of return and the kinds of services that may be
offered. Governmental regulation may also hamper the development of new
technologies.
In addition, many infrastructure companies have historically been subject to the
risks attendant to increases in fuel and other operating costs, high interest
costs on borrowed funds, costs associated with compliance with environmental and
other safety regulations and changes in the regulatory climate. Further,
competition is intense for many infrastructure companies. As a result, many of
these companies may be adversely affected in the future and such companies may
be subject to increased share price volatility. In addition, many companies have
diversified into oil and gas exploration and development, and therefore returns
may be more sensitive to energy prices. Other infrastructure companies, such as
water supply companies, are in a highly fragmented industry due to local
ownership. Generally these companies are mature and are experiencing little or
no growth. Changes in prevailing interest rates may also affect the
Infrastructure Fund's share values because prices of equity and debt securities
of infrastructure companies often tend to increase when interest rates decline
and decrease when interest rates rise.
NATURAL RESOURCES FUND AND NATURAL RESOURCES PORTFOLIO. Natural resource
industries may be subject to greater political, environmental and other
governmental regulation than many other industries. The nature of such
regulation continues to evolve in both the United States and foreign countries,
and changes in governmental policies and the need for regulatory approvals may
have a material effect on the products and services of natural resource
companies. For example, the exploration, development and distribution of coal,
oil and gas in the United States are subject to significant federal and state
regulation, which may affect rates of return on such investments and the kinds
of services that may be offered. Governmental regulations may also hamper the
development of new technologies.
In addition, many natural resource companies historically have been subject to
significant costs associated with compliance with environmental and other safety
regulations and changes in the regulatory climate. Further, competition is
intense for many natural resource companies. As a result, many of these
companies may be adversely affected in the future and the value of the
securities issued by such companies may be subject to increased share price
volatility.
The value of the Natural Resources Portfolio's securities will fluctuate in
response to stock market developments, as well as market conditions for the
particular natural resources with which the issuer is involved. The price of the
commodity will fluctuate due to changes in worldwide levels of inventory, and
changes, perceived or actual, in production and consumption. The values of
natural resources may fluctuate directly with respect to various stages of the
inflationary cycle and perceived inflationary trends and are subject to numerous
factors, including national and international politics. The Natural Resources
Portfolio's investments in precious metals are subject to many risks, including
substantial price fluctuations over short periods of time. Further, the Natural
Resources Portfolio's investments in companies are expected to be subject to
irregular fluctuations in earnings, because these companies are affected by
changes in the availability of money, the level of interest rates, and other
factors.
CONSUMER PRODUCTS AND SERVICES FUND AND CONSUMER PRODUCTS AND SERVICES
PORTFOLIO. The performance of consumer products and services companies relates
closely to the actual or perceived performance of the overall economy, interest
rates and consumer confidence. In addition, changes in demographics and consumer
tastes may also affect the demand for, and success of, particular consumer
products and services. Many consumer products and services companies have
unpredictable earnings, due in part to changes in consumer tastes and intense
competition. As a result, such companies may be subject to increased share price
volatility. The consumer products and services may also be subject to greater
government regulation, including trade regulation, than many other industries.
Changes in governmental policy and the need for regulatory approvals may have a
material effect on the products and services of the consumer products and
services industries. Such governmental regulations may also hamper the
development of new business opportunities.
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GT GLOBAL THEME FUNDS
HEALTH CARE FUND. Health care industries generally are subject to substantial
government regulation and approval of its products and services. Changes in
governmental policy or regulation could have a material effect on the demand for
products and services offered by health care companies and therefore could
affect the performance of the Health Care Fund. In addition, the products and
services offered by such companies may be subject to rapid obsolescence caused
by technological and scientific advances.
TELECOMMUNICATIONS FUND. Telecommunications industries may be subject to greater
governmental regulation than many other industries and changes in governmental
policy and the need for regulatory approvals may have a material effect on the
products and services of this industry. Telephone operating companies in the
United States, for example, are subject to both federal and state regulation
affecting permitted rates of return and the kinds of services that may be
offered. Certain types of companies in the telecommunications industries are
engaged in fierce competition for market share that could result in increased
share price volatility.
FOREIGN INVESTING. Investing in foreign securities entails certain risks. The
securities of non-U.S. issuers generally will not be registered with, nor the
issuers thereof be subject to, the reporting requirements of the SEC.
Accordingly, there may be less publicly available information about foreign
securities and issuers than is available about domestic securities and issuers.
Foreign companies generally are not subject to uniform accounting, auditing and
financial reporting standards, practices and requirements comparable to those
applicable to domestic companies. In addition, certain costs attributable to
foreign investing, such as custody charges, are higher than those attributable
to domestic investing. Securities of some foreign companies are less liquid and
their prices may be more volatile than securities of comparable domestic
companies. The Theme Portfolios' interest and dividends from foreign issuers may
be subject to non-U.S. withholding taxes, thereby reducing the Theme Portfolios'
net investment income.
With respect to some foreign countries, there is the increased possibility of
expropriation or confiscatory taxation, limitations on the removal of funds or
other assets of the Theme Portfolios, political or social instability, or
diplomatic developments which could affect the Theme Portfolios' investments in
those countries. Moreover, individual foreign economies may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross national
product, rate of inflation, rate of savings and capital reinvestment, resource
self-sufficiency and balance of payments positions.
Each Theme Portfolio may invest in issuers domiciled in emerging markets.
Investing in emerging market countries involves risks in addition to those risks
involved in foreign investing. Many emerging market countries have experienced
high rates of inflation for many years. In addition, emerging markets generally
are dependent heavily upon international trade and, accordingly, have been and
continue to be affected adversely by trade barriers, exchange controls, managed
adjustments in relative currency values and other protectionist measures imposed
or negotiated by the countries with which they trade. The securities markets of
emerging market countries are substantially smaller, less developed, less liquid
and more volatile than the securities markets of the developed countries. In
addition, issuers in emerging markets typically are subject to a greater degree
of change in earnings and business prospects than issuers in developed
countries.
The Theme Portfolios will also be affected favorably or unfavorably by exchange
control regulations or changes in the exchange rates between foreign currencies
and the U.S. dollar. Changes in currency exchange rates will influence the value
of the Funds' shares, and also may affect the value of dividends and interest
earned by the Theme Portfolios and gains and losses realized by the Theme
Portfolios.
LOWER QUALITY DEBT SECURITIES. 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. While such lower quality debt will
likely have some
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GT GLOBAL THEME FUNDS
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 are also 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. See
"Description of Debt Ratings" in the Statement of Additional Information for a
full discussion of Moody's and S&P's ratings.
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 Theme Portfolios. If an issuer exercises these provisions in a
declining interest rate market, the Theme Portfolios may have to replace the
security with a lower yielding security, resulting in a decreased return for
investors. In addition, the 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 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 Theme Portfolios to obtain
accurate market quotations for purposes of valuing the Theme Portfolios
portfolio investments. The 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 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. A 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 Theme Portfolio may have
limited legal recourse in the event of a default.
ILLIQUID SECURITIES. The Financial Services Portfolio, Infrastructure Portfolio,
Natural Resources Portfolio, Consumer Products and Services Portfolio and
Telecommunications Fund each may invest up to 15% of its net assets, and the
Health Care Fund up to 10% of its total assets, in securities for which no
readily available market exists, so-called "Illiquid Securities." The Manager
believes that carefully selected investments in joint ventures, cooperatives,
partnerships and state enterprises which are illiquid (collectively, "Special
Situations") could enable the Portfolio to achieve capital appreciation
substantially exceeding the appreciation the Portfolio would realize if it did
not make such investments. However, in order to attempt to
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GT GLOBAL THEME FUNDS
limit investment risk, each of the Theme Portfolios will invest no more than 5%
of its total assets in Special Situations.
Illiquid securities may be more difficult to value than liquid securities and
the sale of illiquid securities generally will require more time and result in
higher brokerage charges or dealer discounts and other selling expenses than the
sale of liquid securities. Moreover, illiquid restricted securities often sell
at a price lower than similar securities that are not subject to restrictions on
resale.
OPTIONS, FUTURES AND FORWARD CURRENCY TRANSACTIONS. Although each Theme
Portfolio is authorized to enter into options, futures and forward currency
transactions, a Portfolio might not enter into any such transactions. Options,
futures and foreign currency transactions involve certain risks, which include:
(1) dependence on the Manager's ability to predict movements in the prices of
individual securities, fluctuations in the general securities markets or in the
appropriate market sector and movements in interest rates and currency markets;
(2) imperfect correlation, or even no correlation, between movements in the
price of options, forward contracts, futures contracts or options thereon and
movements in the price of the currency or security hedged or used for cover; (3)
the fact that skills and techniques needed to trade options, futures contracts
and options thereon or to use forward currency contracts are different from
those needed to select the securities in which a Theme Portfolio invests; (4)
lack of assurance that a liquid secondary market will exist for any particular
option, futures contract or option thereon at any particular time; (5) the
possible loss of principal under certain conditions; (6) the possible inability
of a Theme Portfolio to purchase or sell a portfolio security at a time when it
would otherwise be favorable for it to do so, or the possible need for a Theme
Portfolio to sell a security at a disadvantageous time, due to the need for the
Theme Portfolio to maintain "cover" or to set aside securities in connection
with hedging transactions; and (6) the possible need to defer closing out of
certain options, futures contracts and options thereon and forward currency
contracts in order to qualify or continue to qualify for the beneficial tax
treatment afforded regulated investment companies under the Internal Revenue
Code of 1986, as amended ("Code"). See "Dividends, Other Distributions and
Federal Income Taxation" herein and "Taxes" in the Statement of Additional
Information.
INVESTING IN SMALLER COMPANIES. While each Theme Portfolio's portfolio normally
will include securities of established suppliers of traditional products and
services, each Theme Portfolio may invest in smaller companies which can benefit
from the development of new products and services. These smaller companies may
present greater opportunities for capital appreciation, but may also involve
greater risks than large, established issuers. Such smaller companies may have
limited product lines, markets or financial resources, and their securities may
trade less frequently and in more limited volume than the securities of larger,
more established companies. As a result, the prices of the securities of such
smaller companies may fluctuate to a greater degree than the prices of the
securities of other issuers.
OTHER INFORMATION. The investment objective of each Fund may not be changed
without the approval of a majority of that Fund's outstanding voting securities.
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, each Fund has adopted certain investment limitations which
also may not be changed without shareholder approval. A complete description of
these limitations is included in the Statement of Additional Information. Unless
specifically noted, the Funds' investment policies described in this Prospectus,
and in the Statement of Additional Information are not fundamental policies and
may be changed by vote of the Company's Board of Directors without shareholder
approval. Each Fund's policies regarding concentration and lending, and the
percentage of that Fund's assets that may be committed to borrowing, are
fundamental policies and may not be changed without shareholder approval.
The approval of the Financial Services Fund, Infrastructure Fund, Natural
Resources Fund and Consumer Products and Services Fund and of other investors in
their corresponding Portfolio, if any, is not required to change the investment
objective, policies or limitations of that Portfolio, unless otherwise
specified. Written notice shall be provided to shareholders of such Fund thirty
days prior to any changes in its corresponding Portfolio's investment objective.
OTHER INFORMATION REGARDING THE PORTFOLIOS. As previously described, the
Financial Services Fund, Infrastructure Fund, Natural Resources Fund and
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GT GLOBAL THEME FUNDS
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.
The Financial Services Fund, Infrastructure Fund, Natural Resources Fund and
Consumer Products and Services Fund may each redeem 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 that Fund and its shareholders to
do so. A change in a Portfolio's investment objective, policies or limitations
which is not approved by the Board or the shareholders of the corresponding Fund
could require the Fund to redeem its interest in the Portfolio. Any such
redemption could result in a distribution in kind of portfolio securities (as
opposed to a cash distribution) by the portfolio. Should such a distribution
occur, the Fund could incur brokerage fees or other transaction costs in
converting such securities to cash. In addition, a distribution in kind could
result in a less diversified portfolio of investments for the Fund and could
adversely affect the liquidity of the Fund. The Board would consider what action
might be taken, including the investment of all the investable assets of that
Fund in another pooled investment entity having substantially the same
investment objective as that Fund or the retention by that Fund of its own
investment adviser to manage that Fund's assets in accordance with the
investment objective, policies and limitations discussed herein with respect to
each such Fund and its investment in its corresponding Portfolio.
In addition to selling its interest to its corresponding Fund, the Financial
Services Portfolio, Infrastructure Portfolio, Natural Resources Portfolio and
Consumer Products and Services Portfolio may each sell its interests to other
non-affiliated investment companies and/or other institutional investors. All
institutional investors in a Portfolio will pay a proportionate share of that
Portfolio's expenses and will invest in that Portfolio on the same terms and
conditions. However, if another investment company invests all of its assets in
a Portfolio, it would not be required to sell its shares at the same public
offering price as the Portfolio's corresponding Fund and may charge different
sales commissions. Therefore, investors in the Financial Services Fund,
Infrastructure Fund, Natural Resources Fund and Consumer Products and Services
Fund may experience different returns from investors in another investment
company which invests exclusively in its corresponding Portfolio. As of the date
of this Prospectus, the Financial Services Fund, Infrastructure Fund, Natural
Resources Fund and Consumer Products and Services Fund are the only
institutional investors in their corresponding Portfolios.
The Financial Services Fund, Infrastructure Fund, Natural Resources Fund and
Consumer Products and Services Fund may each be materially affected by the
actions of large investors in its corresponding Portfolio, if any. For example,
as with all open-end investment companies, if a large investor were to redeem
its interest in a Portfolio, (1) that Portfolio's remaining investors could
experience higher pro rata operating expenses, thereby producing lower returns;
and (2) that Portfolio's security holdings may become less diverse, resulting in
increased risk. Institutional investors in a Portfolio that have a greater pro
rata ownership interest in that Portfolio than its corresponding Fund could have
effective voting control over the operation of that Portfolio.
Prospectus Page 28
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GT GLOBAL 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 a
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 comprising or affiliated with Liechtenstein
Global Trust; and (e) any of the companies comprising 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
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 Funds and GT Global reserve the right to
reject any purchase order and to suspend the offering of shares for a period of
time.
For more information on how to purchase shares, please contact your Financial
Advisor or GT Global.
PURCHASES BY BANK WIRE. Shares of the Funds 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 a 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 a 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 Funds' shares will not be
issued unless a written request is submitted to the Transfer Agent. Shares of
the Funds 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 FUNDS 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 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
Prospectus Page 29
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GT GLOBAL THEME FUNDS
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) 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 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
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 brokers may charge a fee for
establishing accounts relating to the Program. Investors should contact their
brokers or GT Global for more information.
Prospectus Page 30
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GT GLOBAL THEME FUNDS
HOW TO MAKE EXCHANGES
- --------------------------------------------------------------------------------
Advisor Class shares of any Fund may only be exchanged for Advisor Class shares
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
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 Funds, 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
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.
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
Funds, 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 Funds employ reasonable procedures to
confirm that instructions communicated by telephone are genuine, including
requiring some form of personal identification prior to acting upon instructions
received by telephone, providing written confirmation of such transactions,
and/or tape recording of telephone instructions. The Funds may be liable for any
losses due to unauthorized or fraudulent instructions if they do 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.
OTHER INFORMATION ABOUT EXCHANGES. Purchases, redemptions and exchanges should
be made for investment purposes only. A pattern of frequent exchanges, purchases
and sales is not acceptable and can be limited by the Funds' or GT Global's
refusal to accept further purchase and exchange orders. The terms of the
exchange offer described above may be modified at any time, on 60 days' prior
written notice.
Prospectus Page 31
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GT GLOBAL THEME FUNDS
HOW TO REDEEM SHARES
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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
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.
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 OF RECORD.
Shareholders automatically have telephone privileges to authorize redemptions.
The Funds, 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 Funds employ reasonable procedures to
confirm that instructions communicated by telephone are genuine, including
requiring some form of personal identification prior to acting upon instructions
received by telephone, providing written confirmation of such transactions,
and/or tape recording of telephone instructions. The Funds may be liable for any
losses due to unauthorized or fraudulent instructions if they do not follow
reasonable procedures.
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.
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 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
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GT GLOBAL THEME FUNDS
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 Funds have not
yet received good payment, the Funds may delay payment of redemption proceeds
until they have assured themselves 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 Global 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.
Prospectus Page 33
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GT GLOBAL THEME FUNDS
SHAREHOLDER ACCOUNT MANUAL
- --------------------------------------------------------------------------------
Purchase, exchange and redemption orders may be placed in accordance with this
Manual. PLEASE BE CAREFUL TO REFERENCE "ADVISOR CLASS" IN ALL INSTRUCTIONS
PROVIDED. See "How to Invest;" "How to Make Exchanges;" "Dividends, Other
Distributions and Federal Income Taxation -- Taxes" and "How to Redeem Shares;"
for more information.
Each 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 7345
San Francisco, California 94120-7345
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 MUST BE SENT 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. 4023-050701
EXCHANGES BY TELEPHONE
Call GT Global at 1-800-223-2138
EXCHANGES BY MAIL
Send complete instructions, including name of 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 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.
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GT GLOBAL THEME FUNDS
CALCULATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
Each 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. Each
Fund's net asset value per share is computed by determining the value of its
total assets (which, in the case of the Financial Services Fund, Infrastructure
Fund, Natural Resources Fund and Consumer Products and Services Fund is the
value of each such Fund's investment in its corresponding Portfolio),
subtracting all of its liabilities, and dividing the result by the total number
of shares outstanding at such time. Net asset value is determined separately for
each class of shares of each Fund.
Equity securities held by the Theme Portfolios are valued at the last sale price
on the exchange or in the over-the-counter market in which such securities are
primarily traded, as of the close of business on the day the securities are
being valued, or, lacking any sales, at the last available bid price. Long-term
debt obligations are valued at the mean of representative quoted bid and asked
prices for such securities or, if such prices are not available, at prices for
securities of comparable maturity, quality and type; however, when the Manager
deems it appropriate, prices obtained from a bond pricing service will be used.
Short-term debt investments are amortized to maturity based on their cost,
adjusted for foreign exchange translation and market fluctuations, provided such
valuations represent fair value. When market quotations for futures and options
positions held by a Fund are readily available, those positions are valued based
upon such quotations.
Securities and other assets for which market quotations are not readily
available are valued at fair value determined in good faith by or under the
direction of the Company's Board of Directors or the Portfolios' Board of
Trustees, as applicable. Securities and other assets quoted in foreign
currencies are valued in U.S. dollars based on the prevailing exchange rates on
that day.
Certain of the Theme Portfolios' securities from time to time may be listed
primarily on foreign exchanges which trade on days when the NYSE is closed (such
as a Saturday). As a result, the net asset value of a Fund's shares may be
significantly affected by such trading on days when shareholders have no access
to that Fund.
- --------------------------------------------------------------------------------
DIVIDENDS, OTHER DISTRIBUTIONS
AND FEDERAL INCOME TAXATION
- --------------------------------------------------------------------------------
DIVIDENDS AND OTHER DISTRIBUTIONS. Each 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. Each Fund also normally 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. Each 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 each 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 a Fund will be higher than the
per share income dividends on shares of other classes of that Fund as a result
of the service and distribution fees applicable to those other shares.
SHAREHOLDERS MAY ELECT:
/ / to have all dividends and other distributions automatically reinvested in
additional Advisor Class
Prospectus Page 35
<PAGE>
GT GLOBAL THEME FUNDS
shares of the distributing Fund (or other GT Global Mutual Funds); or
/ / to receive dividends in cash and have other distributions automatically
reinvested in additional Advisor Class shares of the distributing Fund (or
other GT Global Mutual Funds); or
/ / to receive other distributions in cash and have dividends automatically
reinvested in additional Advisor Class shares of the distributing Fund (or
other GT Global Mutual Funds); or
/ / 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 DISTRIBUTING 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 STATUS OF DIVIDENDS AND OTHER
DISTRIBUTIONS IS THE SAME WHETHER THEY ARE RECEIVED IN CASH OR REINVESTED IN
ADDITIONAL SHARES.
Any dividend or other distribution paid by a 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. Each Fund intends to continue to qualify for treatment as a regulated
investment company under the Code. In each taxable year that a 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, net gains from certain foreign currency
transactions and net short-term capital gain) and net capital gain that is
distributed to its shareholders. Each Portfolio expects that it also will not be
liable for any federal income tax.
Dividends from a 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 a
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.
Each 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, the shareholders' respective
shares of any foreign taxes treated as paid by the Fund, in which event each
shareholder 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.
Each 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 a
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 (including another Fund)
generally will have similar tax consequences. In addition, if Fund shares are
purchased within 90 days before or after redeeming other shares of the same 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
Prospectus Page 36
<PAGE>
GT GLOBAL THEME FUNDS
affecting the Funds and their 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 Company's Board of Directors and the Portfolio's Board of Trustees have
overall responsibility for the operation of the Funds and the Portfolios,
respectively, and have approved contracts with various financial organizations
to provide certain services required by each Fund. See "Directors, Trustees, and
Executive Officers" in the Statement of Additional Information for a complete
description of the Directors of the Funds and the Trustees of the Portfolios.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Services provided by Chancellor LGT
Asset Management, Inc. (the "Manager") as the Theme Portfolios' investment
manager and administrator include, but are not limited to, determining the
composition of the investment portfolio of the Portfolios and placing orders to
buy, sell or hold particular securities. In addition, the Manager provides the
following administration services to the Portfolios and the Funds: furnishing
corporate officers and clerical staff; providing office space, services and
equipment; and supervising all matters relating to the Portfolios' and the
Funds' operation.
The Financial Services Fund, Infrastructure Fund, Natural Resources Fund and
Consumer Products and Services Fund each pays the Manager administration fees
computed daily and payable monthly at the annualized rate of 0.25% of such
Fund's average daily net assets. In addition, each such Fund bears its pro rata
portion of the investment management and administration fees paid by its
corresponding Portfolio to the Manager. The Financial Services Portfolio,
Infrastructure Portfolio, Natural Resources Portfolio and Consumer Products and
Services Portfolio each pays such fees, based on the average daily net assets of
such Portfolio, directly to the Manager at the annualized rate of .725% on the
first $500 million, .70% on the next $500 million, .675% on the next $500
million and .65% on all amounts thereafter. For investment management and
administration services provided to the Health Care Fund and Telecommunications
Fund, each such Fund pays the Manager a fee computed daily and paid monthly
based on each such Fund's average daily net assets at the annualized rate of
.975% on the first $500 million, .95% on the next $500 million, .925% on the
next $500 million and .90% on amounts thereafter. These rates are higher than
those paid by most mutual funds. The Manager has undertaken to limit expenses
(exclusive of brokerage commissions, taxes, interest and extraordinary expenses)
to the annual rate of 1.90% of the average daily net assets of each Fund's
Advisor Class shares.
The Manager also serves as each Theme Portfolio's pricing and accounting agent.
For these services the Manager receives a fee at an annual rate derived by
applying 0.03% to the first $5 billion of assets of GT Global Mutual Funds and
0.02% to the assets in excess of $5 billion, and allocating the result according
to each Fund's average daily net assets.
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
U.S. offices of the Manager are located at 50 California Street, 27th Floor, San
Francisco, CA 94111 and 1166 Avenue of the Americas, New York, NY 10036.
The Manager and its worldwide affiliates, including LGT Bank in Liechtenstein,
formerly Bank in Liechtenstein, comprise 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 a parent organization for the
various business enterprises of the Princely Family of Liechtenstein.
Prospectus Page 37
<PAGE>
GT GLOBAL THEME FUNDS
The principal business address of the Prince of Liechtenstein Foundation is
Herrengasse 12, FL-9490, Vaduz, Liechtenstein.
As of , 1997, the Manager and its worldwide asset management
affiliates manage approximately $ billion. In the United States, as of October
31, 1996, the Manager manages or administers approximately $ billion of GT
Global Mutual Funds. As of , 1997, assets entrusted to
Liechtenstein Global Trust total approximately $80 billion.
On October 31, 1996, Chancellor Capital Management, Inc. ("Chancellor Capital")
merged with LGT Asset Management, Inc. As of September 30, 1996, Chancellor
Capital and its affiliates, based in New York, were the 15th largest independent
investment manager in the United States with approximately $33 billion in assets
under management. Chancellor Capital specialized in public and private U.S.
equity and bond portfolio management for over 300 U.S. institutional clients.
In addition to the investment resources of its San Francisco and New York
offices, the Manager draws upon the expertise, personnel, data and systems of
other offices of Liechtenstein Global Trust, including investment offices in
Frankfurt, Hong Kong, London, Singapore, Sydney, Tokyo, and Toronto. In managing
the GT Global Mutual Funds, the Manager employs a team approach, taking
advantage of its investment resources around the world in seeking to achieve
each Fund's investment objective. Many of the GT Global Mutual Funds' portfolio
managers are natives of the countries in which they invest, speak local
languages and/or live or work in the markets they follow.
The investment professionals primarily responsible for the portfolio management
of the Theme Portfolios are as follows:
GLOBAL FINANCIAL SERVICES PORTFOLIO
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE PORTFOLIO PAST FIVE YEARS
- -------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
A. James Ellman Portfolio Manager since 1995 Portfolio Manager for the Manager
San Francisco since 1995. Analyst for the Manager
from 1994 to 1995. From 1992 to 1994,
Mr. Ellman was a student at the
Harvard Graduate School of Business
Administration (where he received a
Master of Business Administration).
From 1990 to 1992, Mr. Ellman was
employed by the Federal Reserve Bank
of New York as an international bank
examiner.
</TABLE>
Prospectus Page 38
<PAGE>
GT GLOBAL THEME FUNDS
<TABLE>
<S> <C> <C>
GLOBAL INFRASTRUCTURE PORTFOLIO
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE PORTFOLIO PAST FIVE YEARS
- -------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
David L. Sherry Portfolio Manager since Portfolio Portfolio Manager for the Manager
San Francisco inception in 1994 since 1993. From 1992 to 1993, Mr.
Sherry was Senior Securities Analyst
for Franklin Resources, Inc. (San
Mateo, CA). From 1990 to 1992, he was
a student at University of California
at Los Angeles Graduate School of
Business (where he received a Master
of Business Administration.)
Michael Mahoney Portfolio Manager since Portfolio Portfolio Manager for the Manager
San Francisco inception in 1994 since 1993. From 1991 to 1993, Mr.
Mahoney was an Investment Analyst for
the Manager.
GLOBAL NATURAL RESOURCES PORTFOLIO
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE PORTFOLIO PAST FIVE YEARS
- -------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Derek H. Webb Portfolio Manager since Portfolio Portfolio Manager for the Manager
San Francisco inception in 1994 since 1994. Analyst for the Manager
from 1992 to 1994.
GLOBAL CONSUMER PRODUCTS AND SERVICES PORTFOLIO
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE PORTFOLIO PAST FIVE YEARS
- -------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Derek H. Webb Portfolio Manager since Portfolio Portfolio Manager for the Manager
San Francisco inception in 1994 since 1994. Analyst for the Manager
from 1992 to 1994.
GLOBAL HEALTH CARE FUND
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND PAST FIVE YEARS
- -------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Michael Yellen Portfolio Manager since 1996 Research analyst for the Manager from
San Francisco 1994 to 1996. From 1991 to 1994, Mr.
Yellen was a securities analyst and
co-portfolio manager for Franklin
Resources, Inc. (San Mateo, CA).
Prior thereto, Mr. Yellen was a
student at Stanford University, where
he received a Bachelor's Degree in
International Relations.
</TABLE>
Prospectus Page 39
<PAGE>
GT GLOBAL THEME FUNDS
<TABLE>
<S> <C> <C>
GLOBAL TELECOMMUNICATIONS FUND
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND PAST FIVE YEARS
- -------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Michael Mahoney Portfolio Manager since 1993 Portfolio Manager for the Manager
San Francisco since 1993. From 1991 to 1993, Mr.
Mahoney was an Investment Analyst for
the Manager.
David L. Sherry Portfolio Manager since 1993 Portfolio Manager for the Manager
San Francisco since 1993. From 1992 to 1993, Mr.
Sherry was Senior Securities Analyst
for Franklin Resources, Inc. (San
Mateo, CA).
A. James Ellman Portfolio Manager since 1995 Portfolio Manager for the Manager
San Francisco since 1995. Analyst for the Manager
from 1994 to 1995. From 1992 to 1994,
Mr. Ellman was a student at the
Harvard Graduate School of Business
Administration (where he received a
Master of Business Administration).
</TABLE>
Prospectus Page 40
<PAGE>
GT GLOBAL THEME FUNDS
In placing orders for the Theme Portfolios' securities transactions, the Manager
seeks to obtain the best net results. Consistent with its obligation to obtain
the best net results, the Manager may consider a broker/dealer's sale of shares
of the GT Global Mutual Funds as a factor in considering through whom portfolio
transactions will be effected. Brokerage transactions for the Fund may be
executed through any Liechtenstein Global Trust affiliates.
DISTRIBUTION OF FUND SHARES. GT Global is the distributor of the Funds' 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.
The Manager or an affiliate thereof may make ongoing payments to Financial
Advisors and others that facilitate the administration and servicing of Advisor
Class shareholder accounts.
GT Global, at its own expense, may also provide promotional incentives to
broker/dealers that sell shares of the Funds and/or shares of the other GT
Global Mutual Funds. In some instances 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 broker/dealers 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.
Prospectus Page 41
<PAGE>
GT GLOBAL THEME FUNDS
OTHER INFORMATION
- --------------------------------------------------------------------------------
CONFIRMATIONS AND REPORTS TO SHAREHOLDERS. Each time a transaction is made that
affects a shareholder's account in a Fund, the shareholder will receive from the
Transfer Agent a confirmation statement reflecting the transaction.
Confirmations for transactions effected pursuant to a Fund's automatic dividend
reinvestment program may be provided quarterly. Shortly after the end of each
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 a Fund to shareholders will
be reported after the end of the fiscal year on Form 1099-DIV. Under certain
circumstances, duplicate mailings of the foregoing reports to the same household
may be consolidated.
ORGANIZATION OF THE COMPANY. The Company was organized as a Maryland corporation
on October 29, 1987. From time to time, the Company has and may continue to
establish other funds, each corresponding to a distinct investment portfolio and
a distinct series of the Company's common stock. Shares of each Fund 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 a Fund will be
voted by a Fund's shareholders individually when the matter affects the specific
interest of that Fund only, such as approval of its investment management
arrangements. In addition, each class of shares of a Fund has exclusive voting
rights with respect to its distribution plan. The shares of each Fund and of all
the Company's funds will be voted in the aggregate on other matters, such as the
election of Directors and ratification of the selection by the Board of
Directors of the Company's independent accountants.
Normally there will be no annual meeting of shareholders in any year, except as
required under the 1940 Act. Each Fund would be required to hold a shareholders'
meeting in the event that at any time less than a majority of the Directors
holding office had been elected by shareholders. Directors shall continue to
hold office until their successors are elected and have qualified. Shares of
each Fund and of the Company's other funds do not have cumulative voting rights,
which means that the holders of a majority of the shares voting for the election
of Directors can elect all the Directors. A Director may be removed upon a
majority vote of the shareholders qualified to vote in the election.
Shareholders holding 10% of the Company's outstanding voting shares may call a
meeting of shareholders for the purpose of voting upon the question of removal
of any Director or for any other purpose. The 1940 Act requires the Company to
assist shareholders in calling such a meeting.
Advisor Class shares are offered through this Prospectus to certain investors.
There are two other classes of shares offered to investors through a separate
prospectus: Class A shares and Class B shares.
CLASS A. Class A shares 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. Class A
shares of each Fund also bear annual service and distribution fees of up to
0.50% of the average daily net assets of that class. For the fiscal year ended
October 31, 1995, total operating expenses for the Class A shares were 2.40% for
Financial Services Fund, 2.40% for Infrastructure Fund, 2.40% for Natural
Resources Fund, 1.91% for Health Care Fund, 1.83% for Telecommunications Fund,
and 2.40% for Consumer Products and Services Fund, respectively, of average net
assets.
CLASS B. Class B shares are sold at net asset value with no initial sales charge
at the time of purchase. Class B shares bear annual service and distribution
fees of up to 1.00% of the average daily net assets of that class, and investors
pay a contingent deferred sales charge of up to 5% of the lesser of the original
purchase price or the net asset value of such shares at the time of redemption.
This deferred sales charge is waived for certain redemptions and is reduced for
shares held more than one year. For the fiscal year ended October 31, 1995,
total operating expenses for the Class B shares were 2.90% for Financial
Services Fund, 2.90% for Infrastructure Fund, 2.90% for Natural
Prospectus Page 42
<PAGE>
GT GLOBAL THEME FUNDS
Resources Fund, 2.41% for Health Care Fund, 2.33% for Telecommunications Fund,
and 2.90% for Consumer Products and Services Fund, respectively, of average net
assets.
The different expenses borne by each class of shares will result in different
net asset values and dividends. The per share net asset value of the Advisor
Class shares of a Fund generally will be higher than that of the Class A and B
shares of that Fund because of the higher expenses borne by the Class A and B
shares. The per share dividends on Advisor Class shares of a Fund will generally
be higher than the per share dividends on Class A and B shares of that Fund as a
result of the service and distribution fees applicable with respect to Class A
and B shares. Consequently, during comparable periods, the Funds expect 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 Company's Articles of Incorporation, it may issue six billion
shares. Of this number, 300 million shares have been classified as shares of
each Fund, 100 million shares as Class A shares and 100 million shares as Class
B shares, except for the Telecommunications Fund, of which 200 million shares
have each been classified as Class A shares and Class B shares, respectively.
100 million shares have been classified as Advisor Class shares for each Fund.
These amounts may be increased from time to time in the discretion of the Board
of Directors. Each share of each Fund represents an interest in that Fund only,
has a par value of $0.0001 per share, represents an equal proportionate interest
in that Fund with other shares of that Fund and is entitled to such dividends
and other distributions out of the income earned and gain realized on the assets
belonging to that Fund as may be declared at the discretion of the Board of
Directors. Each Class A, Class B and Advisor Class share of each Fund is equal
as to earnings, assets and voting privileges, except as noted above, and each
class bears the expenses, if any, related to the distribution of its shares.
Shares of each Fund when issued are fully paid and nonassessable.
ORGANIZATION OF THE PORTFOLIOS. Each Portfolio is organized as a subtrust of a
New York common law trust. The Declaration of Trust provides that the Financial
Services Fund, Infrastructure Fund, Natural Resources Fund and Consumer Products
and Services Fund and other entities investing in its corresponding Portfolio
(E.G., other investment companies, insurance company separate accounts and
common and commingled trust funds), if any, each will be liable for all
obligations of that Portfolio. However, the Directors of the Company believe
that the risk of such Funds' incurring financial loss because of such liability
is limited to circumstances in which both inadequate insurance existed and each
of the Portfolios itself was unable to meet its obligations, and that neither
the Financial Services Fund, Infrastructure Fund, Natural Resources Fund and
Consumer Products and Services Fund nor their shareholders will be exposed to a
material risk of liability by reason of the Funds' investing in their
corresponding Portfolios.
Whenever the Financial Services Fund, Infrastructure Fund, Natural Resources
Fund and Consumer Products and Services Fund is requested to vote on any
proposal of its corresponding Portfolio, such Fund will hold a meeting of such
Fund's shareholders and will cast its vote as instructed by its shareholders.
Shares for which no voting instructions are received will be voted in the same
proportion as the shares for which voting instructions are received.
SHAREHOLDER INQUIRIES. Shareholder inquiries may be made by calling the Funds
toll-free at (800) 223-2138 or by writing to the Funds at P.O. Box 7893, San
Francisco, CA 94120-7893.
PERFORMANCE INFORMATION. The Funds, from time to time, may include information
on their investment results and/or comparisons of their 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 Funds may quote their average annual total return
("Standardized Return"). Standardized Return is calculated separately for each
class of shares of each Fund. Standardized Return shows percentage rates
reflecting the average annual change in the value of an assumed investment in a
Fund at the end of a one-, 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 a Fund. Standardized Return assumes
the reinvestment of all dividends and other distributions at net asset value on
the reinvestment date as established by the Board of Directors.
In addition, in order to more completely represent the Funds' performance or
more accurately compare such performance to other measures of
Prospectus Page 43
<PAGE>
GT GLOBAL THEME FUNDS
investment return, the Funds 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 Funds' performance data will reflect past performance and will not
necessarily be indicative of future results. The Funds' 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 a Fund's
investment results with those published for other investment companies, other
investment vehicles and unmanaged indices. Each 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.
Each Fund's annual report contains additional information with respect to its
performance. The annual report is available to investors upon request and free
of charge.
TRANSFER AGENT. Shareholder servicing, reporting and general transfer agent
functions for the Funds 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 Portfolios, Health Care
Fund and Telecommunications Fund.
COUNSEL. The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue,
N.W., Washington, D.C. 20036-1800, acts as counsel to the Company and to the
Theme Portfolios. Kirkpatrick & Lockhart LLP also acts as counsel to the
Manager, GT Global and the Transfer Agent in connection with other matters.
INDEPENDENT ACCOUNTANTS. The Theme Portfolios' 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 Funds and Portfolios,
assists in the preparation of the Funds' and Portfolios' federal and state
income tax returns and consults with the Company and the Funds and the
Portfolios 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 44
<PAGE>
GT GLOBAL THEME FUNDS
NOTES
- --------------------------------------------------------------------------------
Prospectus Page 45
<PAGE>
GT GLOBAL THEME FUNDS
NOTES
- --------------------------------------------------------------------------------
Prospectus Page 46
<PAGE>
GT GLOBAL THEME FUNDS
NOTES
- --------------------------------------------------------------------------------
Prospectus Page 47
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL MUTUAL FUNDS
GT GLOBAL OFFERS A BROAD RANGE OF MUTUAL FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY OF THE GT GLOBAL
MUTUAL FUNDS, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR CALL GT GLOBAL
DIRECTLY AT 1-800-824-1580.
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL WORLDWIDE GROWTH FUND
Invests around the world, including the U.S.
GT GLOBAL INTERNATIONAL GROWTH FUND
Provides portfolio diversity by investing outside
the U.S.
GT GLOBAL EMERGING MARKETS FUND
Gives access to the growth potential of developing economies
/ / GLOBAL THEME FUNDS
GT GLOBAL CONSUMER PRODUCTS AND
SERVICES FUND
Invests in companies that manufacture, market, retail, or distribute consumer
products or services
GT GLOBAL FINANCIAL SERVICES FUND
Focuses on the worldwide opportunities from the demand for financial services
and products
GT GLOBAL HEALTH CARE FUND
Invests in growing health care industries worldwide
GT GLOBAL INFRASTRUCTURE FUND
Seeks companies that build, improve or maintain a country's infrastructure
GT GLOBAL NATURAL RESOURCES FUND
Concentrates on companies that own, explore or develop natural resources
GT GLOBAL TELECOMMUNICATIONS FUND
Invests in companies worldwide that develop, manufacture or sell
telecommunications services or equipment
/ / REGIONALLY DIVERSIFIED FUNDS
GT GLOBAL NEW PACIFIC GROWTH FUND
Offers access to the emerging and established markets of the Pacific Rim,
excluding Japan
GT GLOBAL EUROPE GROWTH FUND
Focuses on investment opportunities in the new, unified Europe
GT GLOBAL LATIN AMERICA GROWTH FUND
Invests in the emerging markets of Latin America
/ / SINGLE COUNTRY FUNDS
GT GLOBAL AMERICA SMALL CAP GROWTH FUND
Invests in equity securities of small U.S. companies
GT GLOBAL AMERICA MID CAP GROWTH FUND
Concentrates on medium-sized companies in the U.S.
GT GLOBAL AMERICA VALUE FUND
Concentrates on equity securities of large cap U.S. companies believed to be
undervalued
GT GLOBAL JAPAN GROWTH FUND
Provides U.S. investors with direct access to the Japanese market
GROWTH AND INCOME FUND
GT GLOBAL GROWTH & INCOME FUND
Invests in blue-chip stocks and government bonds from around the world
INCOME FUNDS
GT GLOBAL GOVERNMENT INCOME FUND
Earns monthly income from global government securities
GT GLOBAL STRATEGIC INCOME FUND
Allocates its assets among debt securities from the U.S., developed foreign
countries and emerging markets
GT GLOBAL HIGH INCOME FUND
Invests in debt securities in emerging markets
MONEY MARKET FUND
GT GLOBAL DOLLAR FUND
Invests in high quality, U.S. dollar-denominated money market securities
worldwide for stability and preservation of capital
[LOGO]
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY G.T. INVESTMENT FUNDS, INC.,
GT GLOBAL FINANCIAL SERVICES FUND, GLOBAL FINANCIAL SERVICES PORTFOLIO, GT
GLOBAL INFRASTRUCTURE FUND, GLOBAL INFRASTRUCTURE PORTFOLIO, GT GLOBAL
NATURAL RESOURCES FUND, GLOBAL NATURAL RESOURCES PORTFOLIO, GT GLOBAL
CONSUMER PRODUCTS AND SERVICES FUND, GLOBAL CONSUMER PRODUCTS AND SERVICES
PORTFOLIO, GT GLOBAL HEALTH CARE FUND, GT GLOBAL TELECOMMUNICATIONS FUND,
CHANCELLOR LGT ASSET MANAGEMENT, INC. OR GT GLOBAL, INC. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF ANY OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON IN SUCH
JURISDICTION TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER.
THEPV610004MC
<PAGE>
GT GLOBAL INCOME FUNDS:
ADVISOR CLASS
PROSPECTUS -- MARCH 1, 1997
- --------------------------------------------------------------------------------
GT GLOBAL GOVERNMENT INCOME FUND ("GOVERNMENT INCOME FUND") seeks a high level
of current income by investing primarily in high quality U.S. and foreign
government debt securities. The Fund's secondary objectives are capital
appreciation and protection of principal through active management of its
maturity structure and currency exposure.
GT GLOBAL STRATEGIC INCOME FUND ("STRATEGIC INCOME FUND") primarily seeks high
current income and secondarily seeks capital appreciation. The Fund allocates
its assets among debt securities of issuers in: (1) the United States; (2)
developed foreign countries; and (3) emerging markets.
GT GLOBAL HIGH INCOME FUND ("HIGH INCOME FUND") primarily seeks high current
income and secondarily seeks capital appreciation by investing all of its
investable assets in the Global High Income Portfolio ("Portfolio"), which in
turn, invests in the debt securities of issuers located in emerging markets. The
Portfolio's investment objectives are identical to those of the Fund.
There can be no assurance that any Fund or the Portfolio will achieve their
investment objectives. The investment experience of High Income Fund will
correspond directly with the investment experience of the Portfolio.
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 Funds and the Portfolio are managed and/or administered by Chancellor LGT
Asset Management, Inc. (the "Manager"). The Manager and its worldwide affiliates
are part of the Liechtenstein Global Trust, a global provider of asset
management and private banking products and services to individual and
institutional investors.
The Funds are designed for long-term investors and not as trading vehicles, do
not represent a complete investment program and are not suitable for all
investors. An investment in any of the Funds involves risk factors that should
be reviewed carefully by potential investors. The Strategic Income Fund and the
Portfolio both are authorized to borrow money for investment purposes, which
would increase the volatility of their performance and involves additional
risks. See "Investment Objectives and Policies" and "Risk Factors."
THE STRATEGIC INCOME FUND INVESTS UP TO 50% OF ITS TOTAL ASSETS AND THE GLOBAL
HIGH INCOME PORTFOLIO INVESTS UP TO 100% OF ITS TOTAL ASSETS IN LOWER QUALITY
AND UNRATED FOREIGN GOVERNMENT BONDS WHOSE CREDIT QUALITY IS GENERALLY
CONSIDERED THE EQUIVALENT OF U.S. CORPORATE DEBT SECURITIES COMMONLY KNOWN AS
"JUNK BONDS." INVESTMENTS OF THIS TYPE ARE SUBJECT TO A GREATER RISK OF LOSS OF
PRINCIPAL AND INTEREST. PURCHASERS SHOULD CAREFULLY ASSESS THE RISKS ASSOCIATED
WITH AN INVESTMENT IN THESE FUNDS. SEE "INVESTMENT OBJECTIVES AND POLICIES" AND
"RISK FACTORS."
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 information an investor should know before
investing and should be read carefully and retained for future reference. A
Statement of Additional Information, dated March 1, 1997, has been filed with
the Securities and Exchange Commission (the "SEC") and is incorporated herein by
reference. The Statement of Additional Information, which may be amended or
supplemented from time to time, is available without charge by writing to the
Funds 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.
[LOGO]
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus Page 1
<PAGE>
GT GLOBAL INCOME FUNDS
TABLE OF CONTENTS
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Page
---------
<S> <C>
Prospectus Summary........................................................................ 3
Financial Highlights...................................................................... 6
Investment Objectives and Policies........................................................ 12
Risk Factors.............................................................................. 22
How To Invest............................................................................. 27
How To Make Exchanges..................................................................... 29
How to Redeem Shares...................................................................... 30
Shareholder Account Manual................................................................ 32
Calculation of Net Asset Value............................................................ 33
Dividends, Other Distributions and Federal Income Taxation................................ 33
Management................................................................................ 35
Other Information......................................................................... 38
Appendix A -- Description of Debt Ratings................................................. 41
</TABLE>
Prospectus Page 2
<PAGE>
GT GLOBAL INCOME FUNDS
PROSPECTUS SUMMARY
- ------------------------------------------------------------
The following summary is qualified in its entirety by the more detailed
information appearing in the body of this Prospectus.
<TABLE>
<S> <C> <C>
The Funds and the Portfolio: The Government Income Fund, the Strategic Income Fund and the High
Income Fund (each a "Fund," and collectively, the "Funds") is each
a non- diversified series of G.T. Investment Funds, Inc. (the
"Company"), a Maryland corporation.
Investment Objectives: The Government Income Fund primarily seeks high current income and
secondarily seeks capital appreciation and protection of
principal. The Strategic Income Fund and the High Income Fund
primarily seek high current income and secondarily seek capital
appreciation.
Principal Investments: The Government Income Fund invests primarily in high quality U.S.
and foreign government debt obligations.
The Strategic Income Fund allocates its assets among debt
securities of issuers in: (1) the United States; (2) developed
foreign countries; and (3) emerging markets, and selects
particular securities in each sector based on their relative
investment merit.
The High Income Fund invests all of its investable assets in the
Portfolio, which, in turn, invests primarily in debt securities of
issuers located in emerging markets.
Principal Risk Factors: There is no assurance that the Funds or the Portfolio will achieve
their investment objectives. The Funds' net asset values will
fluctuate, reflecting fluctuations in the market value of their
portfolio holdings.
Investments in foreign securities involve risks relating to
political and economic developments abroad and the differences
between the regulations to which U.S. and foreign issuers are
subject. Individual foreign economies also may differ favorably or
unfavorably from the U.S. economy. Changes in foreign currency
exchange rates will affect a Fund's or the Portfolio's net asset
value, earnings and gains and losses realized on sales of
securities. Securities of foreign companies may be less liquid and
their prices more volatile than those of securities of comparable
U.S. companies.
Each Fund and the Portfolio may engage in certain foreign
currency, options and futures transactions to attempt to hedge
against the overall level of investment and currency risk
associated with its present or planned investments. Such
transactions involve certain risks and transaction costs.
The Strategic Income Fund may invest up to 50% of its total
assets, and the Global High Income Portfolio may invest up to 100%
of its total assets, in debt securities rated below investment
grade or, if not rated, determined by the Manager to be of
comparable quality. The Portfolio will normally invest at least
65% of its total assets in debt securities of issuers in emerging
markets. See "Investment Objectives and Policies" and "Risk
Factors."
</TABLE>
Prospectus Page 3
<PAGE>
GT GLOBAL INCOME FUNDS
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Manager: Chancellor LGT Asset Management, Inc. (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 --------------, 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."
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
Advisor Class Shares: 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 a 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 comprising or affiliated with Liechtenstein Global
Trust; and (e) any of the companies comprising or affiliated with
Liechtenstein Global Trust.
Shares Available Through: Advisor Class shares of each Fund's common stock are available
through Financial Advisors (as defined herein) that have entered
into agreements with the Funds' 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 one Fund may only 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 Funds' transfer agent, GT
Global Investor Services, Inc. ("Transfer Agent"). See "How to
Redeem Shares" and "Shareholder Account Manual."
Dividends and Other Dividends paid monthly from net investment income and net
Distributions: short-term capital gains; other distributions paid annually from
realized net capital gain and net realized gains from foreign
currency transactions, if any.
Reinvestment: Dividends and distributions may be reinvested in Advisor Class
shares of the distributing Fund or of other GT Global Mutual
Funds.
Net Asset Values: Advisor Class shares are expected to be quoted daily in the
financial section of most newspapers.
</TABLE>
Prospectus Page 4
<PAGE>
GT GLOBAL INCOME FUNDS
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
SUMMARY OF INVESTOR COSTS. The expenses and maximum transaction costs associated
with investing in the Adviser Class shares of the Funds are reflected in the
following tables (1):
<TABLE>
<CAPTION>
GOVERNMENT STRATEGIC HIGH INCOME
INCOME FUND INCOME FUND FUND
--------------- --------------- ---------------
ADVISOR CLASS ADVISOR CLASS ADVISOR CLASS
--------------- --------------- ---------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION COSTS:
Maximum sales charge on purchases of shares (as a % of offering
price)................................................................ None None None
Sales charges on reinvested distributions to shareholders............... None None None
Maximum deferred sales charge (as a % of net asset value at time of
purchase or sale, whichever is less).................................. None None None
Redemption charges...................................................... None None None
Exchange fees:
-- On first four exchanges each year.................................. None None None
-- On each additional exchange........................................ $ 7.50 $ 7.50 $ 7.50
ANNUAL FUND OPERATING EXPENSES:
(AS A % OF AVERAGE NET ASSETS) (2)
Investment management and administration fees........................... 0.72% 0.72% 0.73%
12b-1 service and distribution expenses................................. None None None
Other expenses.......................................................... % % %
------- ------- -------
Total Fund Operating Expenses........................................... % % %
------- ------- -------
------- ------- -------
</TABLE>
HYPOTHETICAL EXAMPLE OF EFFECT OF EXPENSES:
An investor directly or indirectly would have paid the following expenses at the
end of the periods shown on a $1,000 investment, assuming a 5% annual
return (1):
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
----- ------ ----- -----
<S> <C> <C> <C> <C>
Government Income Fund
Advisor Class Shares...................................... $ $ $ $
Strategic Income Fund
Advisor Class Shares...................................... $ $ $ $
High Income Fund
Advisor Class Shares...................................... $ $ $ $
</TABLE>
- ------------------------
(1) THESE TABLES ARE INTENDED TO ASSIST INVESTORS IN UNDERSTANDING THE VARIOUS
COSTS AND EXPENSES ASSOCIATED WITH INVESTING IN A FUND. 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 comprising or affiliated with Liechtenstein Global Trust invests
in Advisor Class shares of a Fund, such account shall not be subject to
duplicative advisory fees. THE "HYPOTHETICAL EXAMPLE" IS NOT A
REPRESENTATION OF PAST OR FUTURE EXPENSES; EACH FUND'S ACTUAL EXPENSES MAY
BE MORE OR LESS THAN THOSE SHOWN. The table and the assumption in the
Hypothetical Example of a 5% annual return are required by regulation of the
Securities and Exchange Commission applicable to all mutual funds; the 5%
annual return is not a prediction of and does not represent the Fund's
projected or actual performance. The Board of Directors of the Company
believes that the aggregate per share expenses of the High Income Fund and
the Portfolio will be less than or approximately equal to the expenses which
the Fund would incur if the assets of that Fund were invested directly in
the type of securities being held by the Portfolio.
(2) Expenses are based on the Fund's fiscal year ended October 31, 1996. "Other
expenses" include custody, transfer agent, legal, audit and other expenses.
See "Management" herein and the Statement of Additional Information for more
information."
Prospectus Page 5
<PAGE>
GT GLOBAL INCOME FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The tables below provide condensed information concerning income and capital
changes for one share of each class of shares of the Government Income Fund, the
Strategic Income Fund, and the High Income Fund offered through this Prospectus,
for the periods shown. For the period March 29, 1988 (commencement of
operations) to October 21, 1992, the Strategic Income Fund was named G.T. Global
Bond Fund and operated under different investment objectives, policies and
limitations. This information is supplemented by the financial statements and
accompanying notes appearing in the Statement of Additional Information. The
financial statements and notes for fiscal year ended October 31, 1996 and each
of the preceding four years have been audited by Coopers & Lybrand L.L.P.,
independent accountants, whose report thereon also is included in the Statement
of Additional Information.
GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
CLASS A+
---------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
---------------------------------------------------------------------------------------------
1996 1995(C) 1994(C) 1993(C) 1992 1991 1990 1989
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value,
beginning of period..... $ 8.63 $ 11.07 $ 9.83 $ 10.29 $ 10.46 $ 10.45 $ 10.86
--------- --------- --------- --------- --------- --------- --------- ---------
Income from investment
operations:
Net investment
income................ 0.62 0.65 0.74 0.92 0.99 1.18 1.15
Net realized and
unrealized gain (loss)
on investments........ 0.15 (1.52) 1.34 (0.31) (0.07) (0.02) (0.35)
--------- --------- --------- --------- --------- --------- --------- ---------
Net increase
(decrease) from
investment
operations.......... 0.77 (0.87) 2.08 0.61 0.92 1.16 0.80
--------- --------- --------- --------- --------- --------- --------- ---------
Distributions:
Net investment
income................ (0.59) (0.65) (0.74) (0.83) (1.00) (1.15) (1.20)
Net realized gain on
investments........... (0.00) (0.27) (0.00) (0.13) (0.09) (0.00) (0.00)
In excess of net
realized gain on
investments........... (0.00) (0.55) (0.00) (0.00) (0.00) (0.00) (0.00)
Return of capital...... (0.00) (0.10) (0.00) (0.00) (0.00) (0.00) (0.00)
Sources other than net
investment income..... (0.00) (0.00) (0.10) (0.11) (0.00) (0.00) (0.01)
--------- --------- --------- --------- --------- --------- --------- ---------
Total
distributions....... (0.59) (1.57) (0.84) (1.07) (1.09) (1.15) (1.21)
--------- --------- --------- --------- --------- --------- --------- ---------
Net asset value, end of
period.................. $ 8.81 $ 8.63 $ 11.07 $ 9.83 $ 10.29 $ 10.46 $ 10.45
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
Total investment return
(d)..................... 9.22% (8.87)% 21.9% 6.3% 9.4% 11.9% 7.2%
Ratios and supplemental
data:
Net assets, end of period
(in 000's).............. $385,404 $502,094 $708,301 $623,387 $399,200 $259,726 $122,526
Ratio of net investment
income to average net
assets.................. 6.98% 6.87% 7.1% 9.0% 9.5% 11.4% 10.7%
Ratio of expenses to
average net assets:
With expense
reductions............ 1.35% 1.33% 1.4% 1.6% 1.6% 1.8% 1.7%
Without expense
reductions............ 1.38% --%** --%** --%** --%** --%** --%**
Portfolio turnover
rate ++++............... 385% 625% 495% 351% 326% 334% 413%
</TABLE>
- ------------------------------
+ All capital shares issued and outstanding as of October 21, 1992 were
reclassified as Class A shares.
++ Commencing October 22, 1992, the Fund began offering Class B shares.
+++ On June 1, 1995, the Fund began offering Advisor Class shares.
++++ Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
* Net of $0.01 per share of Fund operating expenses reimbursed by the
Manager.
** Calculation of "Ratio of expenses to average net assets" was made without
considering the effect of expense reductions, if any.
(a) Not annualized.
(b) Annualized.
(c) These selected per share data were calculated based upon weighted average
shares outstanding during the period.
(d) Total investment return does not include sales charges.
Prospectus Page 6
<PAGE>
GT GLOBAL INCOME FUNDS
GOVERNMENT INCOME FUND
(CONTINUED)
<TABLE>
<CAPTION>
ADVISOR
CLASS A+ CLASS B++ CLASS+++
-------------- ----------------------------------------------------------- -----------
MARCH 29, 1988
(COMMENCEMENT
OF OCTOBER 22,
OPERATIONS) TO YEAR ENDED OCTOBER 31, 1992 TO YEAR ENDED
OCTOBER 31, --------------------------------------------- OCTOBER 31, OCTOBER 31,
1988 1996 1995(C) 1994(C) 1993(C) 1992 1996
-------------- --------- --------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value, beginning of
period....................... $ 11.43 $ $ 8.64 $ 11.07 $ 9.83 $ 9.87
-------------- --------- --------- --------- --------- ----------- -----------
Income from investment
operations:
Net investment income....... 0.49* 0.55 0.59 0.67 0.02
Net realized and unrealized
gain (loss) on
investments................ (0.44) 0.14 (1.52) 1.34 (0.06)
-------------- --------- --------- --------- --------- ----------- -----------
Net increase (decrease)
from investment
operations............... 0.05 0.69 (0.93) 2.01 (0.04)
-------------- --------- --------- --------- --------- ----------- -----------
Distributions:
Net investment income....... (0.49) (0.53) (0.59) (0.67) (0.00)
Net realized gain on
investments................ (0.12) (0.00) (0.27) (0.00) (0.00)
In excess of net realized
gain on investments........ (0.00) (0.00) (0.54) (0.00) (0.00)
Return of capital........... (0.00) (0.00) (0.10) (0.00) (0.00)
Sources other than net
investment income.......... (0.01) (0.00) (0.00) (0.10) (0.00)
-------------- --------- --------- --------- --------- ----------- -----------
Total distributions....... (0.62) (0.53) (1.50) (0.77) (0.00)
-------------- --------- --------- --------- --------- ----------- -----------
Net asset value, end of
period....................... $ 10.86 $ $ 8.80 $ 8.64 $ 11.07 $ 9.83
-------------- --------- --------- --------- --------- ----------- -----------
-------------- --------- --------- --------- --------- ----------- -----------
Total investment return (d)... 1.1%(a) 8.22% (9.39)% 21.1% (0.4)%(a)
Ratios and supplemental data:
Net assets, end of period (in
000's)....................... $57,063 $ $235,481 $262,405 $182,972 $ 2,624 $
Ratio of net investment income
to average net assets........ 7.41%*(b) 6.33% 6.22% 6.5% 8.0%(b)
Ratio of expenses to average
net assets:
With expense reductions..... 1.80%*(b) 2.00% 1.98% 2.0% 1.9%(b)
Without expense reductions.. --%** 2.03% --%** --%** --%**
Portfolio turnover rate ++++.. 291%(b) 385% 625% 495% 351%
<CAPTION>
JUNE 1, 1995
TO
OCTOBER 31,
1995(C)
------------
<S> <C>
Per Share Operating
Performance:
Net asset value, beginning of
period....................... $ 8.98
------------
Income from investment
operations:
Net investment income....... 0.26
Net realized and unrealized
gain (loss) on
investments................ (0.19)
------------
Net increase (decrease)
from investment
operations............... 0.07
------------
Distributions:
Net investment income....... (0.25)
Net realized gain on
investments................ (0.00)
In excess of net realized
gain on investments........ (0.00)
Return of capital........... (0.00)
Sources other than net
investment income.......... (0.00)
------------
Total distributions....... (0.25)
------------
Net asset value, end of
period....................... $ 8.80
------------
------------
Total investment return (d)... 0.83%(a)
Ratios and supplemental data:
Net assets, end of period (in
000's)....................... $ 131
Ratio of net investment income
to average net assets........ 7.33%(b)
Ratio of expenses to average
net assets:
With expense reductions..... 1.00%(b)
Without expense reductions.. 1.03%(b)
Portfolio turnover rate ++++.. 385%
</TABLE>
- ------------------------------
+ All capital shares issued and outstanding as of October 21, 1992 were
reclassified as Class A shares.
++ Commencing October 22, 1992, the Fund began offering Class B shares.
+++ On June 1, 1995, the Fund began offering Advisor Class shares.
++++ Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
* Net of $0.01 per share of Fund operating expenses reimbursed by the
Manager.
(a) Not annualized.
(b) Annualized.
(c) These selected per share data were calculated based upon weighted average
shares outstanding during the period.
(d) Total investment return does not include sales charges.
** Calculation of "Ratio of expenses to average net assets" was made without
considering the effect of expense reductions, if any.
Prospectus Page 7
<PAGE>
GT GLOBAL INCOME FUNDS
STRATEGIC INCOME FUND
<TABLE>
<CAPTION>
CLASS A+
--------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------------------------------------
1996 1995(C) 1994 1993(C) 1992 1991 1990
----------- ----------- ----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value, beginning
of period.................. $ 10.88 $ 13.61 $ 11.25 $ 10.91 $ 11.20 $ 11.17
----------- ----------- ----------- ----------- ---------- ---------- ----------
Income from investment
operations:
Net investment income..... 0.97 0.79 0.96 0.86 0.84* 1.04*
Net realized and
unrealized gain (loss) on
investments.............. (0.69) (2.14) 2.85 0.31 (0.02) (0.17)
----------- ----------- ----------- ----------- ---------- ---------- ----------
Net increase (decrease)
from investment
operations............. 0.28 (1.35) 3.81 1.17 0.82 0.87
----------- ----------- ----------- ----------- ---------- ---------- ----------
Distributions:
Net investment income..... (0.80) (0.79) (0.96) (0.83) (0.60) (0.84)
Net realized gain on
investments.............. (0.00) (0.38) (0.37) (0.00) (0.51) (0.00)
Return of capital......... (0.04) (0.21) (0.00) (0.00) (0.00) (0.00)
Sources other than net
investment income........ (0.00) (0.00) (0.12) (0.00) (0.00) (0.00)
----------- ----------- ----------- ----------- ---------- ---------- ----------
Total distributions..... (0.84) (1.38) (1.45) (0.83) (1.11) (0.84)
----------- ----------- ----------- ----------- ---------- ---------- ----------
Net asset value, end of
period..................... $ 10.32 $ 10.88 $ 13.61 $ 11.25 $ 10.91 $ 11.20
----------- ----------- ----------- ----------- ---------- ---------- ----------
----------- ----------- ----------- ----------- ---------- ---------- ----------
Total investment return
(d)........................ 3.06% (10.44)% 37.0% 11.1% 7.7% 8.3%
Ratios and supplemental
data:
Net assets, end of period
(in 000's)................. $ 188,165 $ 275,241 $ 287,870 $ 83,849 $ 55,967 $ 44,545
Ratio of net investment
income to average net
assets..................... 9.64% 6.74% 7.2% 7.6% 7.2%* 9.6%*
Ratio of expenses to average
net assets:
With expense reductions... 1.42% 1.40% 1.7% 1.8% 1.9%* 1.9%*
Without expense
reductions............... 1.45% %--(f) %--(f) %--(f) %--(f) %--(f)
Ratio of interest expenses
to average net assets...... N/A 0.10% N/A N/A N/A N/A
Portfolio turnover
rate+++.................... 238% 583% 310% 418% 630% 501%
<CAPTION>
MARCH 29, 1988
(COMMENCE-MENT
OF
OPERATIONS) TO
OCTOBER 31,
1989 1988
---------- ---------------
<S> <C> <C>
Per Share Operating
Performance:
Net asset value, beginning
of period.................. $ 11.25 $ 11.43
---------- ---------------
Income from investment
operations:
Net investment income..... 0.82* 0.45*
Net realized and
unrealized gain (loss) on
investments.............. (0.10) (0.24)
---------- ---------------
Net increase (decrease)
from investment
operations............. 0.72 0.21
---------- ---------------
Distributions:
Net investment income..... (0.80) (0.39)
Net realized gain on
investments.............. (0.00) (0.00)
Return of capital......... (0.00) (0.00)
Sources other than net
investment income........ (0.00) (0.00)
---------- ---------------
Total distributions..... (0.80) (0.39)
---------- ---------------
Net asset value, end of
period..................... $ 11.17 $ 11.25
---------- ---------------
---------- ---------------
Total investment return
(d)........................ 6.8% 1.2%(a)
Ratios and supplemental
data:
Net assets, end of period
(in 000's)................. $ 37,820 $ 21,830
Ratio of net investment
income to average net
assets..................... 7.7%* 7.22%*(e)
Ratio of expenses to average
net assets:
With expense reductions... 1.8%* 1.70%*(e)
Without expense
reductions............... %--(f) --%(f)
Ratio of interest expenses
to average net assets...... N/A N/A
Portfolio turnover
rate+++.................... 385% 340%
</TABLE>
- ------------------------------
+ All capital shares issued and outstanding as of October 21, 1992 were
reclassified as Class A shares.
++ Commencing October 22, 1992, the Fund began offering Class B shares.
+++ Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
* Includes reimbursement by the Manager of Fund operating expenses of $0.01,
$0.04, $0.02 and 0.05 for the year ended October 31, 1991, 1990, 1989 and
1988, respectively. Without such reimbursements, the expense ratios would
have been 1.92%, 2.20%, 2.02% and 2.42% and the ratio of net investment
income to average net assets would have been 7.16%, 9.26%, 7.56% and 6.42%
for the year ended October 31, 1991, 1990, 1989 and 1988, respectively.
** On June 1, 1995, the Fund began offering Advisor Class shares.
(a) Not annualized.
(b) Ratios are not meaningful due to short period of operation of Class B
shares.
(c) These selected per share data were calculated based upon weighted average
shares outstanding during the period.
(d) Total investment return does not include sales charges.
(e) Annualized.
(f) Calculation of "Ratio of expenses to average net assets" was made without
considering the effect of expense reductions, if any.
<TABLE>
<CAPTION>
AVERAGE AVERAGE NUMBER OF AVERAGE
AMOUNT OF DEBT AMOUNT OF DEBT FUND'S SHARES AMOUNT OF DEBT
OUTSTANDING AT OUTSTANDING OUTSTANDING PER SHARE
END OF PERIOD DURING THE PERIOD DURING THE PERIOD DURING THE PERIOD
-------------- ----------------- ----------------------- -----------------
<S> <C> <C> <C> <C>
Year Ended October 31, 1996....................... $ 0 $ 0 Class A - --------- $ 0
Class B - ---------
Advisor Class - ------
</TABLE>
Prospectus Page 8
<PAGE>
GT GLOBAL INCOME FUNDS
STRATEGIC INCOME FUND
(CONTINUED)
<TABLE>
<CAPTION>
CLASS B++ ADVISOR CLASS**
----------------------------------------------------------- --------------------
JUNE 1,
OCTOBER 22, YEAR 1995 TO
YEAR ENDED OCTOBER 31, 1992 TO ENDED OCTOBER
--------------------------------------------- OCTOBER 31, OCTOBER 31,
1996 1995(C) 1994(C) 1993(C) 1992 31, 1996 1995(C)
--------- --------- --------- --------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ $ 10.88 $ 13.60 $ 11.24 $ 11.36 $ $ 10.32
--------- --------- --------- --------- ----------- --------- --------
Income from investment operations:
Net investment income................. 0.91 0.73 0.89 0.01 0.41
Net realized and unrealized gain
(loss) on investments................ (0.69) (2.14) 2.85 (0.13) (0.04)
--------- --------- --------- --------- ----------- --------- --------
Net increase (decrease) from
investment operations.............. 0.22 (1.41) 3.74 (0.12) 0.37
Distributions:
Net investment income................. (0.73) (0.72) (0.89) (0.00) (0.34)
Net realized gain on investments...... (0.00) (0.38) (0.37) (0.00) (0.00)
Return of capital..................... (0.04) (0.21) (0.00) (0.00) (0.02)
Sources other than net investment
income............................... (0.00) (0.00) (0.12) (0.00) (0.00)
--------- --------- --------- --------- ----------- --------- --------
Total distributions................. (0.77) (1.31) (1.38) (0.00) (0.36)
--------- --------- --------- --------- ----------- --------- --------
Net asset value, end of period.......... $ $ 10.33 $ 10.88 $ 13.60 $ 11.24 $ 10.33
--------- --------- --------- --------- ----------- --------- --------
--------- --------- --------- --------- ----------- --------- --------
Total investment return (d)............. 2.48% (11.02)% 36.2% (1.1)%(a) 3.72%(a)
Ratios and supplemental data:
Net assets, end of period (in
000's)............................... $ $357,852 $458,550 $310,431 $ 533 $ $ 443
Ratio of net investment income to
average net assets................... 8.99% 6.09% 6.5% N/A(b) 9.99%(e)
Ratio of expenses to average net assets:
With expense reductions............... 2.07% 2.05% 2.4% N/A(b) 1.07%(e)
Without expense reductions............ 2.10% --%(f) --%(f) --%(f) 1.10%(e)
Ratio of interest expenses to average
net assets............................. N/A 0.10% N/A N/A N/A
Portfolio turnover rate+++.............. 238% 583% 310% 418% 238%
</TABLE>
- ------------------------------
+ All capital shares issued and outstanding as of October 21, 1992 were
reclassified as Class A shares.
++ Commencing October 22, 1992, the Fund began offering Class B shares.
+++ Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
* Includes reimbursement by the Manager of Fund operating expenses of $0.01,
$0.04, $0.02 and 0.05 for the year ended October 31, 1991, 1990, 1989 and
1988, respectively. Without such reimbursements, the expense ratios would
have been 1.92%, 2.20%, 2.02% and 2.42% and the ratio of net investment
income to average net assets would have been 7.16%, 9.26%, 7.56% and 6.42%
for the year ended October 31, 1991, 1990, 1989 and 1988, respectively.
** Commencing June 1, 1995, the Fund began offering Advisor Class shares.
(a) Not annualized.
(b) Ratios are not meaningful due to short period of operation of Class B
shares.
(c) These selected per share data were calculated based upon weighted average
shares outstanding during the period.
(d) Total investment return does not include sales charges.
(e) Annualized.
(f) Calculation of "Ratio of expenses to average net assets" was made without
considering the effect of expense reductions, if any.
<TABLE>
<CAPTION>
AVERAGE AVERAGE NUMBER OF AVERAGE
AMOUNT OF DEBT AMOUNT OF DEBT FUND'S SHARES AMOUNT OF DEBT
OUTSTANDING AT OUTSTANDING OUTSTANDING PER SHARE
END OF PERIOD DURING THE PERIOD DURING THE PERIOD DURING THE PERIOD
-------------- ----------------- ----------------------- -----------------
<S> <C> <C> <C> <C>
Year Ended October 31, 1996....................... $ 0 $ 0 Class A -- --------- $ 0
Class B -- ---------
Advisor Class -- ------
</TABLE>
Prospectus Page 9
<PAGE>
GT GLOBAL INCOME FUNDS
HIGH INCOME FUND
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------
OCTOBER 22, 1992
(COMMENCEMENT
YEAR ENDED OCTOBER 31, OF OPERATIONS)
----------------------------------------- TO OCTOBER 31,
1996 1995 1994(C) 1993(C) 1992
-------- -------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of year................ $ $ 12.56 $ 14.92 $ 11.43 $11.43
-------- -------- -------- -------- -------
Income from investment operations:
Net investment income........................... 1.35 0.94 0.78 0.00
Net realized and unrealized gain (loss) on
investments.................................... (1.09) (1.87) 3.92 0.00
-------- -------- -------- -------- -------
Net increase (decrease) from investment
operations..................................... 0.26 (0.93) 4.70 0.00
-------- -------- -------- -------- -------
Distributions:
Net investment income........................... (1.03) (0.94) (0.78) (0.00)
Net realized gain on investments................ (0.03) (0.27) (0.00) (0.00)
In excess of net realized gain on investments... (0.00) (0.22) (0.00) (0.00)
Sources other than net investment income........ (0.00) (0.00) (0.43) (0.00)
Return of capital............................... (0.06) (0.00) (0.00) (0.00)
-------- -------- -------- -------- -------
Total distributions........................... (1.12) (1.43) (1.21) (0.00)
-------- -------- -------- -------- -------
Net asset value, end of year...................... $ $ 11.70 $ 12.56 $ 14.92 $11.43
-------- -------- -------- -------- -------
-------- -------- -------- -------- -------
Total investment return (e)....................... 2.81% (6.45)% 43.6% 0.0%(b)
-------- -------- -------- -------- -------
-------- -------- -------- -------- -------
Ratios and supplemental data:
Net assets, end of period (in 000's).............. $ $142,002 $167,974 $143,171 $ 207
Ratio of net investment income (loss) to average
net assets....................................... 11.85% 7.00% 6.4% N/A(d)
Ratio of operating expenses to average net
assets........................................... 1.75% 1.57% 2.2% N/A(d)
Ratio of interest expense to average net assets... N/A 0.22% N/A N/A
Porfolio turnover rate (f)........................
</TABLE>
- ------------------------------
(a) Annualized.
(b) Not annualized.
(c) These selected per share data were calculated based upon weighted average
shares during the year.
(d) Ratios are not meaningful due to short period of operation.
(e) Total investment return does not include sales charges.
(f) The High Income Fund invests only in the Porfolio and does not engage in
securities transactions. Accordingly, the portfolio turnover rates presented
are for the High Income Portfolio.
** Commencing June 1, 1995, the Fund began offering Advisor Class shares.
<TABLE>
<CAPTION>
AVERAGE AVERAGE NUMBER OF AVERAGE
AMOUNT OF DEBT AMOUNT OF DEBT FUND'S SHARES AMOUNT OF DEBT
OUTSTANDING AT OUTSTANDING OUTSTANDING PER SHARE
END OF PERIOD DURING THE PERIOD DURING THE PERIOD DURING THE PERIOD
-------------- ----------------- ----------------------- -----------------
<S> <C> <C> <C> <C>
Year Ended October 31, 1996....................... $ 0 $ 0 Class A -- --------- $ 0
Class B -- ---------
Advisor Class --
---------
</TABLE>
Prospectus Page 10
<PAGE>
GT GLOBAL INCOME FUNDS
HIGH INCOME FUND
(CONTINUED)
<TABLE>
<CAPTION>
CLASS B ADVISOR CLASS**
-------------------------------------------------------- -----------------------
OCTOBER 22,
1992
(COMMENCEMENT YEAR JUNE 1, 1995
YEAR ENDED OCTOBER 31, OF OPERATIONS) ENDED TO
-------------------------------------- TO OCTOBER 31, OCTOBER OCTOBER 31,
1996 1995 1994(C) 1993(C) 1992 31, 1996 1995
-------- -------- -------- -------- ---------------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of
year.............................. $ $ 12.56 $ 14.90 $ 11.43 $11.43 $ $11.44
-------- -------- -------- -------- ------- -------- -------------
Income from investment operations:
Net investment income............ 1.27 0.86 0.70 0.00 0.57
Net realized and unrealized gain
(loss) on investments........... (1.09) (1.85) 3.90 0.00 0.17
-------- -------- -------- -------- ------- -------- -------------
Net increase (decrease) from
investment operations........... 0.18 (0.99) 4.60 0.00 0.74
-------- -------- -------- -------- ------- -------- -------------
Distributions:
Net investment income............ (0.96) (0.86) (0.70) (0.00) (0.44)
Net realized gain on
investments..................... (0.03) (0.27) (0.00) (0.00) (0.00)
In excess of net realized gain on
investments..................... (0.00) (0.22) (0.00) (0.00) (0.00)
Sources other than net investment
income.......................... (0.00) (0.00) (0.43) (0.00) (0.00)
Return of capital................ (0.06) (0.00) (0.00) (0.00) (0.03)
-------- -------- -------- -------- ------- -------- -------------
Total distributions............ (1.05) (1.35) (1.13) (0.00) (0.47)
-------- -------- -------- -------- ------- -------- -------------
Net asset value, end of year....... $ 11.69 $ 12.56 $ 14.90 $11.43 $11.71
-------- -------- -------- -------- ------- -------- -------------
-------- -------- -------- -------- ------- -------- -------------
Total investment return (e)........ 2.07% (6.99)% 42.6% 0.0%(b) 6.54%(b)
-------- -------- -------- -------- ------- -------- -------------
-------- -------- -------- -------- ------- -------- -------------
Ratios and supplemental data:
Net assets, end of period (in
000's)............................ $214,897 $232,423 $127,035 $ 53 $1,463
Ratio of net investment income
(loss) to average net assets...... 11.20% 6.35% 5.8% N/A(d) 12.20%(a)
Ratio of operating expenses to
average net assets................ 2.40% 2.22% 2.8% N/A(d) 1.40%(a)
Ratio of interest expense to
average net assets................ N/A 0.22% N/A N/A N/A
Portfolio turnover rate (f)........
</TABLE>
- ------------------------------
(a) Annualized.
(b) Not annualized.
(c) These selected per share data were calculated based upon weighted average
shares during the year.
(d) Ratios are not meaningful due to short period of operation.
(e) Total investment return does not include sales charges.
(f) The High Income Fund invests only in the Porfolio and does not engage in
securities transactions. Accordingly, the portfolio turnover rates presented
are for the High Income Portfolio.
** Commencing June 1, 1995, the Fund began offering Advisor Class shares.
<TABLE>
<CAPTION>
AVERAGE AVERAGE NUMBER OF AVERAGE
AMOUNT OF DEBT AMOUNT OF DEBT FUND'S SHARES AMOUNT OF DEBT
OUTSTANDING AT OUTSTANDING OUTSTANDING PER SHARE
END OF PERIOD DURING THE PERIOD DURING THE PERIOD DURING THE PERIOD
-------------- ----------------- ----------------------- -----------------
<S> <C> <C> <C> <C>
Year Ended October 31, 1996....................... $ 0 $ 0 Class A -- --------- $ 0
Class B -- ---------
Advisor Class --
---------
</TABLE>
Prospectus Page 11
<PAGE>
GT GLOBAL INCOME FUNDS
INVESTMENT OBJECTIVES
AND POLICIES
- --------------------------------------------------------------------------------
GOVERNMENT INCOME FUND
The Government Income Fund seeks a high level of current income by investing
primarily in high quality debt securities of the U.S. and foreign governments,
their agencies and instrumentalities. The Fund's secondary objectives are
capital appreciation and protection of principal through active management of
its maturity structure and currency exposure.
At least 65% of the Fund's total assets normally are invested in debt
obligations issued or guaranteed by the U.S. or foreign governments (including
foreign states, provinces or municipalities) or their agencies, authorities or
instrumentalities. For purposes of this policy, the Fund considers debt
obligations of supranational entities organized or supported by several national
governments, such as the World Bank and the Asian Development Bank, to be
"government securities."
The Fund invests primarily in high quality government debt securities. "High
quality" debt securities are those rated in the top two ratings categories of
Moody's Investors Service, Inc. ("Moody's") or Standard and Poor's Ratings Group
("S&P") or, if not rated, determined to be of comparable quality by LGT Asset
Management. A description of Moody's and S&P ratings is included in the Appendix
to this Prospectus.
The Fund currently contemplates that it will invest principally in obligations
of the United States, Canada, Japan, the Western European nations, New Zealand
and Australia, as well as in multinational currency units. Under normal market
conditions, the Fund invests in issues of not less than three different
countries; investments in the securities of any one country, other than the
United States, normally represent no more than 40% of the Fund's total assets.
The Fund will not invest in a foreign currency or in securities denominated in a
foreign currency if such currency is not at the time of investment considered by
the Manager to be fully exchangable into U.S. dollars (or a multinational
currency unit) without legal restriction. The Fund may purchase securities that
are issued by the government or a company or financial institution of one
country but denominated in the currency of another country (or a multinational
currency unit).
The Fund may also invest up to 35% of its total assets in: (1) foreign
government securities that are not high quality but are rated at least
"investment grade," i.e., rated within the four highest ratings categories of
Moody's or S&P or, if not rated, determined by the Manager to be of comparable
quality; (2) corporate debt obligations of U.S. or foreign issuers rated at
least investment grade by Moody's or S&P, including debt obligations convertible
into equity securities or having attached warrants or rights to purchase equity
securities; and (3) common stocks, preferred stocks and warrants to acquire such
securities, provided that the Fund will not invest more than 20% of its total
assets in such securities.
STRATEGIC INCOME FUND
The Strategic Income Fund primarily seeks high current income and secondarily
seeks capital appreciation.
The Strategic Income Fund invests in debt securities of issuers in: (1) the
United States; (2) developed foreign countries; and (3) emerging markets. The
Fund selects debt securities from those issued by governments, their agencies
and instrumentalities; central banks; and commercial banks and other corporate
entities. Debt securities in which the Fund may invest include bonds, notes,
debentures, and other similar instruments. The Fund normally invests at least
50% of its total assets in U.S. and foreign debt and other fixed income
securities that, at the time of purchase, are rated at least investment grade by
Moody's or S&P or, if not rated, determined by the Manager to be of comparable
quality. No more than 50% of the Fund's total assets may be invested in
securities rated below investment grade. Such securities involve a high degree
of risk and are predominantly speculative. They are the equivalent of high
yield, high risk bonds, commonly known as "junk bonds." The Fund may also invest
in securities that are in default as to payment of principal and/or interest.
See "Risk Factors."
The Fund's investments in emerging market securities may consist substantially
of Brady Bonds (see "General Policies -- Brady Bonds," below) and other
sovereign debt securities issued by emerging market governments that are traded
in the markets of developed countries or groups of developed countries. The
Manager may invest in debt
Prospectus Page 12
<PAGE>
GT GLOBAL INCOME FUNDS
securities of emerging market issuers that it determines to be suitable
investments for the Fund without regard to ratings. Currently, the substantial
majority of emerging market debt securities are considered to have a credit
quality below investment grade. The Fund also may invest in below-investment
grade debt securities of corporate issuers in the United States and in developed
foreign countries, subject to the overall 50% limitation. See "Risk Factors" for
a more complete description of the risks associated with investment in emerging
market and other lower quality debt securities.
HIGH INCOME FUND
The High Income Fund primarily seeks high current income, and secondarily seeks
capital appreciation. The Fund seeks its objectives by investing all of its
investable assets in the Global High Income Portfolio, which in turn seeks the
same objectives as the Fund by normally investing at least 65% of its total
assets in debt securities of issuers in emerging markets.
The Portfolio intends to invest in the following types of debt securities:
bonds, notes and debentures of emerging market governments; securities issued or
guaranteed by such governments' agencies or instrumentalities; securities issued
or guaranteed by the central banks of emerging market countries; and securities
issued by other banks and companies in such countries and securities denominated
in or indexed to the currencies of emerging markets. Under current market
conditions, the Portfolio expects its investments in emerging market securities
to consist substantially of Brady Bonds (see "General Policies -- Brady Bonds,"
below) and other sovereign debt securities.
The Portfolio may also invest up to 35% of its total assets in (1) equity
securities of issuers in emerging markets included in the list below under the
caption "Emerging Markets"; (2) equity and debt securities of issuers in
developed countries, including the United States; (3) securities of issuers in
emerging markets not included in the emerging markets list, if investing therein
becomes feasible and desirable subsequent to the date of this Prospectus; and
(4) cash and money market instruments. In evaluating investments in securities
of issuers in developed markets, the Manager will consider, among other things,
the business activities of the issuer in emerging markets and the impact that
developments in emerging markets are likely to have on the issuer's financial
condition.
Under normal circumstances, substantially all of the Portfolio's assets will be
invested in debt securities of both governmental and corporate issuers in
emerging markets. Emerging markets debt securities generally are considered to
have a credit quality below investment grade, as defined above. Lower quality
securities involve a high degree of risk and are predominantly speculative.
These debt securities are the equivalent of high yield, high risk bonds,
commonly known as "junk bonds." See "Risk Factors." Many emerging market debt
securities are not rated by U.S. ratings agencies such as Moody's and S&P. The
Portfolio's ability to achieve its investment objectives is thus more dependent
on the Manager's credit analysis. The Portfolio may invest in securities that
are in default as to payment of principal and/or interest.
OTHER INFORMATION REGARDING THE PORTFOLIO. As previously described, investors
should be aware that the High Income Fund, unlike mutual funds which directly
acquire and manage their own portfolios of securities, seeks to achieve its
investment objectives by investing all of its investable assets in the
Portfolio, which is a separate investment company. Since the Fund will invest
only in the Portfolio, the Fund's shareholders will acquire only an indirect
interest in the investments of the Portfolio.The High Income Fund may redeem its
investment from the Portfolio at any time, if the Board of Directors of the
Company determines that it is in the best interests of the Fund and its
shareholders to do so. A change in the Portfolio's investment objectives,
policies or limitations which is not approved by the Board or the shareholders
of the corresponding Fund could require the Fund to redeem its interest in the
Portfolio. Any such redemption could result in a distribution in kind of
portfolio securities (as opposed to a cash distribution) by the Portfolio. In
addition, a distribution in kind could result in a less diversified portfolio of
investments for the Fund and could adversely affect the liquidity of the Fund.
Should such a distribution occur, the Fund could incur brokerage fees or other
transaction costs in converting such securities to cash. In addition, a
distribution in kind could result in a less diversified portfolio of investments
for the Fund and could adversely affect the liquidity of the Fund. Upon
redemption, the Board would consider what action might be taken, including the
investment of all the investable assets of the Fund in another pooled investment
entity having substantially the same investment objectives as the Fund or the
retention by the Fund of its own investment adviser to manage the Fund's assets
in accordance with the investment objectives, policies and limitations discussed
herein with respect to the Portfolio.
In addition to selling its interests to the Fund, the Portfolio may sell its
interests to other non-
Prospectus Page 13
<PAGE>
GT GLOBAL INCOME FUNDS
affiliated investment companies and/or other institutional investors. All
institutional investors in the Portfolio will pay a proportionate share of the
Portfolio's expenses and will invest in the Portfolio on the same terms and
conditions. However, if another investment company invests all of its assets in
the Portfolio, it would not be required to sell its shares at the same public
offering price as the Fund and may charge different sales commissions.
Therefore, investors in the Fund may experience different returns from investors
in another investment company which invests exclusively in the Portfolio. As of
the date of this Prospectus, the High Income Fund is the only institutional
investor in the Portfolio.
Investors in the Fund should be aware that the Funds' investment in the
Portfolio may be materially affected by the actions of large investors in the
Portfolio, if any. For example, as with all open-end investment companies, if a
large investor were to redeem its interest in the Portfolio, the Portfolio's
remaining investors could experience higher pro rata operating expenses, thereby
producing lower returns. As a result, the Portfolio's security holdings may
become less diverse, resulting in increased risk. Institutional investors in the
Portfolio that have a greater pro rata ownership interest in the Portfolio than
the Fund could have effective voting control over the operation of the
Portfolio. A change in the Portfolio's fundamental objectives, policies and
restrictions, which is not approved by the shareholders of the Fund, could
require the Fund to redeem its interest in the Portfolio. Any such redemption
could result in a distribution in kind of portfolio securities (as opposed to a
cash distribution) by the Portfolio. Should such a distribution occur, the Fund
could incur brokerage fees or other transaction costs in converting such
securities to cash. In addition, a distribution in kind could result in a less
diversified portfolio of investments for the Fund and could affect adversely the
liquidity of the Fund.
GENERAL POLICIES
TEMPORARY DEFENSIVE STRATEGIES. 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. Pursuant to such a defensive strategy,
the Government Income Fund, the Strategic Income Fund and the Portfolio
temporarily may hold cash (U.S. dollars, foreign currencies or multinational
currency units) and/or invest up to 100% of their respective assets in high
quality debt securities or money market instruments of U.S. or foreign issuers.
In addition, for temporary defensive purposes most or all of the Government
Income Fund's, the Strategic Income Fund's or the Portfolio's investments may be
made in the United States and denominated in U.S. dollars. To the extent the
Funds or the Portfolio employ a temporary defensive strategy, they will not be
invested so as to achieve directly their investment objectives.
In addition, pending investment of proceeds from new sales of Fund shares or to
meet ordinary daily cash needs, the Government Income Fund, the Strategic Income
Fund and the Portfolio may hold cash (U.S. dollars, foreign currencies or
multinational currency units) and may invest in high quality foreign or domestic
money market instruments.
EMERGING MARKET SECURITIES. The Strategic Income Fund and the Portfolio consider
"emerging markets" to consist of all countries determined by the Manager to have
developing or emerging economies and markets. These countries generally include
every country in the world except the United States, Canada, Japan, Australia,
New Zealand and most countries located in Western Europe. The Strategic Income
Fund and the Portfolio will consider investment in the following emerging
markets:
<TABLE>
<S> <C>
Algeria Malaysia
Argentina Mauritius
Bolivia Mexico
Botswana Morocco
Brazil Nicaragua
Bulgaria Nigeria
Chile Oman
China Pakistan
Colombia Panama
Costa Rica Paraguay
Cyprus Peru
Czech Republic Philippines
Dominican Poland
Republic Portugal
Ecuador Republic of Slovakia
Egypt Russia
El Salvador Singapore
Finland Slovenia
Ghana South Africa
Greece South Korea
Hong Kong Sri Lanka
Hungary Swaziland
India Taiwan
Indonesia Thailand
Israel Turkey
Ivory Coast Uruguay
Jamaica Venezuela
Jordan Zambia
Kenya Zimbabwe
</TABLE>
The Strategic Income Fund and the Portfolio will not be invested in all such
markets at all times. Moreover, investing in some of those markets currently may
not be desirable or feasible, due to the lack of adequate custody arrangements,
overly burdensome repatriation requirements and similar
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GT GLOBAL INCOME FUNDS
restrictions, the lack of organized and liquid securities markets, unacceptable
political risks or for other reasons.
As used in this Prospectus and the Statement of Additional Information, an
issuer in an emerging market is an entity: (i) for which the principal
securities trading market is an emerging market, as defined above; (ii) that
(alone or on a consolidated basis) derives 50% or more of its total revenue from
either goods produced, sales made or services performed in emerging markets; or
(iii) organized under the laws of, or with a principal office in, an emerging
market.
ASSET ALLOCATION. The Government Income Fund, the Strategic Income Fund and the
Portfolio each invests in debt obligations allocated among diverse markets and
denominated in various currencies, including U.S. dollars, or in multinational
currency units such as European Currency Units. The Government Income Fund, the
Strategic Income Fund and the Portfolio may purchase securities that are issued
by the government or a company or financial institution of one country but
denominated in the currency of another country (or a multinational currency
unit). The Funds are designed for investors who wish to accept the risks
entailed in such investments, which are different from those associated with a
portfolio consisting entirely of securities of U.S. issuers denominated in U.S.
dollars. See "Risk Factors."
The Manager allocates the assets of the Government Income Fund, the Strategic
Income Fund and the Portfolio in securities of issuers in countries and in
currency denominations where the combination of fixed income market returns, the
price appreciation potential of fixed income securities and currency exchange
rate movements will present opportunities primarily for high current income and
secondarily for capital appreciation (and, in the case of the Government Income
Fund, secondarily for capital appreciation and protection of principal). In so
doing, the Manager intends to take full advantage of the different yield, risk
and return characteristics that investment in the fixed income markets of
different countries can provide for U.S. investors. Fundamental economic
strength, credit quality and currency and interest rate trends are the principal
determinants of the emphasis given to various country, geographic and industry
sectors within the Government Income Fund, the Strategic Income Fund and the
Portfolio. Securities held by the Government Income Fund, the Strategic Income
Fund and the Portfolio may be invested in without limitation as to maturity.
The Manager selects securities of particular issuers on the basis of its views
as to the best values then currently available in the marketplace. Such values
are a function of yield, maturity, issue classification and quality
characteristics, coupled with expectations regarding the local and world
economies, movements in the general level and term of interest rates, currency
values, political developments and variations in the supply of funds available
for investment in the world bond market relative to the demands placed upon it.
The Manager generally evaluates currencies on the basis of fundamental economic
criteria (e.g., relative inflation, interest rate levels and trends, growth rate
forecasts, balance of payments status and economic policies) as well as
technical and political data. The Manager may seek to protect a Fund against
such negative currency movements through the use of sophisticated investment
techniques. See "Options, Futures and Forward Currency Transactions" and "Swaps,
Caps, Floors and Collars."
BRADY BONDS. The Strategic Income Fund and the Portfolio may invest in "Brady
Bonds," which are debt restructurings that provide for the exchange of cash and
loans for newly issued bonds. Brady Bonds have been issued by the countries of,
among others, Albania, Argentina, Brazil, Bulgaria, Costa Rica, Dominican
Republic, Ecuador, Jordan, Mexico, Nigeria, Philippines, Poland, Uruguay,
Venezuela and are expected to be issued by Panama, Peru and other emerging
market countries. Approximately $139 billion in principal amount of Brady Bonds
are outstanding, the largest proportion having been issued by Brazil, Argentina
and Mexico. Brady Bonds issued by Brazil, Argentina and Mexico currently are
rated below investment grade. As of the date of this Prospectus, the Strategic
Income Fund and the Portfolio are not aware of the occurrence of any payment
defaults on Brady Bonds. Investors should recognize, however, that Brady Bonds
have been issued only recently and, accordingly, do not have a long payment
history.
The Strategic Income Fund and the Portfolio may invest in either collateralized
or uncollateralized Brady Bonds. U.S. dollar-denominated, collateralized Brady
Bonds, which may be fixed rate par bonds or floating rate discount bonds, are
collateralized in full as to principal by U.S. Treasury zero coupon bonds having
the same maturity as the bonds. Interest payments on such bonds generally are
collateralized by cash or securities in an amount that, in the case of fixed
rate bonds, is
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GT GLOBAL INCOME FUNDS
equal to at least one year of rolling interest payments or, in the case of
floating rate bonds, initially is equal to at least one year's rolling interest
payments based on the applicable interest rate at that time and is adjusted at
regular intervals thereafter.
LOAN PARTICIPATIONS AND ASSIGNMENTS. The Strategic Income Fund and the Portfolio
may invest in fixed and floating rate loans ("Loans") arranged through private
negotiations between a foreign entity and one or more financial institutions
("Lenders"). The majority of the Fund's and the Portfolio's investments in Loans
in emerging markets is expected to be in the form of participations in Loans
("Participations") and assignments of portions of Loans from third parties
("Assignments"). Participations typically will result in the Fund and/or the
Portfolio having a contractual relationship only with the Lender, not with the
borrower government. The Fund and/or the Portfolio will have the right to
receive payments of principal, interest and any fees to which it is entitled
only from the Lender selling the Participation and only upon receipt by the
Lender of the payments from the borrower. In connection with purchasing
Participations, the Fund and/or the Portfolio generally will have no right to
enforce compliance by the borrower with the terms of the loan agreement relating
to the loan ("Loan Agreement"), nor any rights of set-off against the borrower,
and the Fund and/or the Portfolio may not directly benefit from any collateral
supporting the Loan in which it has purchased the Participation. As a result,
the Fund and/or the Portfolio will assume the credit risk of both the borrower
and the Lender that is selling the Participation.
In the event of the insolvency of the Lender selling a Participation, the Fund
and/or the Portfolio may be treated as a general creditor of the Lender and may
not benefit from any set-off between the Lender and the borrower. The Fund
and/or the Portfolio will acquire Participations only if the Lender
interpositioned between the Fund and/or the Portfolio and the borrower is
determined by the Manager to be creditworthy. When the Fund and/or the Portfolio
purchases Assignments from Lenders, the Fund and/or the Portfolio will acquire
direct rights against the borrower on the Loan. However, since Assignments are
arranged through private negotiations between potential assignees and assignors,
the rights and obligations acquired by the Fund and/or the Portfolio as the
purchaser of an Assignment may differ from, and be more limited than, those held
by the assigning Lender.
WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES. The Government Income Fund, the
Strategic Income Fund and the Portfolio may purchase debt securities on a
"when-issued" basis and may purchase or sell such securities on a "forward
commitment" basis in order to hedge against anticipated changes in interest
rates and prices. The price, which is generally expressed in yield terms, is
fixed at the time the commitment is made, but delivery and payment for the
securities take place at a later date. When-issued securities and forward
commitments may be sold prior to the settlement date, but the Funds and the
Portfolio will purchase or sell when-issued securities and forward commitments
only with the intention of actually receiving or delivering the securities, as
the case may be. No income accrues on securities which have been purchased
pursuant to a forward commitment or on a when-issued basis prior to delivery of
the securities. If a Fund or the Portfolio disposes of the right to acquire a
when-issued security prior to its acquisition or disposes of its right to
deliver or receive against a forward commitment, it may incur a gain or loss. At
the time a Fund or the Portfolio enters into a transaction on a when-issued or
forward commitment basis, a segregated account consisting of cash or liquid
securities equal to the value of the when-issued or forward commitment
securities will be established and maintained with its custodian and will be
marked to market daily. There is a risk that the securities may not be delivered
and that a Fund or the Portfolio may incur a loss. The Government Income Fund
may invest up to 5% if its total assets in a combination of securities purchased
on a when-issued basis or with respect to which it has entered into forward
commitment agreements.
The Strategic Income Fund and the Portfolio may also sell securities on a "when,
as and if issued" basis for hedging purposes. Under such a transaction, the Fund
or the Portfolio is required to deliver at a future date a security it does not
presently hold, but which it has a right to receive if the security is issued.
Issuance of the security may not occur, in which case the Fund or Portfolio
would have no obligation to the other party, and would not receive payment for
the sale. Selling securities on a "when, as and if issued" basis may reduce risk
of loss to the extent that such a sale wholly or partially offsets unfavorable
price movements on the investments being hedged. However, such sales also limit
the amount the Fund or Portfolio can receive if the "when, as and if issued" is
in fact issued.
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GT GLOBAL INCOME FUNDS
BORROWING, REVERSE REPURCHASE AGREEMENTS AND ROLL TRANSACTIONS. The Government
Income Fund may borrow from banks or may borrow through reverse repurchase
agreements and "roll" transactions in connection with meeting requests for the
redemption of Fund shares. The Government Income Fund also may borrow up to 5%
of its total assets for temporary or emergency purposes other than to meet
redemptions. However, the Government Income Fund will not borrow for investment
purposes, nor will the Fund purchase securities while borrowings are
outstanding.
Both the Strategic Income Fund and the Portfolio are authorized to borrow money
from banks in an amount up to 33 1/3% of its total assets (including the amount
borrowed), less all liabilities and indebtedness other than the borrowings and
may use the proceeds of such borrowings for investment purposes. The Strategic
Income Fund and the Portfolio will borrow for investment purposes only when the
Manager believes that such borrowings will benefit the Fund or the Portfolio,
respectively, after taking into account considerations such as the costs of the
borrowing and the likely investment returns on the securities purchased with the
borrowed monies.
Borrowing for investment purposes is known as leveraging, which is a speculative
practice. Such borrowing by the Strategic Income Fund and the Portfolio creates
the opportunity for increased net income and appreciation but, at the same time,
involves special risk considerations. For example, leveraging might exaggerate
changes in the net asset value of Fund shares and in the yield realized by the
Fund or the Portfolio. Although the principal amount of such borrowings will be
fixed, the Fund's and the Portfolio's assets may change in value during the time
the borrowing is outstanding. By leveraging the Fund or the Portfolio, changes
in net asset values, higher or lower, may be greater in degree than if leverage
was not employed. To the extent the income derived from the assets obtained with
borrowed funds exceeds the interest and other expenses that the Fund or the
Portfolio will have to pay, the Fund's or the Portfolio's net income will be
greater than if borrowing was not used. Conversely, if the income from the
assets obtained with borrowed funds is not sufficient to cover the cost of
borrowing, the net income of the Fund or the Portfolio will be less than if
borrowing were not used, and therefore the amount available for distribution to
shareholders as dividends will be reduced. The Strategic Income Fund and the
Portfolio each expects that some of its borrowings may be made on a secured
basis.
In addition to the foregoing borrowings, the Strategic Income Fund and the
Portfolio each may borrow money for temporary or emergency purposes or payments
in an amount not exceeding 5% of the value of its total assets (not including
the amount borrowed) provided that the total amount borrowed by the Strategic
Income Fund or the Portfolio for any purpose does not exceed 33 1/3% of its
total assets.
The Funds and the Portfolio may also enter into reverse repurchase agreements
with a bank or recognized securities dealer, although the Strategic Income Fund
currently has no intention of doing so with respect to more than 5% of its total
assets. Under a reverse repurchase agreement, the Funds or the Portfolio would
sell securities and agree to repurchase them at a particular price at a future
date. At the time a Fund or the Portfolio enters into a reverse repurchase
agreement, it will establish and maintain a segregated account with an approved
custodian containing cash or liquid securities having a value not less than the
repurchase price, including accrued interest. Reverse repurchase agreements
involve the risk that the market value of the securities retained in lieu of
sale by a Fund or the Portfolio may decline below the price of the securities a
Fund or the Portfolio has sold but is obligated to repurchase. In the event the
buyer of securities under a reverse repurchase agreement files for bankruptcy or
becomes insolvent, such buyer or its trustee or receiver may receive an
extension of time to determine whether to enforce a Fund's or the Portfolio's
obligation to repurchase the securities, and a Fund's or the Portfolio's use of
the proceeds of the reverse repurchase agreement may effectively be restricted
pending such decision.
The Strategic Income Fund and the Portfolio also may enter into "dollar rolls,"
in which the Fund or the Portfolio sells fixed income securities for delivery in
the current month and simultaneously contracts to repurchase substantially
similar (same type, coupon and maturity) securities on a specified future date.
During the roll period, the Fund or the Portfolio would forego principal and
interest paid on such securities. The Fund or the Portfolio would be compensated
by the difference between the current sales price and the forward price for the
future purchase, as well as by the interest earned on the cash proceeds of the
initial sale. See "Investment Objectives and Policies" in the Statement of
Additional Information.
Prospectus Page 17
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GT GLOBAL INCOME FUNDS
Reverse repurchase agreements and dollar rolls will be treated as borrowings and
will be deducted from the Strategic Income Fund's or the Portfolio's assets for
purposes of calculating compliance with the Fund's or the Portfolio's borrowing
limitation. See "Investment Limitations" in the Statement of Additional
Information.
SECURITIES LENDING. The Government Income Fund, the Strategic Income Fund and
the Portfolio may lend their respective portfolio securities to broker/dealers
or to other institutional investors. Securities lending allows a Fund to retain
ownership of the securities loaned and, at the same time earn additional income
that may be used to offset the Fund's custody fee. At all times a loan is
outstanding, each Fund and the Portfolio requires the borrower to maintain with
the Fund's or the Portfolio's custodian, collateral consisting of cash, U.S.
government securities, or certain irrovocable letters of credit equal to at
least the value of the borrowed securities, plus any accrued interest. Each Fund
and the Portfolio limits its loans of portfolio securities to an aggregate of
30% of the value of its total assets, measured at the time any such loan is
made. 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 loaned securities and possible loss of rights in the
collateral should the borrower fail financially.
ZERO COUPON SECURITIES. The Strategic Income Fund and the Portfolio may invest
in certain zero coupon securities that are "stripped" U.S. Treasury notes and
bonds. They also may invest in zero coupon and other deep discount securities
issued by foreign governments and domestic and foreign corporations, including
certain Brady Bonds and other foreign debt and in payment-in-kind securities.
Zero coupon securities pay no interest to holders prior to maturity, and
payment-in-kind securities pay interest in the form of additional securities.
However, a portion of the original issue discount on zero coupon securities and
the "interest" on payment-in-kind securities will be included in the investing
Fund's or Portfolio's income. Accordingly, for a Fund to continue to qualify for
tax treatment as a regulated investment company and to avoid a certain excise
tax (see "Taxes" in the Statement of Additional Information), it may be required
to distribute an amount that is greater than the total amount of cash it
actually receives (or, in the case of the High Income Fund, its share of the
total amount of cash the Portfolio actually receives). These distributions must
be made from the Fund's (or, in the case of the High Income Fund, its, or its
share of the Portfolio's) cash assets or, if necessary, from the proceeds of
sales of portfolio securities. The Fund or the Portfolio will not be able to
purchase additional income-producing securities with cash used to make such
distributions, and its current income ultimately may be reduced as a result.
Zero coupon and payment-in-kind securities usually trade at a deep discount from
their face or par value and will be subject to greater fluctuations of market
value in response to changing interest rates than debt obligations of comparable
maturities that make current distributions of interest in cash.
SYNTHETIC SECURITY POSITIONS. The Government Income Fund, the Strategic Income
Fund and the Portfolio may utilize combinations of futures on bonds and forward
currency contracts to create investment positions that have substantially the
same characteristics as bonds of the same type as those on which the futures
contracts are written. Investment positions of this type are generally referred
to as "synthetic securities."
For example, in order to establish a synthetic security position for a Fund or
the Portfolio that is comparable to owning a Japanese government bond, the
Manager might purchase futures contracts on Japanese government bonds in the
desired principal amount and purchase forward currency contracts for Japanese
Yen in an amount equal to the then current purchase price for such bonds in the
Japanese cash market, with each contract having approximately the same delivery
date.
The Manager might roll over the futures and forward currency contract positions
before taking delivery in order to continue the Fund's or the Portfolio's
investment position, or the Manager might close out those positions, thus
effectively selling the synthetic security. Further, the amount of each contract
might be adjusted in response to market conditions and the forward currency
contract might be changed in amount or eliminated in order to hedge against
currency fluctuations.
The Manager would create synthetic security positions for a Fund or the
Portfolio when it believes that it can obtain a better yield or achieve cost
savings in comparison to purchasing actual bonds or when comparable bonds are
not readily available in the market. Synthetic security positions are subject to
the risk that changes in the value of purchased futures contracts may differ
from changes in the value of the bonds that might otherwise have
Prospectus Page 18
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GT GLOBAL INCOME FUNDS
been purchased in the cash market. Also, while the Manager believes that the
cost of creating synthetic security positions generally will be materially lower
than the cost of acquiring comparable bonds in the cash market, a Fund or the
Portfolio will incur transaction costs in connection with each purchase of a
futures or forward currency contract. The use of futures contracts and forward
currency contracts to create synthetic security positions also is subject to
substantially the same risks as those that exist when these instruments are used
in connection with hedging strategies. See "Options, Futures and Forward
Currency Transactions" below and "Options, Futures and Currency Strategies" in
the Statement of Additional Information.
OPTIONS, FUTURES AND FORWARD CURRENCY TRANSACTIONS. The Government Income Fund,
the Strategic Income Fund and the Portfolio may use forward currency contracts,
futures contracts, options on securities, options on indices, options on
currencies, and options on futures contracts to attempt to hedge against the
overall level of investment and currency risk normally associated with the
Funds' or Portfolio invesstment. The Strategic Income Fund and the Portfolio
also may enter into interest rate, currency and index swaps and purchase or sell
related caps, floors and collars and other similar instruments. See "Swaps,
Caps, Floors and Collars" below. These instruments are often referred to as
"derivatives," which may be defined as financial instruments whose performance
is derived, at least in part, from the performance of another asset (such as a
security, currency or an index of securities). The Government Income Fund, the
Strategic Income Fund and the Portfolio may enter into such instruments up to
the full value of their portfolio assets.
To attempt to hedge against adverse movements in exchange rates between
currencies, the Government Income Fund, the Strategic Income Fund and the
Portfolio may enter into forward currency contracts for the purchase or sale of
a specified currency at a specified future date. Such contracts may involve the
purchase or sale of a foreign currency against the U.S. dollar or may involve
two foreign currencies. The Government Income Fund, the Strategic Income Fund
and the Portfolio may enter into forward currency contracts either with respect
to specific transactions or with respect to the respective Fund's or the
Portfolio's portfolio positions. Each Fund and the Portfolio also may purchase
and sell put and call options on currencies, futures contracts on currencies and
options on such futures contracts to hedge against movements in exchange rates.
In addition, each Fund and the Portfolio may purchase and sell put and call
options on securities to hedge against the risk of fluctuations in the prices of
securities held by the Fund or the Portfolio or that the Manager intends to
include in the Fund's or the Portfolio's portfolio. The Funds and the Portfolio
also may purchase and sell put and call options on indices to hedge against
overall fluctuations in the securities markets generally or in a specific market
sector.
Further, the Funds and the Portfolio may sell index futures contracts and may
purchase put options or write call options on such futures contracts to protect
against a general market or market sector decline that could adversely affect
the Fund's or the Portfolio's portfolio. The Funds and the Portfolio also may
purchase index futures contracts and purchase call options or write put options
on such contracts to hedge against a general market or market sector advance and
thereby attempt to lessen the cost of future securities acquisitions. A Fund or
the Portfolio may use interest rate futures contracts and options thereon to
hedge its portfolio against changes in the general level of interest rates.
Although a Fund or the Portfolio might not enter into any such transaction,
options, futures and foreign currency transactions involve certain risks, which
include: (1) dependence on the Manager's ability to predict movements in the
prices of individual securities, fluctuations in the general securities markets
and movements in interest rates and currency markets; (2) imperfect correlation,
or even no correlation, between movements in the price of forward contracts,
options, futures contract's or options thereon and movements in the price of the
currency or security hedged or used for cover; (3) the fact that skills and
techniques needed to trade options, futures contracts and options thereon or to
use forward currency contracts are different from those needed to select the
securities in which a Fund or the Portfolio invests; (4) lack of assurance that
a liquid secondary market will exist for any particular option, futures contract
or option thereon at any particular time; (5) the possible loss of principal
under certain conditions; (6) the possible inability of a Fund or the Portfolio
to purchase or sell a portfolio security at a time when it would otherwise be
favorable for it to do so, or the possible need for a Fund or the Portfolio to
sell a security at a disadvantageous time, due to the need for the Fund or the
Portfolio to maintain
Prospectus Page 19
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GT GLOBAL INCOME FUNDS
"cover" or to set aside securities in connection with hedging transactions; and
(7) the possible need of a Fund or the Portfolio to defer closing out of certain
options, futures contracts and options thereon and forward currency contracts in
order to qualify or continue to qualify for the beneficial tax treatment
afforded regulated investment companies under the Internal Revenue Code of 1986,
as amended ("Code"). See "Dividends, Other Distributions and Federal Income
Taxation" herein and "Taxes" in the Statement of Additional Information.
SWAPS, CAPS, FLOORS AND COLLARS. The Strategic Income Fund and the Portfolio may
enter into interest rate, currency and index swaps, and purchase or sell related
caps, floors and collars and other derivative instruments. The Strategic Income
Fund and the Portfolio expect to enter into these transactions primarily to
preserve a return or spread on a particular investment or portion of its
portfolio, to protect against currency fluctuations, as a technique for managing
the portfolio's duration (I.E., the price sensitivity to changes in interest
rates) or to protect against any increase in the price of securities the Fund or
the Portfolio anticipates purchasing at a later date. The Fund and the Portfolio
intend to use these transactions as hedges, and neither will sell interest rate
caps or floors if it does not own securities or other instruments providing an
income stream roughly equivalent to what the Fund or the Portfolio may be
obligated to pay.
Interest rate swaps involve the exchange by the Fund or the Portfolio with
another party of their respective commitments to pay or receive interest (for
example, an exchange of floating rate payments for fixed rate payments) with
respect to a notional amount of principal. A currency swap is an agreement to
exchange cash flows on a notional amount based on changes in the values of the
reference indices.
The purchase of a cap entitles the purchaser to receive payments on a notional
principal amount from the party selling the cap to the extent that a specified
index exceeds a predetermined interest rate. The purchase of an interest rate
floor entitles the purchaser to receive payments on a notional principal amount
from the party selling the floor to the extent that a specified index falls
below a predetermined interest rate or amount. A collar is a combination of a
cap and a floor that preserves a certain return within a predetermined range of
interest rates or values.
INDEXED COMMERCIAL PAPER. The Strategic Income Fund and the Portfolio may invest
without limitation in commercial paper which is indexed to certain specific
foreign currency exchange rates. The terms of such commercial paper provide that
its principal amount is adjusted upwards or downwards (but not below zero) at
maturity to reflect changes in the exchange rate between two currencies while
the obligation is outstanding. The Strategic Income Fund and the Portfolio will
purchase such commercial paper with the currency in which it is denominated and,
at maturity, will receive interest and principal payments thereon in that
currency, but the amount of principal payable by the issuer at maturity will
change in proportion to the change (if any) in the exchange rate between the two
specified currencies between the date the instrument is issued and the date the
instrument matures. While such commercial paper entails the risk of loss of
principal, the potential for realizing gains as a result of changes in foreign
currency exchange rates enables the Fund and the Portfolio to hedge against a
decline in the U.S. dollar value of investments denominated in foreign
currencies while seeking to provide an attractive money market rate of return.
The Fund and the Portfolio will not purchase such commercial paper for
speculation.
OTHER INDEXED SECURITIES. The Government Income Fund, Strategic Income Fund and
the Portfolio may invest in indexed securities (in addition to indexed
commercial paper), which are securities whose prices are indexed to the prices
of other securities, securities indices, currencies, precious metals or other
commodities, or other financial indicators. Indexed securities typically, but
not always, are debt securities or deposits whose value at maturity or coupon
rate is determined by reference to a specific instrument or statistic. The
performance of indexed securities depends to a great extent on the performance
of the security, currency, or other instrument to which they are indexed, and
may also be influenced by interest rate changes in the United States and abroad.
At the same time, indexed securities are subject to the credit risks associated
with the issuer of the security, and their values may decline substantially if
the issuer's creditworthiness deteriorates. Indexed securities may be more
volatile than the underlying instruments. New forms of indexed securities
continue to be developed. Each Fund and Portfolio may invest in such securities
to the extent consistent with its investment objectives.
ILLIQUID SECURITIES. The Government Income Fund may invest up to 10% of its
total assets, and the
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GT GLOBAL INCOME FUNDS
Strategic Income Fund and the Portfolio up to 15% of its total assets, in
securities for which no readily available market exists, so-called "illiquid
securities." The Manager believes that carefully selected investments in joint
ventures, cooperatives, partnerships and state enterprises which are illiquid
(collectively, "Special Situations") could enable a Fund or the Portfolio to
achieve capital appreciation substantially exceeding the appreciation a Fund or
the Portfolio would realize if it did not make such investments.
Illiquid securities may be more difficult to value than liquid securities and
the sale of illiquid securities generally will require more time and result in
higher brokerage charges or dealer discounts and other selling expenses than the
sale of liquid securities. Moreover, illiquid restricted securities often sell
at a price lower than similar securities that are not subject to restrictions on
resale.
OPTIONS, FUTURES AND FORWARD CURRENCY TRANSACTIONS. Although each Fund and the
Portfolio is authorized to enter into options, futures and forward currency
transactions, the Funds and the Portfolio might not enter into any such
transactions. In addition, issuers in emerging markets typically are subject to
a greater degree of change in earnings and business prospects than issuers in
developed countries. Options, futures and foreign currency transactions involve
certain risks, which include: (1) dependence on the Manager's ability to predict
movements in the prices of individual securities, fluctuations in the general
securities markets or in the appropriate market sector and movements in interest
rates and currency markets; (2) imperfect correlation, or even no correlation,
between movements in the price of options, forward contracts, futures contracts
or options thereon and movements in the price of the currency or security hedged
or used for cover; (3) the fact that skills and techniques needed to trade
options, futures contracts and options thereon or to use forward currency
contracts are different from those needed to select the securities in which a
Fund or Portfolio invests; (4) lack of assurance that a liquid secondary market
will exist for any particular option, futures contract or option thereon at any
particular time; (5) the possible loss of principal under certain conditions;
(6) the possible inability of a Fund or Portfolio to purchase or sell a
portfolio security at a time when it would otherwise be favorable for it to do
so, or the possible need for a Fund or Portfolio to sell a security at a
disadvantageous time, due to the need for the Fund or Portfolio to maintain
"cover" or to set aside securities in connection with hedging transactions; and
(7) the possible need to defer closing out of certain options, futures contracts
and options thereon and forward currency contracts in order to qualify or
continue to qualify for the beneficial tax treatment afforded regulated
investment companies under the Code. See "Dividends, Other Distributions and
Federal Income Taxation" herein and "Taxes" in the Statement of Additional
Information.
OTHER INFORMATION. Each Fund's investment objectives may not be changed without
the approval of a majority of the respective Fund's outstanding voting
securities. A "majority of the Fund's outstanding voting securities" means the
lesser of (i) 67% of the 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, each Fund has adopted certain investment
limitations which also may not be changed without shareholder approval. A
complete description of these limitations is included in the Statement of
Additional Information. Each Fund's other investment policies described herein
are not fundamental policies and may be changed by a vote of a majority of the
Company's Board of Directors without shareholder approval.
According to the Manager, as of December 31, 1996, over
- --% of the value of all outstanding government debt obligations throughout the
world was represented by obligations denominated in currencies other than the
U.S. dollar. Moreover, from time to time, the debt securities of issuers located
outside the United States have substantially outperformed the debt obligations
of U.S. issuers. Accordingly, the Manager believes that the Government Income
Fund's and the Strategic Income Fund's policy of investing in debt securities
throughout the world and the Portfolio's policy of investing in debt securities
of issuers in emerging markets may enable the achievement of results superior to
those produced by mutual funds with similar objectives to those of the Funds and
the Portfolio, that invest solely in debt securities of U.S. issuers.
The approval of the High Income Fund and of other investors in the Portfolio, if
any, is not required to change the investment objectives, policies or
limitations of the Portfolio, unless otherwise specified. Written notice shall
be provided to shareholders of the High Income Fund thirty days prior to any
changes in the Portfolio's investment objectives.
Prospectus Page 21
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GT GLOBAL INCOME FUNDS
RISK FACTORS
- --------------------------------------------------------------------------------
GENERAL. There is no assurance that any Fund or the Portfolio will achieve its
investment objectives. The Fund's net asset value will fluctuate, reflecting
fluctuations in the market value of its portfolio positions and its net currency
exposure. The value of fixed income securities held by the Government Income
Fund, the Strategic Income Fund and the Portfolio generally fluctuates inversely
with interest rate movements. Longer term bonds held by the Government Income
Fund, the Strategic Income Fund or the Portfolio are subject to greater interest
rate risk.
Each Fund and the Portfolio is classified under the 1940 Act as a
"non-diversified" fund; therefore, the Government Income Fund, the Strategic
Income Fund, the High Income Fund (through its investment in the Portfolio) and
the Portfolio each will be able, with respect to 50% of their total assets, to
invest more than 5% of their total assets in obligations of one issuer. To the
extent that a Fund or the Portfolio invests in a smaller number of issuers, the
value of each Fund's shares may fluctuate more widely and the Funds and the
Portfolio may be subject to greater investment and credit risk with respect to
their portfolios.
FOREIGN INVESTING. Foreign investing in foreign securities entails certain
risks. The securities of non-U.S. issuers generally are not registered with the
SEC, nor are the issuers thereof usually subject to the SEC's reporting
requirements. Accordingly, there may be less publicly available information
about foreign securities and issuers than is available with respect to U.S.
securities and issuers. Foreign companies generally are not subject to uniform
accounting, auditing and financial reporting standards, practices and
requirements comparable to those applicable to U.S. companies. In addition,
certain costs attibutable to foreign investing, such as custody charges, are
higher than those attributable to domestic investing. Securities of some foreign
companies are less liquid and their prices may be more volatile than securities
of comparable domestic companies. The Government Income and Strategic Income
Funds' and the Portfolio's interest and dividends from foreign issuers may be
subject to non-U.S. withholding taxes, thereby reducing their net investment
income.
With respect to some foreign countries, there is the increased possibility of
expropriation or confiscatory taxation, limitations on the removal of funds or
other assets of the Government Income Fund, the Strategic Income Fund and the
Portfolio, political or social instability, or diplomatic developments which
could affect the investments of the Government Income Fund, the Strategic Income
Fund and the Portfolio in those countries. Moreover, individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation, rate of savings
and capital reinvestment, resource self-sufficiency and balance of payments
positions.
CURRENCY RISK. Since the Government Income Fund, the Strategic Income Fund and
the Portfolio normally invest substantially in securities denominated in
currencies other than the U.S. dollar, and because they may hold foreign
currencies, they will be affected favorably or unfavorably by exchange control
regulations or changes in the exchange rates between such currencies and the
U.S. dollar. Changes in currency exchange rates will influence the value of the
Funds' shares, and also may affect the value of dividends and interest earned by
the Funds and gains and losses realized by the Funds. Currencies generally are
evaluated on the basis of fundamental economic criteria (e.g., relative
inflation and interest rate levels and trends, growth rate forecasts, balance of
payments status and economic policies) as well as technical and political data.
The exchange rates between the U.S. dollar and other currencies are determined
by supply and demand in the currency exchange markets, the international balance
of payments, governmental intervention, speculation and other economic and
political conditions. If the currency in which a security is denominated
appreciates against the U.S. dollar, the dollar value of the security will
increase. Conversely, a decline in the exchange rate of the currency would
adversely affect the value of the security expressed in U.S. dollars.
In addition, many of the currencies in emerging market countries have
experienced steady devaluations relative to the U.S. dollar and major
Prospectus Page 22
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GT GLOBAL INCOME FUNDS
devaluations have historically occurred in certain countries.
INVESTING IN EMERGING MARKETS. Because of the special risks associated with
investing in emerging markets, an investment in the Strategic Income Fund and
the Portfolio should be considered speculative. Investors are strongly advised
to consider carefully the special risks involved in emerging markets, which are
in addition to the usual risks of investing in developed foreign markets around
the world.
Investing in emerging markets involves risks relating to potential political and
economic instability within such markets and the risks of expropriation,
nationalization, confiscation of assets and property or the imposition of
restrictions on foreign investment and on repatriation of capital invested. In
the event of such expropriation, nationalization or other confiscation in any
emerging market, the Strategic Income Fund or the Portfolio could lose its
entire investment in that market.
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 have had and may continue to have negative
effects on the economies and securities markets of certain emerging market
countries.
Economies in emerging markets generally are dependent heavily upon international
trade and, accordingly, have been and may continue to be affected adversely by
trade barriers, exchange controls, managed adjustments in relative currency
values and other protectionist measures imposed or negotiated by the countries
with which they trade. These economies also have been and may continue to be
affected adversely by economic conditions in the countries in which they trade.
The securities markets of emerging countries are substantially smaller, less
developed, less liquid and more volatile than the securities markets of the
United States and other more developed countries. Disclosure and regulatory
standards in many respects are less stringent than in the United States and
other major markets. There also may be a lower level of monitoring and
regulation of emerging securities markets and the activities of investors in
such markets, and enforcement of existing regulations has been extremely
limited.
In addition, brokerage commissions, custodial services and other costs relating
to investment in foreign markets generally are more expensive than in the United
States, particularly with respect to emerging markets. Such markets have
different settlement and clearance procedures. In certain markets there have
been times when settlements have been unable to keep pace with the volume of
securities transactions, making it difficult to conduct such transactions. The
inability of the Strategic Income Fund or the Portfolio to make intended
securities purchases due to settlement problems could cause the Strategic Income
Fund or the Portfolio to forego attractive investment opportunities. Inability
to dispose of a portfolio security caused by settlement problems could result
either in losses to the Strategic Income Fund or the Portfolio due to subsequent
declines in value of the portfolio security or, if the Strategic Income Fund or
the Portfolio has entered into a contract to sell the security, could result in
possible liability to the purchaser.
The risk also exists that an emergency situation may arise in one or more
emerging markets as a result of which trading of securities may cease or may be
substantially curtailed and prices for the Strategic Income Fund's or the
Portfolio's portfolio securities in such markets may not be readily available.
Section 22(e) of the 1940 Act permits a registered investment company to suspend
redemption of its shares for any period during which an emergency exists, as
determined by the SEC. Accordingly, when the Strategic Income Fund or the
Portfolio believes that appropriate circumstances warrant, it will promptly
apply to the SEC for a determination that an emergency exists within the meaning
of Section 22(e) of the 1940 Act. During the period commencing from the
Strategic Income Fund's or the Portfolio's identification of such conditions
until the date of SEC action, the portfolio securities of the Strategic Income
Fund or the Portfolio in the affected markets will be valued at fair value as
determined in good faith by or under the direction of the Company's Board of
Directors or the Portfolio's Board of Trustees.
LOAN PARTICIPATIONS AND ASSIGNMENTS. The Strategic Income Fund and the Portfolio
may have difficulty disposing of Assignments and Participations. The liquidity
of such securities is limited and, the Fund and the Portfolio anticipate that
such securities could be sold only to a limited number of institutional
investors. The lack of a liquid secondary market could have an adverse impact on
the value of such securities and on the Fund's and the Portfolio's ability to
dispose of particular Assignments or Participations when necessary to meet the
Fund's and/or the Portfolio's
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<PAGE>
GT GLOBAL INCOME FUNDS
liquidity needs or in response to a specific economic event, such as a
deterioration in the creditworthiness of the borrower. The lack of a liquid
secondary market for Assignments and Participations also may make it more
difficult for the Fund and/or the Portfolio to assign a value to those
securities for purposes of valuing the Fund's or the Portfolio's portfolio and
calculating its net asset value.
SOVEREIGN DEBT. The Strategic Income Fund and the Portfolio may invest in
sovereign debt securities of emerging market governments, including Brady Bonds.
Investments in such securities involve special risks. The issuer of the debt or
the governmental authorities that control the repayment of the debt may be
unable or unwilling to repay principal or interest when due in accordance with
the terms of such debt. Periods of economic uncertainty may result in the
volatility of market prices of sovereign debt obligations, and in turn a Fund's
net asset value, to a greater extent than the volatility inherent in domestic
fixed income securities.
A sovereign debtor's willingness or ability to repay principal and pay interest
in a timely manner may be affected by, among other factors, its cash flow
situation, the extent of its foreign reserves, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of the debt
service burden to the economy as a whole, the sovereign debtor's policy toward
principal international lenders and the political constraints to which a
sovereign debtor may be subject. Emerging market governments could default on
their sovereign debt. Such sovereign debtors also may be dependent on expected
disbursements from foreign governments, multilateral agencies and other entities
abroad to reduce principal and interest arrearages on their debt. The commitment
on the part of these governments, agencies and others to make such disbursements
may be conditioned on a sovereign debtor's implementation of economic reforms
and/or economic performance and the timely service of such debtor's obligations.
Failure to implement such reforms, achieve such levels of economic performance
or repay principal or interest when due, may result in the cancellation of such
third parties' commitments to lend funds to the sovereign debtor, which may
further impair such debtor's ability or willingness to timely service its debts.
The occurrence of political, social or diplomatic changes in one or more of the
countries issuing sovereign debt could adversely affect the Fund's or the
Portfolio's investments. Emerging markets are faced with social and political
issues and some of them have experienced high rates of inflation in recent years
and have extensive internal debt. Among other effects, high inflation and
internal debt service requirements may adversely affect the cost and
availability of future domestic sovereign borrowing to finance governmental
programs, and may have other adverse social, political and economic
consequences. Political changes or a deterioration of a country's domestic
economy or balance of trade may affect the willingness of countries to service
their sovereign debt. Although the Manager intends to manage the Strategic
Income Fund and the Portfolio in a manner that will minimize the exposure to
such risks, there can be no assurance that adverse political changes will not
cause the Fund or the Portfolio to suffer a loss of interest or principal on any
of its holdings.
In recent years, some of the emerging market countries in which the Strategic
Income Fund and the Portfolio expect to invest have encountered difficulties in
servicing their sovereign debt obligations. Some of these countries have
withheld payments of interest and/or principal of sovereign debt. These
difficulties have also led to agreements to restructure external debt
obligations -- in particular, commercial bank loans, typically by rescheduling
principal payments, reducing interest rates and extending new credits to finance
interest payments on existing debt. In the future, holders of emerging market
sovereign debt securities may be requested to participate in similar
rescheduling of such debt. Certain emerging market countries are among the
largest debtors to commercial banks and foreign governments. Currently, Brazil,
Mexico and Argentina are the largest debtors among developing countries. At
times certain emerging market countries have declared moratoria on the payment
of principal and interest on external debt; such a moratorium is currently in
effect in certain emerging market countries. There is no bankruptcy proceeding
by which a creditor may collect in whole or in part sovereign debt on which an
emerging market government has defaulted.
The ability of emerging market governments to make timely payments on their
sovereign debt securities is likely to be influenced strongly by a country's
balance of trade and its access to trade and other international credits. A
country whose exports are concentrated in a few commodities could be vulnerable
to a decline in the international prices of one or more of such commodities.
Increased protectionism on the part of a country's
Prospectus Page 24
<PAGE>
GT GLOBAL INCOME FUNDS
trading partners could also adversely affect its exports. Such events could
diminish a country's trade account surplus, if any. To the extent that a country
receives payment for its exports in currencies other than hard currencies, its
ability to make hard currency payments could be affected.
Investors should also be aware that certain sovereign debt instruments in which
the Strategic Income Fund and the Portfolio may invest involve great risk. As
noted above, sovereign debt obligations issued by emerging market governments
generally are deemed to be the equivalent in terms of quality to securities
rated below investment grade by Moody's and S&P. Such securities are regarded as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligations and involve
major risk exposure to adverse conditions. Some of such securities, with respect
to which the issuer currently may not be paying interest or may be in payment
default, may be comparable to securities rated D by S&P or C by Moody's. The
Strategic Income Fund and the Portfolio may have difficulty disposing of and
valuing certain sovereign debt obligations because there may be a limited
trading market for such securities. Because there is no liquid secondary market
for many of these securities, the Strategic Income Fund and the Portfolio
anticipate that such securities could be sold only to a limited number of
dealers or institutional investors.
LOWER QUALITY DEBT SECURITIES. Under normal market conditions the Strategic
Income Fund may invest up to 50% of its total assets in debt securities rated
below investment grade, and substantially all the Portfolio's assets will be so
invested. Such investments involve a high degree of risk.
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. 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 quality 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 are also generally considered to be subject to greater
risk than higher quality securities with regard to a deterioration of general
economic conditions. These securities are the equivalent of high yield, high
risk bonds, commonly known as "junk bonds." As noted above, the Strategic Income
Fund and the Portfolio may invest in debt securities rated below C, which are in
default as to principal and/ or interest.
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 quality in response to subsequent events, so that an issuer's
current financial condition may be better or worse than a rating indicates. See
"Appendix" for a full discussion of Moody's and S&P's ratings.
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 Strategic Income Fund or the Portfolio. If an issuer exercises
these provisions in a declining interest rate market, the Strategic Income Fund
or the Portfolio may have to replace the security with a lower yielding
security,
Prospectus Page 25
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GT GLOBAL INCOME FUNDS
resulting in a decreased return for investors. In addition, the Strategic Income
Fund and the Portfolio may have difficulty disposing of lower quality securities
because there may be a thin trading market for such securities. There may be no
established retail secondary market for many of these securities, and the
Strategic Income Fund and the Portfolio anticipate 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 Strategic Income Fund
and the Portfolio to obtain accurate market quotations for purposes of valuing
the securities in the portfolios of the Strategic Income Fund and the Portfolio.
Adverse publicity and investor perceptions, whether or not based on fundamental
analysis, may also decrease the values and liquidity of lower quality
securities, especially in a thinly traded market. The Strategic Income Fund and
the Portfolio also may acquire lower quality debt securities during an initial
underwriting or may acquire lower quality debt securities which are sold without
registration under applicable securities laws. Such securities involve special
considerations and risks.
Factors having an adverse effect on the market value of lower rated securities
or their equivalents purchased by the Strategic Income Fund and the Portfolio
will adversely impact net asset value of the Strategic Income Fund and the High
Income Fund. See "Risk Factors" in the Statement of Additional Information. In
addition to the foregoing, such factors may 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.
The Strategic Income Fund and the Portfolio each also may incur additional
expenses to the extent it is required to seek recovery upon a default in the
payment of principal or interest on its portfolio holdings, and the Fund and the
Portfolio may have limited legal recourse in the event of a default. Debt
securities issued by governments in emerging markets can differ from debt
obligations issued by private entities in that remedies from defaults generally
must be pursued in the courts of the defaulting government, and legal recourse
is therefore somewhat diminished. Political conditions, in terms of a
government's willingness to meet the terms of its debt obligations, also are of
considerable significance. There can be no assurance that the holders of
commercial bank debt may not contest payments to the holders of debt securities
issued by governments in emerging markets in the event of default by the
governments under commercial bank loan agreements.
As of October 31, 1996, the Strategic Income Fund and the Portfolio had
- ----% and
- ----%, respectively, of their total net assets in debt securities that received
a rating from Moody's and
- ----% and
- ----%, respectively, of their total net assets in debt securities that were not
so rated. In addition, the Strategic Income Fund and the Portfolio had
- ----% and
- ----%, respectively, of their total net assets in cash and cash items. The
Strategic Income Fund had the following percentages of its total net assets
invested in rated securities: Aaa --
- ----%, Aa --
- ----%, A --
- ----%, Baa --
- ----%, Ba --
- ----%, B --
- ----%, Caa --
- ----%, Ca --
- ----%, C --
- ----%. Included under the unrated category are securities comprising
- ----% of the Strategic Income Fund's total net assets which, while unrated, have
been determined by the Manager to be of comparable quality to securities in the
following categories: Baa (4.2%); Ba (1.6%); and B (20.4%). The Portfolio had
the following percentages of its total net assets invested in rated securities:
Aaa --
- ----%, Aa --
- ----%, A --
- ----%, Baa --
- ----%, Ba --
- ----%, B --
- ----%, Caa --
- ----%, Ca --
- ----%, C -- 0%. Included under the unrated category are securities comprising
56.3% of the Portfolio's total net assets which, while unrated, have been
determined by the Manager to be of comparable quality to securities in the
following rating categories: Baa (11.3%); Ba (5.2%); and B (39.8%). It should be
noted that the allocation of the investments of the Strategic Income Fund and
the Portfolio by rating on any given date will vary and should not be considered
representative of the future portfolio composition of the Strategic Income Fund
or the Portfolio.
Prospectus Page 26
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GT GLOBAL INCOME 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 a
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 comprising or affiliated with Liechtenstein
Global Trust; and (e) any of the companies comprising 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." 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 and 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
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 Funds and GT Global reserve the right to
reject any purchase order.
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 contact your
Financial Advisor or GT Global.
PURCHASES BY BANK WIRE. Shares of the Funds 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. Accordingly, a bank wire
received by the close of regular trading on the NYSE on a Business Day will be
effected that day. A wire investment is considered received when the Transfer
Agent is notified that the bank wire has been credited to the Funds. Prior
telephonic or facsimile notice that a bank wire is being sent must be provided
to the Transfer Agent. A bank may charge a service fee for wiring money to the
Funds. 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 a Fund's shares will not be
issued unless a written request is submitted to the Transfer Agent. Shares of a
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 FUNDS 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 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
Prospectus Page 27
<PAGE>
GT GLOBAL INCOME FUNDS
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) 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 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 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
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 brokers may charge a
fee for establishing accounts relating to the Program.
Prospectus Page 28
<PAGE>
GT GLOBAL INCOME FUNDS
HOW TO MAKE EXCHANGES
- --------------------------------------------------------------------------------
Advisor Class shares of any Fund may only be exchanged for Advisor Class shares
of 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 --
Taxes." In addition to the Funds, the GT Global Mutual Funds currently include:
-- GT GLOBAL WORLDWIDE GROWTH FUND
-- GT GLOBAL INTERNATIONAL GROWTH FUND
-- GT GLOBAL EMERGING MARKETS FUND
-- GT GLOBAL HEALTH CARE FUND
-- GT GLOBAL TELECOMMUNICATIONS FUND
-- GT GLOBAL FINANCIAL SERVICES FUND
-- GT GLOBAL INFRASTRUCTURE FUND
-- GT GLOBAL NATURAL RESOURCES FUND
-- GT GLOBAL CONSUMER PRODUCTS AND
SERVICES 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 DOLLAR FUND
Up to four exchanges each year per Fund 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.
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
Funds, 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 Funds employ reasonable procedures to
confirm that instructions communicated by telephone are genuine, including
requiring some form of personal identification prior to acting upon instructions
received by telephone, providing written confirmation of such transactions,
and/or tape recording of telephone instructions. The Funds may be liable for any
losses due to unauthorized or fraudulent instructions if they do not follow
reasonable procedures.
Investors in Wrap Fee Accounts and Advisory Accounts interested in making an
exchange should contact his or her Financial Advisor 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.
OTHER INFORMATION ABOUT EXCHANGES. Purchases, redemptions and exchanges should
be made for investment purposes only. A pattern of frequent exchanges, purchases
and sales is not acceptable and can be limited by a Fund's or GT Global's
refusal to accept further purchase and exchange orders. The terms of the
exchange offer described above may be modified at any time, on 60 days' prior
written notice.
Prospectus Page 29
<PAGE>
GT GLOBAL INCOME FUNDS
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
Shares of each Fund 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 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.
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 OF RECORD.
Shareholders automatically have telephone privileges to authorize redemptions.
The Funds, 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, including
requiring some form of personal identification prior to acting upon instructions
received by telephone, 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.
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 a Wrap Fee Account or Advisory Account who is in doubt
as to what documents are required should contact his 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
Prospectus Page 30
<PAGE>
GT GLOBAL INCOME FUNDS
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 a Fund has not yet
received good payment, the Fund may delay payment of redemption proceeds until
it 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 Global 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.
Prospectus Page 31
<PAGE>
GT GLOBAL INCOME FUNDS
SHAREHOLDER ACCOUNT MANUAL
- --------------------------------------------------------------------------------
Purchase, exchange and redemption orders may be placed in accordance with this
Manual. 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.
Each 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 7345
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. 4023-050701
EXCHANGES BY TELEPHONE
Call GT Global at 1-800-223-2138
EXCHANGES BY MAIL
Send complete instructions, including name of Fund exchanging from, 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, California 94120-7893
REDEMPTIONS BY TELEPHONE
Call GT Global at 1-800-223-2138
REDEMPTIONS BY MAIL
Send complete instructions, including name of Fund, class of shares, amount of
redemption, shareholder's registered name and account number, to:
GT Global
P.O. Box 7893
San Francisco, California 94120-7893
OVERNIGHT MAIL
Overnight mail services do not deliver to post office boxes. To send purchase,
exchange or redemption orders by overnight mail, comply with the above
instructions but send to the following address:
GT Global Investor Services
California Plaza
2121 N. California Boulevard
Suite 450
Walnut Creek, California 94596
ADDITIONAL QUESTIONS
Shareholders with additional questions regarding purchase, exchange and
redemption procedures should call GT Global at 1-800-223-2138.
Prospectus Page 32
<PAGE>
GT GLOBAL INCOME FUNDS
CALCULATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
The Funds calculate net asset value as of the close of normal 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. Each
Fund's net asset value per share is computed by determining the value of its
total assets (which, in the case of the High Income Fund is the value of its
investment in the Portfolio) subtracting all of its liabilities and dividing the
result by the total number of shares outstanding at such time. Net asset value
is determined separately for each class of shares of each Fund.
Long-term debt obligations held by a Fund or the Portfolio are valued at the
mean of representative quoted bid and asked prices for such securities or, if
such prices are not available, at prices for securities of comparable maturity,
quality and type; however, when the Manager deems it appropriate, prices
obtained from a bond pricing service will be used. Short-term debt investments
are amortized to maturity based on their cost, adjusted for foreign exchange
translation and market fluctuations. Equity securities are valued at the last
sale price on the exchange or in the OTC market in which such securities are
primarily traded, as of the close of business on the day the securities are
being valued, or, lacking any sales, at the last available bid price. When
market quotations for futures and options positions held by a Fund or the
Portfolio are readily available, those positions are valued based upon such
quotations.
Securities and other assets for which market quotations are not readily
available are valued at fair value determined in good faith by or under the
direction of the Company's Board of Directors or the Portfolio's Board of
Trustees. Securities and other assets quoted in foreign currencies are valued in
U.S. dollars based on the prevailing exchange rates on that day.
Each Fund's portfolio securities, from time to time, may be listed primarily on
foreign exchanges or OTC dealer markets which may trade on days when the NYSE is
closed (such as Saturday). As a result, the net asset values of a Fund's shares
may be significantly affected by such trading on days when shareholders have no
access to that Fund.
- --------------------------------------------------------------------------------
DIVIDENDS, OTHER DISTRIBUTIONS
AND FEDERAL INCOME TAXATION
- --------------------------------------------------------------------------------
DIVIDENDS AND OTHER DISTRIBUTIONS. Each Fund pays monthly dividends from its net
investment income, if any, which includes accrued interest, earned discount
(including both original issue and market discounts) and dividends less
applicable expenses. Each Fund also normally 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. Each 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 each 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 a Fund will be higher than the
per share income dividends on shares of other classes of that Fund as a result
of the service and distribution fees applicable to those other shares.
SHAREHOLDERS MAY ELECT:
/ / to have all dividends and other distributions automatically reinvested in
additional Advisor Class shares of the distributing Fund (or other GT Global
Mutual Funds); or
/ / to receive dividends in cash and have other distributions automatically
reinvested in additional Advisor Class shares of the distributing Fund (or
other GT Global Mutual Funds); or
Prospectus Page 33
<PAGE>
GT GLOBAL INCOME FUNDS
/ / to receive other distributions in cash and have dividends automatically
reinvested in additional Advisor Class shares of the distributing Fund (or
other GT Global Mutual Funds); or
/ / 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 DISTRIBUTING 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 STATUS OF DIVIDENDS AND OTHER
DISTRIBUTIONS IS THE SAME WHETHER THEY ARE RECEIVED IN CASH OR REINVESTED IN
ADDITIONAL SHARES.
Any dividend or other distribution paid by a 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. Each Fund intends to continue to qualify for treatment as a regulated
investment company under the Code. In each taxable year that a 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, net gains from certain foreign currency
transactions and net short-term capital gain) and net capital gain that is
distributed to its shareholders. The Portfolio expects that it also will not be
liable for any federal income tax.
Dividends from a Fund's investment company taxable income are taxable to its
shareholders as ordinary income to the extent of the Fund's earnings and
profits. Distributions of a 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.
Each 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, the shareholders' respective
shares of any foreign taxes treated as paid by the Fund, in which event each
shareholder 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.
Each 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 a
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 (including another Fund)
generally will have similar tax consequences. In addition, if shares of a Fund
are purchased within 30 days before or after redeeming other shares of that 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 each 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 are therefore urged to consult their
tax advisers.
Prospectus Page 34
<PAGE>
GT GLOBAL INCOME FUNDS
MANAGEMENT
- --------------------------------------------------------------------------------
The Company's Board of Directors and the Portfolio's Board of Trustees have
overall responsibility for the operation of the Funds and the Portfolio,
respectively, and have approved contracts with various financial organizations
to provide, among other things, day to day management services required by the
Funds and the Portfolio. See "Directors, Trustees, and Executive Officers" in
the Statement of Additional Information for a complete description of the
Directors of each of the Funds and the Trustees of the Portfolio.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Services provided by Chancellor LGT
Asset Management, Inc. (the "Manager") as the Government Income Fund's, the
Strategic Income Fund's and the Portfolio's investment manager and administrator
include, but are not limited to, determining the composition of the investment
portfolio of the Government Income Fund, the Strategic Income Fund and the
Portfolio and placing orders to buy, sell or hold particular securities. In
addition, the Manager provides the following administration services to the
Funds and the Portfolio: furnishing corporate officers and clerical staff;
providing office space, services and equipment; and supervising all matters
relating to the Government Income Fund's, the Strategic Income Fund's and the
Portfolio's operation.
The Government Income Fund and the Strategic Income Fund each pays the Manager
administration fees computed daily and payable monthly, based on their
respective average daily net assets, for such services at the annualized rate of
.725% on the first $500 million, .70% on the next $1 billion, .675% on the next
$1 billion, and .65% on amounts thereafter. The High Income Fund pays
administration fees, directly to the Manager at the annualized rate of 0.25% of
the Fund's average daily net assets. In addition, the Fund bears its pro rata
portion of the investment management and administration fees paid by the
Portfolio to the Manager. The Portfolio pays such fees, based on the average
daily net assets of the Portfolio, directly to the Manager at the annualized
rate of .475% on the first $500 million, .45% on the next $1 billion, .425% on
the next $1 billion and .40% on amounts thereafter, plus 2% of the Portfolio's
total investment income as stated in the Portfolio's Statement of Operations,
calculated in accordance with generally accepted accounting principles, adjusted
daily for currency revaluations, on a marked to market basis, of the Portfolio's
assets; provided, however, that during any fiscal year this amount shall not
exceed 2% of the Portfolio's total investment income calculated in accordance
with generally accepted accounting principles. These rates are higher than those
paid by most mutual funds. Each Fund pays all expenses not assumed by the
Manager, GT Global or any other agents. The Manager and GT Global have
undertaken to limit the expenses of the Advisor Class shares of the Government
Income Fund and the Strategic Income Fund (exclusive of brokerage commissions,
taxes, interest and extraordinary expenses) to the maximum annual level of 1.50%
of the average daily net assets of each such Fund's Advisor Class shares. The
Manager and GT Global have undertaken to limit the expenses of the High Income
Fund's Advisor Class shares (and such Fund's pro-rata portion of the Portfolio's
expenses) to the maximum annual level of 1.85% of the average daily net assets
of such Fund's Advisor Class shares.
The Manager also serves as each Fund's pricing and accounting agent. For these
services the Manager receives a fee at an annual rate derived by applying 0.03%
to the first $5 billion of assets of GT Global Mutual Funds and 0.02% to the
assets in excess of $5 billion and allocating the result according to each
Fund's average daily net assets.
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
U.S. offices of the Manager are located at 50 California Street, 27th Floor, San
Francisco, CA 94111 and 1166 Avenue of the Americas, New York, NY 10036.
The Manager and its worldwide affiliates, including LGT Bank in Liechtenstein,
formerly Bank in Liechtenstein, comprise Liechtenstein Global Trust, formerly
BIL GT Group Limited. Liechtenstein Global Trust is a provider of global asset
Prospectus Page 35
<PAGE>
GT GLOBAL INCOME FUNDS
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 a 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
- ------------, 1997, the Manager and its worldwide asset management affiliates
manage approximately $
- -- billion. In the United States, as of
- ------------,1997, the Manager manages or administers approximately $
- -- billion of GT Global Mutual Funds. As of
- ------------,1997, assets entrusted to Liechtenstein Global Trust total
approximately $
- -- billion.
On October 31, 1996, Chancellor Capital Management, Inc. ("Chancellor Capital")
merged with LGT Asset Management, Inc. As of September 30, 1996, Chancellor
Capital and its affiliates, based in New York, were the 15th largest independent
investment manager in the United States with approximately $33 billion in assets
under management. Chancellor Capital specialized in public and private U.S.
equity and bond portfolio management for over 300 U.S. institutional clients.
In addition to the investment resources of its San Francisco and New York
offices, the Manager draws upon the expertise, personnel, data and systems of
other offices of Liechtenstein Global Trust, including investment offices in
Frankfurt, Hong Kong, London, Singapore, Sydney, Tokyo, and Toronto. In managing
the GT Global Mutual Funds, the Manager employs a team approach, taking
advantage of its investment resources around the world in seeking to achieve
each Fund's investment objective. Many of the GT Global Mutual Funds' portfolio
managers are natives of the countries in which they invest, speak local
languages and/or live or work in the markets they follow.
The investment professionals primarily responsible for the portfolio management
of the Government Income Fund, the Strategic Income Fund and the Portfolio are
as follows:
GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND LAST FIVE YEARS
- ------------------------- ------------------------- -------------------------------------------------------------------
<S> <C> <C>
Robert F. Allen Portfolio Manager since Portfolio Manager for the Manager since 1989.
San Francisco 1989
John W. Geissinger Portfolio Manager since Portfolio Manager for the Manager since ------------, 199--. Mr.
San Francisco 199 -- Geissinger has been a Senior Portfolio Manager and Head of the
Investment Grade Fixed Income Group for the Manager since 1993.
Mr. Geissinger was a Portfolio Manager at the Putnam Companies
from 1987 until 1993.
STRATEGIC INCOME FUND
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND LAST FIVE YEARS
- ------------------------- ------------------------- -------------------------------------------------------------------
<S> <C> <C>
Cheng-Hock Lau Portfolio Manager since Portfolio Manager for the Manager since -------------,1996. Mr Lau
San Francisco 1996 has been Chief Investment Officer for Developed Market Debt for
the Manager since November 1996, and was a Senior Portfolio
Manager for global/international fixed income for the Manager from
July 1995 to November 1996. Prior thereto, Mr. Lau was a Senior
Vice President and Senior Portfolio Manager for Fiduciary Trust
Company International from 1993 to 1995, and Vice President at
Bankers Trust Company from 1991 to 1993.
Simon Nocera Portfolio Manager since Chief Investment Officer for Emerging Market Debt for the Manager
San Francisco 1992 since January 1996. Mr. Nocera has been a Portfolio Manager and
Economist for the Manager since 1992. From 1991 to 1992, Mr.
Nocera was Senior Vice President and Director for Global Fixed
Income Research at The Putnam Companies. Prior thereto, Mr. Nocera
was a Financial Economist at the International Monetary Fund.
</TABLE>
Prospectus Page 36
<PAGE>
GT GLOBAL INCOME FUNDS
<TABLE>
<CAPTION>
HIGH INCOME PORTFOLIO
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE PORTFOLIO LAST FIVE YEARS
- -------------------- -------------------- ------------------------------------------------------
<S> <C> <C>
Simon Nocera Portfolio Manager Chief Investment Officer for Emerging Market Debt for
San Francisco since Portfolio the Manager since January 1996. Mr. Nocera has been a
inception in 1992 Portfolio Manager and Economist for the Manager since
1992. From 1991 to 1992, Mr. Nocera was Senior Vice
President and Director for Global Fixed Income
Research at The Putnam Companies. Prior thereto, Mr.
Nocera was a Financial Economist at the International
Monetary Fund.
</TABLE>
In placing orders for the Government Income Fund's, Strategic Income Fund's and
the Portfolio's securities transactions, the Manager seeks to obtain the best
net results. Consistent with its obligation to obtain the best net results, the
Manager may consider a broker/dealer's sale of shares of the GT Global Mutual
Funds as a factor in considering through whom portfolio transactions will be
effected. Brokerage transactions for the Fund may be executed through any
Liechtenstein Global Trust affiliate. High portfolio turnover (over 100%)
involves correspondingly greater brokerage commissions and other transaction
costs that the Funds or the Portfolio will bear directly and could result in the
realization of net capital gains which would be taxable to shareholders. See
"Management" and "Dividends, Other Distributions, and Federal Income Taxation."
DISTRIBUTION OF FUND SHARES. GT Global is the distributor of each 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,
California 94111.
The Manager or an affiliate thereof may make ongoing payments to Financial
Advisors and others that facilitate the administration and servicing of Advisor
Class shareholder accounts.
GT Global, at its own expense, may also provide promotional incentives to
brokers that sell shares of the Funds and/or shares of the other GT Global
Mutual Funds. In some instances compensation or promotional incentives may be
offered to brokers 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.
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. Banks and broker/ dealer affiliates of banks also may
execute dealer agreements with GT Global for the purpose of selling shares of
the Fund. 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.
Prospectus Page 37
<PAGE>
GT GLOBAL INCOME FUNDS
OTHER INFORMATION
- --------------------------------------------------------------------------------
CONFIRMATIONS AND REPORTS TO SHAREHOLDERS. Each time a transaction is made that
affects a shareholder's account in a Fund, the shareholder will receive from the
Transfer Agent a confirmation statement reflecting the transaction.
Confirmations for transactions effected pursuant to a Fund's automatic dividend
reinvestment program may be provided quarterly. Shortly after the end of each
Fund's fiscal year on October 31 and fiscal half-year on April 30 of each year,
shareholders receive an annual and a semiannual report, respectively. In
addition, the federal income status of distributions made by the Fund to
shareholders are reported after the end of each calendar year on Form 1099-DIV.
Under certain circumstances, duplicate mailings of the foregoing reports to the
same household may be consolidated.
ORGANIZATION OF THE COMPANY. The Company was organized as a Maryland corporation
on October 29, 1987. From time to time, the Company has and may continue to
establish other funds, each corresponding to a distinct investment portfolio and
a distinct series of the Company's common stock. Shares of each Fund 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 a 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 Fund has
exclusive voting rights with respect to its distribution plan. The shares of all
the Company's funds will be voted in the aggregate on all other matters, such as
the election of Directors and ratification of the Board of Directors' selection
of the Company's independent accountants.
Normally there will be no annual meeting of shareholders of the Company in any
year, except as required under the 1940 Act. The Company would be required to
hold a shareholders' meeting in the event that at any time less than a majority
of the Directors holding office had been elected by shareholders. Directors
shall continue to hold office until their successors are elected and have
qualified. Shares of the Company's funds do not have cumulative voting rights,
which means that the holders of a majority of the shares voting for the election
of Directors can elect all the Directors. A Director may be removed upon a
majority vote of the shareholders qualified to vote in the election.
Shareholders holding 10% of the Company's outstanding voting shares may call a
meeting of shareholders for the purpose of voting upon the question of removal
of any Director or for any other purpose. The 1940 Act requires the Company to
assist shareholders in calling such a meeting.
Advisor Class shares are offered through this prospectus to certain investors.
There are two other classes of shares offered to investors through a separate
prospectus: Class A shares and Class B shares.
CLASS A. Class A shares are sold at 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. Class A shares
of each Fund also bear annual service and distribution fees of up to 0.35% of
the average daily net assets of that class. For the fiscal year ended October
31, 1995, total operating expenses for the Class A shares were 1.45% for
Strategic Income Fund, 1.38% for Government Income Fund, and 1.75% for High
Income Fund.
CLASS B. Class B shares are sold at net asset value with no initial sales charge
at the time of purchase. Class B shares bear annual service and distribution
fees of up to 1.00% of the average daily net assets of that class, and investors
pay a contingent deferred sales charge of up to 5% of the lesser of the original
purchase price or the net asset value of such shares at the time of redemption.
This deferred sales charge is waived for certain redemptions and is reduced for
shares held more than one year. For the fiscal year ended October 31, 1995,
total operating expenses for the Class B shares were 2.10% for Strategic Income
Fund, 2.03% for Government Income Fund, and 2.40% for High Income Fund, of
average net assets.
The different expenses borne by each class of shares will result in different
net asset values and dividends. The per share net asset value of the Advisor
Class shares of a Fund generally will be higher than that of the Class A and B
shares of that Fund because of the higher expenses borne by the Class A and B
shares. The per share dividends on Advisor Class shares of a Fund will generally
be
Prospectus Page 38
<PAGE>
GT GLOBAL INCOME FUNDS
higher than the per share dividends on Class A and B shares of that Fund as a
result of the service and distribution fees applicable with respect to Class A
and B shares. Consequently, during comparable periods, the Funds expect that the
total return on an investment in shares of the Advisor Class will be higher than
the total return on Class A or B shares.
Pursuant to the Company's Articles of Incorporation, it may issue six billion
shares. Of this number, 300 million shares have been classified as shares of the
Strategic Income Fund and the High Income Fund; 100 million shares of each Fund
have been classified as Class A and Class B shares, respectively. In addition,
500 million shares have been classified as shares of Government Income Fund; 200
million shares have each been classified as Class A and Class B shares,
respectively. Moreover, 100 million shares have been classified as Advisor Class
shares for each Fund. This amount may be increased from time to time in the
discretion of the Board of Directors. Each share of a Fund represents an
interest in that Fund only, has a par value of $0.0001 per share, represents an
equal proportionate interest 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 Directors. Each Class A, Class B and Advisor Class
share of a Fund is equal as to earnings, assets and voting privileges, except as
noted above, and each class bears the expenses related to the distribution of
its shares. Shares of each Fund when issued are fully paid and nonassessable.
ORGANIZATION OF THE PORTFOLIO. The Portfolio is organized as a trust under the
laws of the state of New York. The Portfolio's Declaration of Trust provides
that the High Income Fund and other entities investing in the Portfolio (E.G.,
other investment companies, insurance company separate accounts and common and
commingled trust funds), if any, each will be liable for all obligations of the
Portfolio. However, the Directors of the Company believe that the risk of the
High Income Fund incurring financial loss on account of such liability is
limited to circumstances in which both inadequate insurance existed and the
Portfolio itself was unable to meet its obligations, and that neither the High
Income Fund nor its shareholders will be exposed to a material risk of liability
by reason of the High Income Fund's investing in the Portfolio. Any information
received from the Portfolio in the Portfolio shareholder report will be provided
to the High Income Fund's shareholders.
Whenever the High Income Fund is requested to vote on any proposal of the
Portfolio, the High Income Fund will hold a meeting of Fund shareholders and
will cast its vote as instructed by Fund shareholders. Shares for which no
voting instructions are received will be voted in the same proportion as the
shares for which voting instructions are received.
SHAREHOLDER INQUIRIES. Shareholder inquiries may be made by calling the Funds
toll free at (800) 223-2138 or by writing to the Funds at 50 California Street,
27th Floor, San Francisco, CA 94111.
PERFORMANCE INFORMATION. The Funds, from time to time, may include information
on their investment results and/or comparisons of their 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. Investors should be aware that as of October 22, 1992,
the investment objectives of the Strategic Income Fund were changed from
long-term high capital appreciation, primarily and moderate income, secondarily,
to primarily high current income and secondarily capital appreciation. In
addition, the investment policies and limitations of the Strategic Income Fund
were modified.
In such materials, each Fund may quote its average annual total return
("Standardized Return"). Standardized Return is calculated separately for each
class of shares of each 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-, 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 at net
asset value on the reinvestment date as established by the Board of Directors.
In addition, in order to more completely represent each Fund's performance or
more accurately compare such performance to other measures of investment return,
each 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); it
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
Prospectus Page 39
<PAGE>
GT GLOBAL INCOME FUNDS
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.
Each Fund also may refer in advertising and promotional materials to its yield,
which will fluctuate over time. A Fund's yield shows the rate of income that it
earns on its investments, expressed as a percentage of the public offering price
of its shares. A Fund calculates yield by determining the interest income it
earned from its portfolio investments for a specified thirty-day period (net of
expenses), dividing such income by the average number of shares outstanding, and
expressing the result as an annualized percentage based on the public offering
price at the end of that thirty-day period. Yield accounting methods differ from
the methods used for other accounting purposes. Accordingly, a Fund's yield may
not equal the dividend income actually paid to investors or the income reported
in its financial statements. Yield is calculated separately for Class A, Class B
and Advisor Class shares of each Fund.
Each Fund's performance data will reflect past performance and will not
necessarily be indicative of future results. A Fund's investment results will
vary from time to time depending upon market conditions, the composition of its
portfolio and its operating expenses. These factors and possible differences in
calculation methods should be considered when comparing a Fund's investment
results with those published for other investment companies, other investment
vehicles and unmanaged indices. Each Fund's results also should be considered
relative to the risks associated with its investment objectives and policies.
See "Investment Results" in the Statement of Additional Information.
Each Fund's annual report contains additional information with respect to its
performance. The annual report is available to investors upon request and free
of charge.
TRANSFER AGENT. Shareholder servicing, reporting and general transfer agent
functions for the Funds 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 its offices at California Plaza, 2121
N. California Boulevard, Suite 450, Walnut Creek, California 94596.
CUSTODIAN. State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, is custodian of each Fund's and the Portfolio's assets.
COUNSEL. The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue,
N.W., Washington, D.C. 20036-1800, acts as counsel to the Company, the Funds and
the Portfolio. Kirkpatrick & Lockhart LLP also acts as counsel to the Manager,
GT Global and the Transfer Agent in connection with other matters.
INDEPENDENT ACCOUNTANTS. The Company's and each Fund's and the Portfolio'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 each Fund and the Portfolio, assist in the preparation of each Fund's and the
Portfolio's federal and state income tax returns and consult with the Company,
each Fund and the Portfolio 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 INCOME FUNDS
APPENDIX A
DESCRIPTION OF DEBT RATINGS
- --------------------------------------------------------------------------------
DESCRIPTION OF BOND RATINGS
MOODY'S INVESTORS SERVICE, INC. ("Moody's") rates the 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 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. They are rated lower than the best
bond 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 risks appear somewhat
larger.
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 some time in the future.
Baa -- Medium-grade obligations. 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 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 through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its
Prospectus Page 41
<PAGE>
GT GLOBAL INCOME FUNDS
generic rating category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the company ranks in the lower end of its generic
rating category.
STANDARD & POOR'S RATINGS GROUP ("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 -- High grade. Very strong capacity to pay interest and repay
principal. Generally, these bonds differ from AAA issues only in a small
degree.
A -- Have a strong capacity to pay interest and repay principal although
it is somewhat more susceptible to the adverse effects of change in
circumstances and economic conditions than debt in higher rated categories.
BBB -- Regarded as having adequate capacity to pay interest and repay
principal. These bonds normally exhibit adequate protection parameters, but
adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity to pay interest and repay principal than for
debt in higher rated categories.
BB, B, CCC, CC, C -- Debt rated "BB," "B," "CCC," "CC," and "C" are
regarded, on balance, as predominantly speculative with respect to capacity
to pay interest and repay principal in accordance with the terms of this
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 volnerability 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 which 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" 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. The "D" rating also will 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
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.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
MOODY'S employs the designation "Prime-1" to indicate commercial paper having a
superior ability for repayment of senior short-term debt obligations. Prime-1
repayment ability will often be evidenced by many of the
Prospectus Page 42
<PAGE>
GT GLOBAL INCOME FUNDS
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. Issues rated Prime-2 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 ratings of commercial paper are graded into several categories ranging from
"A1" for the highest quality obligations to "D" for the lowest. Issues in the
"A" category are delineated with numbers 1, 2, and 3 to indicate the relative
degree of safety. 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 payments on issues with this designation
is satisfactory; however, the relative degree of safety is not as high as for
issues designated "A-1."
Prospectus Page 43
<PAGE>
GT GLOBAL INCOME FUNDS
NOTES
- --------------------------------------------------------------------------------
Prospectus Page 44
<PAGE>
GT GLOBAL INCOME FUNDS
NOTES
- --------------------------------------------------------------------------------
Prospectus Page 45
<PAGE>
GT GLOBAL INCOME FUNDS
NOTES
- --------------------------------------------------------------------------------
Prospectus Page 46
<PAGE>
GT GLOBAL INCOME FUNDS
GT GLOBAL MUTUAL FUNDS
GT GLOBAL OFFERS A BROAD RANGE OF MUTUAL FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY OF THE GT GLOBAL
MUTUAL FUNDS, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR CALL GT GLOBAL
DIRECTLY AT 1-800-824-1580.
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL WORLDWIDE GROWTH FUND
Invests around the world, including the U.S.
GT GLOBAL INTERNATIONAL GROWTH FUND
Provides portfolio diversity by investing outside
the U.S.
GT GLOBAL EMERGING MARKETS FUND
Gives access to the growth potential of developing economies
/ / GLOBAL THEME FUNDS
GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
Invests in companies that manufacture, market, retail, or distribute consumer
products or services
GT GLOBAL FINANCIAL SERVICES FUND
Focuses on the worldwide opportunities from the demand for financial services
and products
GT GLOBAL HEALTH CARE FUND
Invests in growing health care industries worldwide
GT GLOBAL INFRASTRUCTURE FUND
Seeks companies that build, improve or maintain a country's infrastructure
GT GLOBAL NATURAL RESOURCES FUND
Concentrates on companies that own, explore or develop natural resources
GT GLOBAL TELECOMMUNICATIONS FUND
Invests in companies worldwide that develop, manufacture or sell
telecommunications services or equipment
/ / REGIONALLY DIVERSIFIED FUNDS
GT GLOBAL NEW PACIFIC GROWTH FUND
Offers access to the emerging and established markets of the Pacific Rim,
excluding Japan
GT GLOBAL EUROPE GROWTH FUND
Focuses on investment opportunities in the new, unified Europe
GT GLOBAL LATIN AMERICA GROWTH FUND
Invests in the emerging markets of Latin America
/ / SINGLE COUNTRY FUNDS
GT GLOBAL AMERICA SMALL CAP GROWTH FUND
Invests in equity securities of small U.S. companies
GT GLOBAL AMERICA MID CAP GROWTH FUND
Concentrates on medium-sized companies in the U.S.
GT GLOBAL AMERICA VALUE FUND
Concentrates on equity securities of large cap U.S. companies believed to be
undervalued
GT GLOBAL JAPAN GROWTH FUND
Provides U.S. investors with direct access to the Japanese market
GROWTH AND INCOME FUND
GT GLOBAL GROWTH & INCOME FUND
Invests in blue-chip stocks and government bonds from around the world
INCOME FUNDS
GT GLOBAL GOVERNMENT INCOME FUND
Earns monthly income from global government securities
GT GLOBAL STRATEGIC INCOME FUND
Allocates its assets among debt securities from the U.S., developed foreign
countries and emerging markets
GT GLOBAL HIGH INCOME FUND
Invests in debt securities in emerging markets
MONEY MARKET FUND
GT GLOBAL DOLLAR FUND
Invests in high quality, U.S. dollar-denominated money market securities
worldwide for stability and preservation of capital
[LOGO]
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY CHANCELLOR LGT ASSET
MANAGEMENT, INC., G.T. INVESTMENT FUNDS, INC., GT GLOBAL GOVERNMENT INCOME
FUND, GT GLOBAL STRATEGIC INCOME FUND, GT GLOBAL HIGH INCOME FUND, GLOBAL
HIGH INCOME PORTFOLIO, OR GT GLOBAL, INC. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF ANY OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
INCPV610003MC
<PAGE>
GT GLOBAL GROWTH & INCOME FUND:
ADVISOR CLASS
PROSPECTUS -- MARCH 1, 1997
- --------------------------------------------------------------------------------
GT GLOBAL GROWTH & INCOME FUND ("FUND") seeks long-term capital appreciation
together with current income. The Fund invests in a global portfolio of both
equity and debt securities, in such relative proportions as deemed most
appropriate by the Fund's investment manager in view of then-current economic
and market conditions. There can be no assurance that the Fund will achieve its
investment objective.
The Fund's investment manager, Chancellor LGT Asset Management, Inc. (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 information an investor should know before
investing and should be read carefully and retained for future reference. A
Statement of Additional Information, dated March 1, 1997, has been filed with
the Securities and Exchange Commission ("SEC") and is incorporated herein by
reference. The Statement of Additional Information which may be amended or
supplemented from time to time, is available without charge by writing to the
Fund at 50 California Street, San Francisco, California 94111, or by calling
(800) 824-1580.
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.
An investment in the GT Global Growth & Income Fund offers the following
advantages:
/ / Professional Management by a Leading Manager with Offices in the World's
Major Markets
/ / Automatic Dividend and Other Distribution Reinvestment at No Additional
Sales Charge
/ / Exchange Privileges with the Advisor Class of the Other GT Global Mutual
Funds
FOR FURTHER INFORMATION, CALL
(800) 824-1580 OR CONTACT YOUR FINANCIAL ADVISOR.
[LOGO]
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus Page 1
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
TABLE OF CONTENTS
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Page
---------
<S> <C>
Prospectus Summary........................................................................ 3
Financial Highlights...................................................................... 6
Investment Objective and Policies......................................................... 7
How To Invest............................................................................. 11
How To Make Exchanges..................................................................... 13
How To Redeem Shares...................................................................... 14
Shareholder Account Manual................................................................ 16
Calculation of Net Asset Value............................................................ 17
Dividends, Other Distributions and Federal Income Taxation................................ 17
Management................................................................................ 19
Other Information......................................................................... 21
</TABLE>
Prospectus Page 2
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
PROSPECTUS SUMMARY
- ------------------------------------------------------------
The following summary is qualified in its entirety by the more detailed
information appearing in the body of this Prospectus.
<TABLE>
<S> <C> <C>
The Fund: The Fund is a non-diversified series of G.T. Investment Funds, Inc.
Investment Objective: The Fund seeks long-term capital appreciation together with
current income.
Principal Investments: Invests primarily in blue-chip equity securities and high quality
government bonds of issuers located in the United States and
throughout the world.
Investment Manager: Chancellor LGT Asset Management, Inc. (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 , 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."
There is no assurance that the Fund will achieve its investment
objective. The Fund's net asset value will fluctuate, reflecting
fluctuations in the market value of its portfolio positions
Principal Risk Factors: holdings. Investments in foreign securities involve risks relating
to political and economic developments abroad and the differences
between the regulations to which U.S. and foreign issuers are
subject. Individual foreign economies also may differ favorably or
unfavorably from the U.S. economy. Changes in foreign currency
exchange rates will affect the Fund's net asset value, earnings
and gains and losses realized on sales of securities. Securities
of foreign companies may be less liquid and their prices more
volatile than those of securities of comparable U.S. companies.
The value of debt securities held by the Fund generally fluctuates
inversely with interest rate movements. Certain investment grade
debt securities may possess speculative qualities. The Fund may
engage in certain foreign currency, options and futures transac-
tions to attempt to hedge against the overall level of investment
and currency risk associated with its present or planned
investments. Such transactions involve certain risks and
transaction costs. See "Investment Objective and Policies."
</TABLE>
Prospectus Page 3
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
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
Advisor Class Shares: 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 a 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 comprising or affiliated with the Liechtenstein Global
Trust; and (e) any of the companies comprising or affiliated with
the Liechtenstein Global Trust.
Shares Available Through: Advisor Class shares of the Fund's common stock are available
through Financial Advisors (as defined herein) that 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 may only 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.
Redemptions: Shares may be redeemed through the Fund's transfer agent, GT
Global Investor Services, Inc. ("Transfer Agent"). See "How to
Redeem Shares" and "Shareholder Account Manual."
Dividends and Other Dividends paid quarterly from net investment income and realized
Distributions: net short-term capital gains; other distributions paid annually
from net capital gain and net gains from foreign currency
transactions, if any.
Reinvestment: Dividends and other distributions may be reinvested automatically
in Advisor Class shares of the Fund or of other GT Global Mutual
Funds.
Net Asset Value: Advisor Class shares are expected to be quoted daily in the
financial section of most newspapers.
</TABLE>
Prospectus Page 4
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
SUMMARY OF INVESTOR COSTS. The expenses and maximum transactions costs
associated with investing in the Advisor Class shares of the Fund are reflected
in the following tables(1):
<TABLE>
<CAPTION>
ADVISOR CLASS
---------------
<S> <C>
SHAREHOLDER TRANSACTION COSTS:
Maximum sales charge on purchases of shares (as a % of offering price)................................. None
Sales charges on reinvested distributions to shareholders.............................................. None
Maximum deferred sales charge (as a % of net asset value at time of purchase or sale, whichever is
less)................................................................................................ None
Redemption charges..................................................................................... None
Exchange Fees:
-- On first four exchanges each year................................................................. None
-- On each additional exchange....................................................................... $ 7.50
ANNUAL FUND OPERATING EXPENSES:
(AS A % OF AVERAGE NET ASSETS)(2)
Investment management and administration fees.......................................................... 0.97%
12b-1 service and distribution fees.................................................................... None
Other expenses.........................................................................................
-------
Total Fund Operating Expenses............................................................................
-------
-------
</TABLE>
HYPOTHETICAL EXAMPLE OF EFFECT OF EXPENSES
An investor would have directly or indirectly paid the following expenses at the
end of the periods shown on a $1,000 investment in the Fund, assuming a 5%
annual return(1):
<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---- ----- ----- -----
<S> <C> <C> <C> <C>
Advisor Class Shares.....................................................................
</TABLE>
- --------------
(1) THESE TABLES ARE INTENDED TO ASSIST INVESTORS IN UNDERSTANDING THE VARIOUS
COSTS AND EXPENSES ASSOCIATED WITH INVESTING IN THE FUND. 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 comprising or affiliated with Liechtenstein Global Trust invests
in Advisor Class shares of the Fund, such account shall not be subject to
duplicative advisory fees. THE "HYPOTHETICAL EXAMPLE" IS NOT A
REPRESENTATION OF PAST OR FUTURE EXPENSES. THE FUND'S ACTUAL EXPENSES MAY BE
MORE OR LESS THAN THOSE SHOWN. The tables and the assumption in the
Hypothetical Example of a 5% annual return are required by regulation of the
Securities and Exchange Commission applicable to all mutual funds. The 5%
annual return is not a prediction of and does not represent the Fund's
projected or actual performance.
(2) Expenses are based on the Fund's fiscal year ended October 31, 1996.
"Other Expenses" include custody, transfer agent, legal, audit and other
expenses. See "Management" herein and the Statement of Additional
Information for more information.
Prospectus Page 5
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The tables below provide condensed information concerning income and capital
changes for one share of each class of shares of the Fund for the periods shown.
This information is supplemented by the financial statements and accompanying
notes appearing in the Statement of Additional Information. The financial
statements and notes, for
the fiscal year ended October 31, 1996 and each of the preceeding five reporting
periods have been audited by Coopers & Lybrand L.L.P., independent accountants,
whose report thereon also is included in the Statement of Additional
Information.
<TABLE>
<CAPTION>
CLASS A+ CLASS B++
------------------------------------------------------------------------------------------- ---------
YEAR
SEPTEMBER 25, 1990 ENDED
(COMMENCE- OCTOBER
YEAR ENDED OCTOBER 31, MENT OF 31,
---------------------------------------------------------------------- OPERATIONS) TO ---------
1996 1995 1994 1993(A) 1992 1991 OCTOBER 31, 1990 1996
--------- --------- --------- ---------- --------- --------- ------------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value, beginning
of period................ $ 6.21 $ 6.29 $ 5.28 $ 5.25 $ 4.77 $ 4.76
--------- --------- --------- ---------- --------- --------- ------- ---------
Income from investment
operations:
Net investment income..... 0.24 0.22 0.24* 0.21* 0.27* 0.01*
Net realized and
unrealized gain (loss) on
investments.............. 0.13 (0.03) 1.05 0.10 0.47 --
--------- --------- --------- ---------- --------- --------- ------- ---------
Net increase (decrease)
from investment
operations............... 0.37 0.19 1.29 0.31 0.74 0.01
--------- --------- --------- ---------- --------- --------- ------- ---------
Distributions:
Net investment income... (0.22) (0.21) (0.24) (0.14) (0.26) --
Net realized gain on
investments............ (0.01) (0.06) -- (0.14) -- --
Sources other than net
income................. -- -- (0.04) -- -- --
--------- --------- --------- ---------- --------- --------- ------- ---------
Total distributions... (0.23) (0.27) (0.28) (0.28) (0.26) --
--------- --------- --------- ---------- --------- --------- ------- ---------
Net asset value, end of
period................... $ 6.35 $ 6.21 $ 6.29 $ 5.28 $ 5.25 $ 4.77
--------- --------- --------- ---------- --------- --------- ------- ---------
--------- --------- --------- ---------- --------- --------- ------- ---------
Total investment return
(e)...................... 6.27% 3.14% 25.1% 5.9% 15.68% 0.2%(b)
--------- --------- --------- ---------- --------- --------- ------- ---------
--------- --------- --------- ---------- --------- --------- ------- ---------
Ratios and supplemental
data:
Net assets, end of period
(in 000's)............... $ 284,069 $ 317,847 $ 251,428 $ 27,754 $ 71,376 $9,486
Ratio of net investment
income to average net
assets................... 3.85% 3.30% 3.3%* 4.1%* 5.0%* 2.9%*(c)
Ratio of expenses to
average net assets:
With expense
reductions............. 1.70% 1.67% 1.8%* 1.9%* 1.9%* 0.6%*(c)
Without expense
reductions............. 1.74% --%(f) --%(f) --%(f) --%(f) --%(f)
Portfolio turnover
rate+++.................. 83% 117% 24% 53% 46% none
<CAPTION>
ADVISOR CLASS**
------------------
OCTOBER 22, JUNE 1, 1995
1992 TO TO
OCTOBER 31, OCTOBER 31,
1995 1994 1993(A) 1992(A) 1995
----------- ----------- ----------- ----------- ------------------
<S> <C> <C> <C> <C> <C>
Per Share Operating
Performance:
Net asset value, beginning
of period................ $ 6.21 $ 6.29 $ 5.28 $ 5.29 $ 6.24
----------- ----------- ----------- ----------- -------
Income from investment
operations:
Net investment income..... 0.20 0.18 0.20 0.01 0.11
Net realized and
unrealized gain (loss) on
investments.............. 0.13 (0.03) 1.05 (0.02) 0.13
----------- ----------- ----------- ----------- -------
Net increase (decrease)
from investment
operations............... 0.33 0.15 1.25 (0.01) 0.24
----------- ----------- ----------- ----------- -------
Distributions:
Net investment income... (0.18) (0.17) (0.20) -- (0.13)
Net realized gain on
investments............ (0.01) (0.06) -- -- --
Sources other than net
income................. -- -- (0.04) -- --
----------- ----------- ----------- ----------- -------
Total distributions... (0.19) (0.23) (0.24) -- (0.13)
----------- ----------- ----------- ----------- -------
Net asset value, end of
period................... $ 6.35 $ 6.21 $ 6.29 $ 5.28 $ 6.35
----------- ----------- ----------- ----------- -------
----------- ----------- ----------- ----------- -------
Total investment return
(e)...................... 5.57% 2.48% 24.3% (0.2)%(b) 3.83%(b)
----------- ----------- ----------- ----------- -------
----------- ----------- ----------- ----------- -------
Ratios and supplemental
data:
Net assets, end of period
(in 000's)............... $ 356,796 $ 359,242 $ 150,768 $ 280 944
Ratio of net investment
income to average net
assets................... 3.20% 2.65% 2.6% N/A(d) 4.20%(c)
Ratio of expenses to
average net assets:
With expense
reductions............. 2.35% 2.32% 2.5% N/A(d) 1.35%(c)
Without expense
reductions............. 2.39% --%(f) --%(f) --%(f)(d) 1.39%(c)
Portfolio turnover
rate+++.................. 83% 117% 24% 53% 83%
</TABLE>
- --------------
+ All capital shares issued and outstanding as of October 21, 1992 were
reclassified as Class A shares.
++ Commencing October 22, 1992 the Fund began offering Class B shares.
+++ Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
* Includes reimbursement by the Manager of Fund operating expenses of $0.005,
$0.02, $0.03 and $0.01 for the years ended October 31, 1993, 1992, 1991 and
for the period from September 25, 1990 to October 31, 1990, respectively.
Without such reimbursements, the expense ratios would have been 1.93%,
2.20%, 2.46% and 2.40% and the net investment income to average net assets
would have been 3.20%, 3.70%, 4.40% and 1.04% for the years ended October
31, 1993, 1992, 1991 and for the period from September 25, 1990 to October
31, 1990, respectively.
** Commencing June 1, 1995, the Fund began offering Advisor Class shares.
(a) These selected per share data were calculated based upon weighted average
shares outstanding during the year.
(b) Not annualized.
(c) Annualized.
(d) Ratios are not meaningful due to short period of operation of Class B
shares.
(e) Total investment return does not include sales charges.
(f) Calculation of "Ratio of expenses to average net assets" was made without
considering the effect of expense reductions, if any.
Prospectus Page 6
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
INVESTMENT OBJECTIVE
AND POLICIES
- --------------------------------------------------------------------------------
The Fund's investment objective is long-term capital appreciation together with
current income. The Fund seeks its objective by investing in a global portfolio
of both equity and debt securities, allocated among diverse international
markets. There is no assurance that the Fund's investment objective will be
achieved.
At least 65% of the Fund's total assets normally will be invested in a
combination of blue-chip equity securities and high quality government bonds.
The Fund considers an equity security to be "blue chip" if: (i) during the
issuer's most recent fiscal year the security offered an above average dividend
yield relative to the latest reported dividend yield on the Morgan Stanley
Capital International World Index; AND (ii) the total equity market
capitalization of the issuer is at least $1 billion. Government bonds are deemed
to be high quality if at the time of the Fund's investment they are rated within
one of the two highest ratings categories of Moody's Investors Service, Inc.
("Moody's") or by Standard & Poor's Ratings Group ("S&P") or, if not rated, are
deemed to be of equivalent quality in the judgment of the Manager.
Up to 35% of the Fund's total assets may be invested in other equity securities
and investment grade government and corporate debt obligations which the Manager
believes will assist the Fund in achieving its objective. "Investment grade"
debt securities are those rated within one of the four highest ratings
categories of Moody's or S&P, or, if not rated, deemed to be of equivalent
quality in the judgment of the Manager.
Equity securities which the Fund may purchase include common stocks, preferred
stocks and warrants to acquire such stocks and other equity securities.
Government bonds that the Fund may purchase include debt obligations issued or
guaranteed by the United States or foreign governments (including foreign
states, provinces or municipalities) or their agencies, authorities or
instrumentalities and debt obligations of supranational entities organized or
supported by several national governments, such as the World Bank and the Asian
Development Bank. The debt obligations held by the Fund may include debt
obligations convertible into equity securities or having attached warrants or
rights to purchase equity securities.
The Fund currently contemplates that it will invest principally in securities of
issuers in the United States, Canada, Japan, Western Europe, New Zealand and
Australia. The Fund may invest substantially in securities denominated in one or
more currencies. Under normal conditions, the Fund invests in issuers of not
less than three different countries and issuers of any one country, other than
the United States, will represent no more than 40% of the Fund's total assets.
The Fund may purchase securities that are issued by the government or a
corporation or financial institution of one nation but denominated in the
currency of another nation (or a multinational currency unit).
According to the Manager, as of December 31, 1996, approximately % of the
total equity market capitalization worldwide was represented by non-U.S. equity
securities, and as of December 31, 1996, more than % of the value of all
outstanding government debt obligations throughout the world was represented by
obligations denominated in currencies other than the U.S. dollar. Moreover, from
time to time the equity and debt securities of issuers located outside the
United States have substantially outperformed the equity and debt securities of
U.S. issuers. Accordingly, the Manager believes that the Fund's policy of
investing in a global portfolio of equity and debt securities may enable the
achievement of long-term results superior to those produced by mutual funds with
similar objectives to that of the Fund that invest solely in U.S. equity and
debt securities.
SELECTION OF INVESTMENTS AND ASSET ALLOCATION. Consistent with the Fund's
investment objective, the Manager employs a conservative investment style in
managing the Fund's assets. In so doing the Manager attempts to limit volatility
and risk to capital.
The Manager allocates the Fund's assets among securities of countries and in
currency denominations where opportunities for meeting the Fund's investment
objective are expected to be the most attractive. The Manager attempts to
identify
Prospectus Page 7
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
those countries and industries where economic and political factors are likely
to produce above-average growth rates and to further identify companies in such
countries and industries that are best positioned and managed to benefit from
these factors.
The relative proportions of equity and debt securities held by the Fund at any
one time will vary, depending upon the Manager's assessment of global political
and economic conditions and the relative strengths and weaknesses of the world
equity and debt markets. To enable the Fund to respond to general economic
changes and market conditions around the world, the Fund is authorized to invest
up to 100% of its total assets in either equity securities or debt securities.
In selecting equity securities for investment, the Manager attempts to identify
and acquire only securities it deems to represent high or improving investment
quality. Securities representing high investment quality generally will include
those of well-known, established and successful issuers that the Manager
believes will continue to be successful in the future. Securities representing
improving investment quality may include those of an issuer that has improved
its sales or earnings or of an issuer the balance sheet and financial condition
of which is improving. The Manager seeks to avoid investing in equity securities
that appear overly speculative or risky, even if they have attractive features
or investment potential.
In evaluating debt securities considered for the Fund, the Manager analyzes
their yield, maturity, issue classification and quality characteristics, coupled
with expectations regarding local and world economies, movements in the general
level and term of interest rates, currency values, political developments, and
variations in the supply of funds available for investment in the world bond
market relative to the demands placed upon it. There are no limitations on the
maximum or minimum maturities of the debt securities considered by the Fund or
on the average weighted maturity of the debt portion of the Fund's portfolio.
Should the rating of any debt security be revised while such security is owned
by the Fund, the Manager will evaluate what action, if any, is appropriate with
respect to such security.
The Manager generally evaluates currencies on the basis of fundamental economic
criteria (e.g., relative inflation and interest rate levels and trends, growth
rate forecasts, balance of payments status and economic policies) as well as
technical and political data. The Fund may seek to protect itself against
negative currency movements by engaging in hedging techniques through the use of
options, futures and forward currency contracts.
TEMPORARY DEFENSIVE STRATEGIES. In the interest of preserving shareholders'
capital, the Manager may employ a temporary defensive investment strategy if it
determines such a strategy to be warranted due to market conditions. Under a
defensive strategy, the Fund may hold cash (U.S. dollars, foreign currencies or
multinational currency units) and/or invest any portion or all of its assets in
high quality money market instruments of U.S. or foreign government or corporate
issuers, and most or all of the Fund's investments may be made in the United
States and denominated in U.S. dollars. To the extent the Fund adopts a
temporary defensive posture, it will not be invested so as to directly achieve
its investment objective. In addition, pending investment of proceeds from new
sales of Fund shares or in order to meet ordinary daily cash needs, the Fund may
hold cash (U.S. dollars, foreign currencies or multinational currency units) and
may invest in foreign or domestic high quality money market instruments.
BORROWING, REVERSE REPURCHASE AGREEMENTS AND ROLL TRANSACTIONS. The Fund may
borrow from banks or may borrow through reverse repurchase agreements and "roll"
transactions in connection with meeting requests for the redemption of Fund
shares. The Fund also may borrow up to 5% of its total assets for temporary or
emergency purposes other than to meet redemptions. However, the Fund will not
borrow for leverage purposes nor will the Fund purchase securities while
borrowings in excess of 5% of the Fund's total assets are outstanding.
SECURITIES LENDING.
The Fund may lend its portfolio securities to broker/ dealers or to other
institutional investors. Securities lending allows the Fund to retain ownership
of the securities loaned and, at the same time earn additional income that may
be used to offset the Fund's custody fees. The Fund will limit its loans of
portfolio securities to an aggregate of 30% of the value of its total assets,
measured at the time any such loan is made. While a loan is outstanding the
borrower must maintain with the Fund's custodian collateral consisting of cash,
U.S. government securities or certain irrevocable letters of credit equal to at
least 100% of the value of the borrowed securities, plus any accrued interest.
The risks in
Prospectus Page 8
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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.
FOREIGN INVESTING. Foreign investing entails certain risks. The securities of
non-U.S. issuers generally will not be registered with, nor the issuers thereof
be subject to the reporting requirements of the SEC. Accordingly, there may be
less publicly available information about foreign securities and issuers than is
available about domestic securities and issuers. Foreign companies generally are
not subject to uniform accounting, auditing and financial reporting standards,
practices and requirements comparable to those applicable to domestic companies.
In addition, certain costs attributable to foreign investing, such as custody
charges, are higher than those attributable to domestic investing. Securities of
some foreign companies are less liquid and their prices may be more volatile
than securities of comparable domestic companies. The Fund's net investment
income from foreign issuers may be subject to non-U.S. withholding taxes,
thereby reducing the Fund's net investment income.
With respect to some foreign countries, there is the increased possibility of
expropriation or confiscatory taxation, limitations on the removal of funds or
other assets of the Fund, political or social instability, or diplomatic or
economic developments which could affect the Fund's investments in those
countries. Moreover, individual foreign economies may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross national
product, rate of inflation, rate of savings and capital reinvestment, resource
self-sufficiency and balance of payments positions. Investments in foreign
government securities involve special risks, including the risk that the
government issuers may be unable or unwilling to repay principal and interest
when due.
The Fund will also be affected favorably or unfavorably by exchange control
regulations or changes in the exchange rates between such currencies and the
U.S. dollar. Changes in currency exchange rates will influence the value of the
Fund's shares, and also may affect the value of dividends and interest earned by
the Fund and gains and losses realized by the Fund.
OPTIONS, FUTURES AND FORWARD CURRENCY TRANSACTIONS. To attempt to increase
return, the Fund may write call options on securities. This strategy will be
employed only when, in the opinion of the Manager, the size of the premium the
Fund receives for writing the option is adequate to compensate the Fund against
the risk that appreciation in the underlying security may not be fully realized
if the option is exercised. The Fund also is authorized to write put options to
attempt to enhance return, although it does not have the current intention of so
doing.
The Fund may also use of forward currency contracts, futures contracts, options
on securities, options on currencies, options on indices and options on futures
contracts to attempt to reduce the overall level of investment risk normally
associated with the Fund. These instruments are often referred to as
"derivatives," which may be defined as financial instruments whose performance
is derived, at least in part, from the performance of another asset (such as a
security, currency or an index of securities). The Fund may enter into such
instruments up to the full value of its portfolio assets. See "Options, Futures
and Forward Currency Strategies" in the Statement of Additional Information.
To attempt to hedge against adverse movements in exchange rates between
currencies, the Fund may enter into forward currency contracts for the purchase
or sale of a specified currency at a specified future date. Such contracts may
involve the purchase or sale of a foreign currency against the U.S. dollar, or
may involve two foreign currencies. The Fund may enter into forward currency
contracts either with respect to specific transactions or with respect to the
Fund's portfolio positions. The Fund also may purchase and sell put and call
options on currencies, futures contracts on currencies and options on such
futures contracts to hedge the Fund's portfolio against movements in foreign
currency exchange rates.
In addition, the Fund may purchase and sell put and call options on equity and
debt securities to hedge against the risk of fluctuations in the prices of
securities held by the Fund or that the Manager intends to include in the Fund's
portfolio. The Fund also may purchase and sell put and call options on stock
indices to hedge against overall fluctuations in the securities markets or in a
specific market sector.
Further, the Fund may sell index futures contracts and may purchase put options
or write call options on such futures contracts to protect against a general
market or a specific market sector decline that could adversely affect the
Fund's portfolio. The Fund also may purchase index futures contracts and
Prospectus Page 9
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
purchase call options or write put options on such contracts to hedge against a
general market or market sector advance and thereby attempt to lessen the cost
of future securities acquisitions. Similarly, the Fund may use interest rate
futures contracts and options thereon to hedge the debt portion of its portfolio
against changes in the general level of interest rates.
Although the Fund is authorized to enter into options, futures and forward
currency transactions, the Fund might not enter into any such transactions,
options, futures and foreign currency transactions involve certain risks, which
include: (1) dependence on the Manager's ability to predict movements in the
prices of individual securities, fluctuations in the general securities markets
and movements in interest rates and currency markets; (2) imperfect correlation,
or even no correlation, between movements in the price of forward contracts,
options, futures contracts or options thereon and movements in the price of the
currency or security hedged or used for cover; (3) the fact that the skills and
techniques needed to trade options, futures contracts and options thereon or to
use forward currency contracts are different from those needed to select the
securities in which the Fund invests; (4) the lack of assurance that a liquid
secondary market will exist for any particular option, futures contract or
option thereon at any particular time; (5) the possible loss of principal under
certain conditions; (6) the possible inability of the Fund to purchase or sell a
portfolio security at a time when it would otherwise be favorable for it to do
so, or the possible need for the Fund to sell a security at a disadvantageous
time, due to the need for the Fund to maintain "cover" or to set aside
securities in connection with hedging transactions; and (7) the possible need to
defer closing out certain options, futures contracts and options thereon and
forward currency contracts in order to continue to qualify for the beneficial
tax treatment afforded regulated investment companies under the Internal Revenue
Code of 1986, as amended ("Code"). See "Dividends, Other Distributions and
Federal Income Taxation" herein and "Taxes" in the Statement of Additional
Information.
OTHER POLICIES AND RISKS. The Fund may invest up to 10% of its net assets in
illiquid securities and other securities for which no readily available market
exists, and up to 5% of its total assets in a combination of securities
purchased on a when-issued basis or with respect to which it has entered into
forward commitment agreements.
OTHER INFORMATION. The Fund's investment objective may not be changed without
the approval of a majority of the Fund's outstanding voting securities. As
defined in the 1940 Act, a "majority of the Fund's outstanding voting
securities" means the lesser of (i) 67% of the 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 which also may not be changed without shareholder
approval. A complete description of these limitations is included 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 may be changed by a vote of a majority of the Company's
Board of Directors without shareholder approval. The Fund's policies regarding
lending, and the percentage of Fund assets that may be committed to borrowing,
are fundamental policies and may not be changed without shareholder approval.
The Fund's net asset value will fluctuate, reflecting fluctuations in the market
value of its portfolio positions. Equity securities, particularly common stocks,
generally represent the most junior position in an issuer's capital structure,
and entitle holders to an interest in the assets of an issuer, if any, remaining
after all more senior claims have been satisfied. In addition, the value of debt
securities held by the Fund generally will fluctuate with changes in the
perceived creditworthiness of the issuers of such securities and movements in
interest rates. Investment grade debt securities rated Baa by Moody's are
described by Moody's as having speculative characteristics, and therefore may be
affected by economic conditions and changes in the circumstances of their
issuers to a greater extent than higher rated bonds.
The Fund normally will invest in a substantial number of issuers; however, the
Fund is authorized to invest, with respect to 50% of its assets, more than 5% of
its assets in the securities of a single issuer. To the extent the Fund invests
in a smaller number of issuers, the value of the Fund's shares may fluctuate
more widely and the Fund may be subject to greater investment and credit risk
with respect to its portfolio.
Prospectus Page 10
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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 a
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 comprising or affiliated with Liechtenstein
Global Trust; and (e) any of the companies comprising 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." 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 and certain of its affiliates.
Investors may be charged a fee by their agents or brokers if they effect
transactions other than through a dealer.
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 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. All purchase orders will be
executed at the public offering price next determined after the purchase order
is received. 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.
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 contact your
Financial Advisor or GT Global.
PURCHASE 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. Accordingly, a bank wire
received by the close of regular trading on the NYSE on a Business Day will be
effected that day. 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 that a bank wire is being sent must be provided
to the Transfer Agent. 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 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
Prospectus Page 11
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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) 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 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 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
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 brokers may charge a
fee for establishing accounts relating to the Program.
Prospectus Page 12
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
HOW TO MAKE EXCHANGES
- --------------------------------------------------------------------------------
Advisor Class shares of the Fund may only be exchanged for Advisor Class shares
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."
In addition to the Fund, the GT Global Mutual Funds currently include:
-- GT GLOBAL AMERICA SMALL CAP
GROWTH FUND
-- GT GLOBAL AMERICA MID CAP GROWTH FUND
-- GT GLOBAL AMERICA VALUE FUND
-- GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
-- GT GLOBAL DOLLAR FUND
-- GT GLOBAL EMERGING MARKETS GROWTH FUND
-- GT GLOBAL EUROPE GROWTH FUND
-- GT GLOBAL FINANCIAL SERVICES FUND
-- GT GLOBAL GOVERNMENT INCOME FUND
-- GT GLOBAL HEALTH CARE FUND
-- GT GLOBAL HIGH INCOME FUND
-- GT GLOBAL INFRASTRUCTURE FUND
-- GT GLOBAL INTERNATIONAL GROWTH FUND
-- GT GLOBAL JAPAN GROWTH FUND
-- GT GLOBAL LATIN AMERICA GROWTH FUND
-- GT GLOBAL NATURAL RESOURCES FUND
-- GT GLOBAL NEW PACIFIC GROWTH FUND
-- GT GLOBAL STRATEGIC INCOME FUND
-- GT GLOBAL TELECOMMUNICATIONS FUND
-- GT GLOBAL WORLDWIDE GROWTH 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.
EXCHANGES BY TELEPHONE. A shareholder may give exchange instructions 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 previously have 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, including requiring some
form of personal identification prior to acting upon instructions received by
telephone, providing written confirmation of such transactions, and/or tape
recording of telephone instructions.
Investors in Wrap Fee Accounts and Advisory Accounts interested in making an
exchange should contact their Financial Advisors to request the prospectuses of
the other GT Global Mutual Fund(s) being considered. Other investors should
contact GT Global. See the Shareholder Account Manual in this Prospectus.
OTHER INFORMATION ABOUT EXCHANGES. Purchases, redemptions and exchanges should
be made for investment purposes only. A pattern of frequent exchanges, purchases
and sales is not acceptable and can be limited by the Fund's or GT Global's
refusal to accept further purchase and exchange orders. The terms of the
exchange offer described above may be modified at any time, on 60 days' prior
written notice.
Prospectus Page 13
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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.
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 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 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 institutions. 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 change 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 OF RECORD.
Shareholders automatically have telephone privileges to authorize redemptions.
The Fund, GT Global and the Transfer Agent shall 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, including
requiring some form of personal identification prior to acting upon instructions
received by telephone, 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.
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 a Wrap Fee Account or Advisory Account who is in doubt
as to what documents are required should contact his Financial Advisor.
Except in extraordinary circumstances and as permitted under the 1940 Act,
payment for shares
Prospectus Page 14
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
redeemed by telephone or in writing 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 it 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 Global 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 more information on how to redeem Fund shares, see the Shareholder Account
Manual in this Prospectus, or contact your Financial Advisor.
Prospectus Page 15
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
SHAREHOLDER ACCOUNT MANUAL
- --------------------------------------------------------------------------------
Purchase, exchange and redemption orders may be placed in accordance with this
Manual. It is recommended that investors in Wrap Fee Accounts and Advisory
Acounts make such orders through their Financial Advisor. INVESTORS SHOULD
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 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 7345
San Francisco, California 94120-7345
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 INVESTOR'S CERTIFIED TAXPAYER IDENTIFICATION NUMBER MUST BE SENT 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. 4023-050701
EXCHANGES BY TELEPHONE
Call GT Global at 1-800-223-2138
EXCHANGES BY MAIL
Send complete instructions, including name of 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, California 94120-7893
REDEMPTIONS BY TELEPHONE
Call GT Global at 1-800-223-2138
REDEMPTIONS BY MAIL
Send complete instructions, including name of Fund, class of shares, amount of
redemption, shareholder's registered name and account number, to:
GT Global
P.O. Box 7893
San Francisco, California 94120-7893
OVERNIGHT MAIL
Overnight mail services do not deliver to post office boxes. To send purchase,
exchange or redemption orders by overnight mail, comply with the instructions
but send to the following:
GT Global Investor Services
California Plaza
2121 N. California Boulevard
Suite 450
Walnut Creek, California 94596
ADDITIONAL QUESTIONS
Shareholders with additional questions regarding purchase, exchange and
redemption procedures may call GT Global at 1-800-223-2138.
Prospectus Page 16
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
CALCULATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund calculates its net asset value as of the close of normal 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 determining the value of its
total assets (the securities it holds plus any cash or other assets, including
the interest accrued but not yet received), subtracting all of its liabilities
(including accrued expenses), and dividing the result by the total number of
shares outstanding at such time. Net asset value is determined separately for
each class of the Fund.
Equity securities are valued at the last sale price on the exchange or in the
over-the-counter market in which such securities are primarily traded, as of the
close of business on the day the securities are being valued, or, lacking any
sales, at the last available bid price. Long-term obligations are valued at the
mean of representative quoted bid and asked prices for such securities or, if
such prices are not available, at prices for securities of comparable maturity,
quality and type; however, when the Manager deems it appropriate, prices
obtained from a bond pricing service will be used. Short-term debt investments
are amortized to maturity based on their cost, adjusted for foreign exchange
translation and market fluctuations, provided such valuations represent fair
value. When market quotations for futures and options positions held by the Fund
are readily available, those positions are valued based upon such quotations.
Securities and other assets for which market quotations are not readily
available are valued at fair value determined in good faith by or under the
direction of the Company's Board of Directors. Securities and other assets
quoted in foreign currencies are valued in U.S. dollars based on the prevailing
exchange rates on that day.
The Fund's portfolio securities, from time to time, may be listed primarily on
foreign exchanges or over-the-counter dealer markets which trade on days when
the NYSE is closed (such as a Saturday). As a result, the net asset values of
the Fund may be significantly affected by such trading on days when shareholders
cannot purchase or redeem shares of the Fund.
- --------------------------------------------------------------------------------
DIVIDENDS, OTHER DISTRIBUTIONS
AND FEDERAL INCOME TAXATION
- --------------------------------------------------------------------------------
DIVIDENDS AND OTHER DISTRIBUTIONS. The Fund pays quarterly dividends from 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 normally annually distributes substantially
all of its realized net short-term capital gains (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 will be higher than the per share
income dividends on other classes of the Fund's shares as a result of the
service and distribution fees applicable to those other shares. SHAREHOLDERS MAY
ELECT:
/ / to have all dividends and other distributions automatically reinvested in
additional Advisor Class shares of the Fund (or other GT Global Mutual
Funds); or
/ / to receive dividends in cash and have other distributions automatically
reinvested in additional
Prospectus Page 17
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
Advisor Class shares of the Fund (or other GT Global Mutual Funds); or
/ / 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
/ / 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 REINVESTED
AUTOMATICALLY 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 STATUS OF DIVIDENDS AND OTHER DISTRIBUTIONS
IS THE SAME WHETHER THEY ARE RECEIVED IN CASH OR REINVESTED IN ADDITIONAL
SHARES.
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 continue 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, net gains from certain foreign currency
transaction 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 gain, 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, the shareholders' respective
shares of any foreign taxes paid by the Fund, in which event each shareholder
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. In addition, if Fund shares are purchased within 90
days before or after redeeming other Fund shares (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.
Prospectus Page 18
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
MANAGEMENT
- --------------------------------------------------------------------------------
The Company's Board of Directors has overall responsibility for the operation of
the Fund. Pursuant to such responsibility, the Board has approved contracts with
various financial organizations to provide, among other things, day to day
management services required by the Fund. See "Directors and Executive Officers"
in the Statement of Additional Information for a complete description of the
Directors of the Fund.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Services provided by Chancellor LGT
Asset Management, Inc. (the "Manager") as the Fund's investment manager and
administrator include, but are not limited to, determining the composition of
the Fund's portfolio and placing orders to buy, sell or hold particular
securities; furnishing corporate officers and clerical staff; providing office
space, services and equipment; and supervising all matters relating to the
Fund's operation. For these services, the Fund pays the Manager investment
management and administration fees, computed daily and paid monthly, based on
the average daily net assets, at the annualized rate of .975% on the first $500
million, .95% on the next $500 million, .925% on the next $500 million and .90%
on amounts thereafter. This rate is higher than that paid by most mutual funds.
The Manager has undertaken to limit the Fund's expenses (exclusive of brokerage
commissions, taxes, interest and extraordinary expenses) to the annual rate of
1.50% of the average daily net assets of the Fund's Advisor Class shares.
The Manager also serves as the Fund's pricing and accounting agent. For these
services the Manager receives a fee at an annual rate derived by applying 0.03%
to the first $5 billion of assets of GT Global Mutual Funds and 0.02% to the
assets in excess of $5 billion, and allocating the result according to each
Fund's average daily net assets.
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
U.S. offices of the Manager are located at 50 California Street, 27th Floor, San
Francisco, CA 94111 and 1166 Avenue of the Americas, New York, NY 10036.
The Manager and its worldwide affiliates, including LGT Bank in Liechtenstein,
formerly Bank in Liechtenstein, comprise 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 a 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 , 1997, the Manager and its worldwide asset management
affiliates manage approximately $ billion. In the United States, as of
, 1997, the Manager manages or administers approximately $ billion of
GT Global Mutual Funds. As of , 1997, assets entrusted to
Liechtenstein Global Trust total approximately $ billion.
On October 31, 1996, Chancellor Capital Management, Inc. ("Chancellor Capital")
merged with LGT Asset Management, Inc. As of September 30, 1996, Chancellor
Capital and its affiliates, based in New York, were the 15th largest independent
investment manager in the United States with approximately $33 billion in assets
under management. Chancellor Capital specialized in public and private U.S.
equity and bond portfolio management for over 300 U.S. institutional clients.
In addition to the investment resources of its San Francisco and New York
offices, the Manager draws upon the expertise, personnel, data and systems of
other offices of Liechtenstein Global Trust, including investment offices in
Frankfurt, Hong Kong, London, Singapore, Sydney, Tokyo, and Toronto. In managing
the GT Global Mutual Funds, the Manager employs a team approach, taking
advantage of its investment resources around the world in seeking to achieve
each Fund's investment objective. Many of the GT Global Mutual Funds' portfolio
managers are natives of the
Prospectus Page 19
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
countries in which they invest, speak local languages and/or live or work in the
markets they follow.
The investment professionals primarily responsible for the portfolio management
of the Fund are as follows:
GROWTH & INCOME FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND LAST FIVE YEARS
- ------------------ ------------------------------------ ------------------------------------------------------------
<S> <C> <C>
Nicholas S. Train Portfolio Manager since Fund Portfolio Manager for the Manager since 1991.
London inception in 1991
Paul Griffiths Portfolio Manager since 1995 Portfolio Manager for LGT Asset Management PLC (London) and
London the Manager since 1994; from 1993 to 1994, Global Bond Fund
Manager, Lazard Investors; from 1991 to 1993, Global Bond
Fund Manager, Sanwa International PLC.
</TABLE>
In placing securities orders for the Fund's portfolio transactions, the Manager
seeks to obtain the best net results. Consistent with its obligation to obtain
the best net results, the Manager may consider a broker/dealer's sale of shares
of the GT Global Mutual Funds as a factor in considering through whom portfolio
transactions will be effected. Brokerage transactions may be executed through
any Liechtenstein Global Trust affiliate.
DISTRIBUTION OF FUND SHARES. GT Global is the distributor of the Fund's Advisor
Class shares. GT Global is a subsidiary of Liechtenstein Global Trust with
offices at 50 California Street, 27th Floor, San Francisco, California 94111.
The Manager or an affiliate thereof may make ongoing payments to Financial
Advisors and others that facilitate the administration and servicing of Advisor
Class shareholder accounts.
GT Global, at its own expense, may also provide promotional incentives to
brokers that sell shares of the Fund and/or shares of the other GT Global Mutual
Funds. In some instances compensation or promotional incentives may be offered
to brokers 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.
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. Banks and broker/ dealer affiliates of banks may also
execute dealer agreements with GT Global for the purpose of selling shares of
the Fund. 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.
Prospectus Page 20
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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
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 tax status of distributions made by the Fund to
shareholders are reported after the end of each calendar year on Form 1099-DIV.
ORGANIZATION OF THE COMPANY. The Company was organized as a Maryland corporation
on October 29, 1987. From time to time, the Company has and may continue to
establish other funds, each corresponding to a distinct investment portfolio and
a distinct series of the Company's common stock. Shares of the Fund 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 Company's funds will be voted in the aggregate on other matters, such as the
election of Directors and ratification of the Board of Directors' selection of
the Company's independent accountants.
Normally there will be no annual meeting of shareholders in any year, except as
required under the 1940 Act. The Company would be required to hold a
shareholders' meeting in the event that at any time less than a majority of the
Directors holding office had been elected by shareholders. Directors shall
continue to hold office until their successors are elected and have qualified.
Shares of the Company's funds do not have cumulative voting rights, which means
that the holders of a majority of the shares voting for the election of
Directors can elect all the Directors. A Director may be removed upon a majority
vote of the shareholders qualified to vote in the election. Shareholders holding
10% of the Company's outstanding voting securities may call a meeting of
shareholders for the purpose of voting upon the question of removal of any
Director or for any other purpose. The 1940 Act requires the Company to assist
shareholders in calling such a meeting.
Advisor Class shares are offered through this prospectus to certain investors.
There are two other classes of shares offered to investors through a separate
prospectus: Class A shares and Class B shares.
CLASS A. Class A shares 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. Class A
shares of each Fund also bear annual service and distribution fees of up to
0.35% of the average daily net assets of that class. For the fiscal year ended
October 31, 1995, total operating expenses for the Class A shares were 1.74% of
average net assets for the Fund.
CLASS B. Class B shares are sold at net asset value with no initial sales charge
at the time of purchase. Class B shares bear annual service and distribution
fees of up to 1.00% of the average daily net assets of that class, and investors
pay a contingent deferred sales charge of up to 5% of the lesser of the original
purchase price or the net asset value of such shares at the time of redemption.
This deferred sales charge is waived for certain redemptions and is reduced for
shares held more than one year. For the fiscal year ended October 31, 1995,
total operating expenses for the Class B shares were 2.39% of average net assets
for the Fund.
The different expenses borne by each class of shares will result in different
net asset values and dividends. 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 B
shares of the
Prospectus Page 21
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
Fund because of the higher expenses borne by the Class A and B shares. The per
share dividends on Advisor Class shares of the Fund will generally be higher
than the per share dividends on Class A and B shares of the Fund as a result of
the service and distribution fees applicable with respect to Class A and 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 Company's Articles of Incorporation, it may issue six billion
shares. Of this number, 300 million shares have been classified as shares of the
Fund; 100 million shares have been classified as Class A shares, 100 million
shares have been classified as Class B shares and 100 million shares have been
classified as Advisor Class shares for the Fund. This amount may be increased
from time to time in the discretion of the Board of Directors. Each share of the
Fund represents an interest in the Fund only, has a par value of $0.0001 per
share, represents an equal proportionate interest 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 Directors. Each Class A, Class B and
Advisor Class share of the Fund is equal as to earnings, assets and voting
privileges, 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.
SHAREHOLDER INQUIRIES. Shareholder inquiries may be made by calling the Fund
toll free at (800) 223-2138 or by writing to the Fund at P.O. Box 7893, San
Francisco, California 94120-7893.
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 one-, 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 at net asset
value on the reinvestment date as established by the Board of Directors.
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 total return (e.g., income and capital appreciation or
depreciation); it 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 reflects past performance and is not necessarily
indicative of future results. The Fund's investment results will vary from time
to time depending upon market conditions, the composition of its portfolio and
its 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.
The Fund's annual report contains additional information with respect to its
performance. The annual report is available to investors upon request and free
of charge.
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
Prospectus Page 22
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
and GT Global and a subsidiary of Liechtenstein Global Trust, and maintains its
offices at California Plaza, 2121 North California Boulevard, Suite 450, Walnut
Creek, California 94596.
CUSTODIAN. State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110 is custodian of the Fund's assets.
COUNSEL. The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue,
N.W., Washington, D.C. 20036-1800, acts as counsel to the Company and 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 Company's and 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 Company 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 23
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
NOTES
- --------------------------------------------------------------------------------
Prospectus Page 24
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
NOTES
- --------------------------------------------------------------------------------
Prospectus Page 25
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
NOTES
- --------------------------------------------------------------------------------
Prospectus Page 26
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
NOTES
- --------------------------------------------------------------------------------
Prospectus Page 27
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
GT GLOBAL MUTUAL FUNDS
GT GLOBAL OFFERS A BROAD RANGE OF MUTUAL FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY GT GLOBAL MUTUAL
FUND, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR CALL GT GLOBAL DIRECTLY AT
1-800-824-1580.
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL WORLDWIDE GROWTH FUND
Invests around the world, including the U.S.
GT GLOBAL INTERNATIONAL GROWTH FUND
Provides portfolio diversity by investing outside
the U.S.
GT GLOBAL EMERGING MARKETS GROWTH FUND
Gives access to the growth potential of developing economies
/ / GLOBAL THEME FUNDS
GT GLOBAL CONSUMER PRODUCTS AND
SERVICES FUND
Invests in companies that manufacture, market, retail, or distribute consumer
products or services
GT GLOBAL FINANCIAL SERVICES FUND
Focuses on the worldwide opportunities from the demand for financial services
and products
GT GLOBAL HEALTH CARE FUND
Invests in growing health care industries worldwide
GT GLOBAL INFRASTRUCTURE FUND
Seeks companies that build, improve or maintain a country's infrastructure
GT GLOBAL NATURAL RESOURCES FUND
Concentrates on companies that own, explore or develop natural resources
GT GLOBAL TELECOMMUNICATIONS FUND
Invests in companies worldwide that develop, manufacture or sell
telecommunications services or equipment
/ / REGIONALLY DIVERSIFIED FUNDS
GT GLOBAL NEW PACIFIC GROWTH FUND
Offers access to the emerging and established markets of the Pacific Rim,
excluding Japan
GT GLOBAL EUROPE GROWTH FUND
Focuses on investment opportunities in the new, unified Europe
GT GLOBAL LATIN AMERICA GROWTH FUND
Invests in the emerging markets of Latin America
/ / SINGLE COUNTRY FUNDS
GT GLOBAL AMERICA SMALL CAP GROWTH FUND
Invests in equity securities of small U.S. companies
GT GLOBAL AMERICA MID CAP GROWTH FUND
Concentrates on medium-sized companies in the U.S.
GT GLOBAL AMERICA VALUE FUND
Concentrates on equity securities of large cap U.S. companies believed to be
undervalued
GT GLOBAL JAPAN GROWTH FUND
Provides U.S. investors with direct access to the Japanese market
GROWTH AND INCOME FUND
GT GLOBAL GROWTH & INCOME FUND
Invests in blue-chip stocks and government bonds from around the world
INCOME FUNDS
GT GLOBAL GOVERNMENT INCOME FUND
Earns monthly income from global government securities
GT GLOBAL STRATEGIC INCOME FUND
Allocates its assets among debt securities from the U.S., developed foreign
countries and emerging markets
GT GLOBAL HIGH INCOME FUND
Invests in debt securities in emerging markets
MONEY MARKET FUND
GT GLOBAL DOLLAR FUND
Invests in high quality, U.S. dollar-denominated money market securities
worldwide for stability and preservation of capital
[LOGO]
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY G.T. INVESTMENT FUNDS, INC.,
GT GLOBAL GROWTH & INCOME FUND, CHANCELLOR LGT ASSET MANAGEMENT, INC. OR GT
GLOBAL, INC. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION.
GROPV610003.5MC
<PAGE>
GT GLOBAL EMERGING MARKETS FUND: ADVISOR CLASS
GT GLOBAL LATIN AMERICA GROWTH FUND: ADVISOR CLASS
PROSPECTUS -- MARCH 1, 1997
- --------------------------------------------------------------------------------
GT GLOBAL EMERGING MARKETS FUND ("EMERGING MARKETS FUND") seeks long-term growth
of capital by investing primarily in equity securities of companies in emerging
markets.
GT GLOBAL LATIN AMERICA GROWTH FUND ("LATIN AMERICA GROWTH FUND") seeks capital
appreciation by investing primarily in equity and debt securities of a broad
range of Latin American issuers. Each Fund is referred to individually as a
"Fund" and together as the "Funds."
The Funds are mutual funds 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.
The Funds are investment companies designed for long term investors and not as
trading vehicles. The Funds do not represent a complete investment program nor
are the Funds suitable for all investors. The Funds may invest significantly in
lower quality and unrated foreign government bonds whose credit quality is
generally considered the equivalent of U.S. corporate debt securities commonly
known as "junk bonds." Investments of this type are subject to a greater risk of
loss of principal and interest. An investment in either Fund should be
considered speculative and subject to special risk factors, related primarily to
the Funds' investments in emerging markets and Latin America. Purchasers should
carefully assess the risks associated with an investment in either Fund. There
can be no assurance that the Funds will achieve their investment objectives.
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 for each Fund dated March 1, 1997, has
been filed with the Securities and Exchange Commission and is incorporated
herein by reference. The Statement of Additional Information, which may be
amended or supplemented from time to time, is available without charge by
writing to the Funds at 50 California Street, 27th Floor, San Francisco,
California 94111, or calling (800) 824-1580.
FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR ENDORSED OR GUARANTEED BY,
ANY BANK, NOR ARE THEY FEDERALLY INSURED BY THE FEDERAL RESERVE BOARD, THE
FEDERAL DEPOSIT INSURANCE CORPORATION, OR ANY OTHER GOVERNMENT AGENCY.
An investment in one or both of the Funds offers the following advantages:
/ / Access to Securities Markets Around the World
/ / Professional Management by a Leading Manager with Offices in the World's
Major Markets
/ / Automatic Dividend and Other Distribution Reinvestment
/ / Exchange Privileges with the Advisor Class of the Other GT Global Mutual
Funds
FOR FURTHER INFORMATION CALL
(800) 824-1580 OR CONTACT YOUR FINANCIAL ADVISOR.
[LOGO]
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus Page 1
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
TABLE OF CONTENTS
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Page
---------
<S> <C>
Prospectus Summary........................................................................ 3
Financial Highlights...................................................................... 7
Investment Objectives and Policies........................................................ 11
Risk Factors.............................................................................. 17
How to Invest............................................................................. 22
How to Make Exchanges..................................................................... 24
How to Redeem Shares...................................................................... 25
Shareholder Account Manual................................................................ 27
Calculation of Net Asset Value............................................................ 28
Dividends, Other Distributions and Federal Income Taxation................................ 28
Management................................................................................ 30
Other Information......................................................................... 32
</TABLE>
Prospectus Page 2
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------
The following summary is qualified in its entirety by the more detailed
information appearing in the body of this Prospectus.
<TABLE>
<S> <C> <C>
The Funds: The Emerging Markets Fund is a diversified series of G.T.
Investment Funds, Inc. The Latin America Growth Fund is a
non-diversified series of G.T. Investment Fund, Inc.
Investment Objectives: The Emerging Markets Fund seeks long-term growth of capital.
The Latin America Growth Fund seeks capital appreciation.
The Emerging Markets Fund normally invests at least 65% of its
Principal Investments: total assets in equity securities of companies in emerging
markets.
The Latin America Growth Fund normally invests at least 65% of its
total assets in equity and debt securities issued by Latin
American companies and governments.
Investment Manager: Chancellor LGT Asset Management, Inc. (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 , 1997. The Manager and its
worldwide asset management affiliates maintain fully-staffed
investment offices in Frankfurt, Hong Kong, London, New York, San
Francisco, Singapore, Tokyo and Toronto. See "Management."
There is no assurance that the Funds will achieve their investment
objective. The Funds' net asset values will fluctuate, reflecting
fluctuations in the market value of their portfolio positions
Principal Risk Factors: holdings. Investments in foreign securities involve risks relating
to political and economic developments abroad and the differences
between the regulations to which U.S. and foreign issuers are
subject. Individual foreign economies also may differ favorably or
unfavorably from the U.S. economy. Changes in foreign currency
exchange rates will affect a Fund's net asset value, earnings and
gains and losses realized on sales of securities. Securities of
foreign companies may be less liquid and their prices more
volatile than those of securities of comparable U.S. companies.
Each Fund may engage in certain foreign currency, options and
futures transactions to attempt to hedge against the overall level
of investment and currency risk associated with its present or
planned investments. Such transactions involve certain risks and
transaction costs.
The Emerging Markets Fund may invest up to 20% of its total assets
in below investment grade debt securities. There is no limitation
on the percentage of the Latin America Growth Fund's total assets
that may be invested in below investment grade debt securities.
See "Investment Objectives and Policies."
</TABLE>
Prospectus Page 3
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
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
Advisor Class Shares: 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 a 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 comprising or affiliated with Liechtenstein Global
Trust; and (e) any of the companies comprising or affiliated with
Liechtenstein Global Trust.
Shares Available Through: Advisor Class shares of common stock of the Funds are available
through Financial Advisors (as defined herein) that have entered
into agreements with the Funds' 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 either 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.
Dividends and Other
Distributions: Dividends paid annually from available net investment income and
realized net short-term capital gains; other distributions paid
annually from net capital gain and net gains from foreign currency
transactions, if any.
Reinvestment: Dividends and other distributions may be reinvested automatically
in Advisor Class shares of the distributing Fund or of other GT
Global Mutual Funds.
Net Asset Value: Advisor Class shares of each Fund are expected to be quoted daily
in the financial section of most newspapers.
</TABLE>
Prospectus Page 4
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
GT GLOBAL EMERGING MARKETS FUND
SUMMARY OF INVESTOR COSTS. The expenses and maximum transaction costs associated
with investing in the Advisor Class shares of the Emerging Markets Fund are
reflected in the following tables (1):
<TABLE>
<CAPTION>
ADVISOR
CLASS
-----------
<S> <C>
SHAREHOLDER TRANSACTION COSTS
Maximum sales charge on purchases (as a % of offering price)................................................ None
Sales charges on reinvested distributions to shareholders................................................... None
Maximum deferred sales charge (as a % of net asset value at time of purchase or sale, whichever is less).... None
Redemption charges.......................................................................................... None
Exchange fees:
-- On first four exchanges each year...................................................................... None
-- On each additional exchange............................................................................ $ 7.50
ANNUAL FUND OPERATING EXPENSES (2)
(AS A % OF AVERAGE NET ASSETS)
Investment management and administration fees............................................................... 0.98%
12b-1 service and distribution fees......................................................................... None
Other expenses.............................................................................................. %
-----
Total Fund Operating Expenses............................................................................... %
-----
-----
</TABLE>
HYPOTHETICAL EXAMPLE OF EFFECT OF EXPENSES:
An investor directly or indirectly would have paid the following expenses at the
end of the periods shown on a $1,000 investment, assuming a 5% annual return
(1):
<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---- ----- ----- -----
<S> <C> <C> <C> <C>
Advisor Class Shares........................................ $ $ $ $
</TABLE>
- --------------
(1) THESE TABLES ARE INTENDED TO ASSIST INVESTORS IN UNDERSTANDING THE VARIOUS
COSTS AND EXPENSES ASSOCIATED WITH INVESTING IN THE FUND. 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 comprising or affiliated with Liechtenstein Global Trust invests
in Advisor Class shares of the Fund, such account shall not be subject to
duplicative advisory fees. THE "HYPOTHETICAL EXAMPLE" IS NOT A
REPRESENTATION OF PAST OR FUTURE EXPENSES. THE FUND'S ACTUAL EXPENSES MAY BE
MORE OR LESS THAN THOSE SHOWN. The table and the assumption in the
Hypothetical Example of a 5% annual return are required by regulation of the
Securities and Exchange Commission applicable to all mutual funds. The 5%
annual return is not a prediction of and does not represent the Fund's
projected or actual performance.
(2) Expenses are based on the Fund's fiscal year ended October 31, 1996. "Other
Expenses" include custody, transfer agent, legal audit and other expenses.
See "Management" herein and the Statement of Additional Information for more
information.
Prospectus Page 5
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
PROSPECTUS SUMMARY
(Continued)
- --------------------------------------------------------------------------------
GT GLOBAL LATIN AMERICA GROWTH FUND
SUMMARY OF INVESTOR COSTS. The expenses and maximum transaction costs associated
with investing in the Advisor Class shares of the Latin America Growth Fund are
reflected in the following tables (1):
<TABLE>
<CAPTION>
ADVISOR
CLASS
-----------
<S> <C>
SHAREHOLDER TRANSACTION COSTS:
Maximum sales charge on purchases of shares (% of offering price)........................................... None
Sales charges on reinvested distributions to shareholders................................................... None
Maximum deferred sales charge (as a % of net asset value at time of purchase or sale, which ever is less)... None
Redemption charges.......................................................................................... None
Exchange fees:
-- On first four exchanges each year.................................................................... None
-- On each additional exchange.......................................................................... $ 7.50
ANNUAL FUND OPERATING EXPENSES: (2)
(AS A % OF AVERAGE NET ASSETS)
Investment management and administration fees............................................................... 0.98%
12b-1 distribution and service fees......................................................................... None
Other expenses.............................................................................................. %
-----------
Total Fund Operating Expenses................................................................................. %
-----------
-----------
</TABLE>
HYPOTHETICAL EXAMPLE OF EFFECT OF EXPENSES:
An investor would have directly or indirectly paid the following expenses at the
end of the periods shown on a $1,000 investment in the Fund, assuming a 5%
annual return (1):
<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---- ----- ----- -----
<S> <C> <C> <C> <C>
Advisor Class Shares..................................................................... $ $ $ $
</TABLE>
- ------------------
(1) THESE TABLES ARE INTENDED TO ASSIST INVESTORS IN UNDERSTANDING THE VARIOUS
COSTS AND EXPENSES ASSOCIATED WITH INVESTING IN THE FUND. 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 comprising or affiliated with Liechtenstein Global Trust invests
in Advisor Class shares of the Fund, such account shall not be subject to
duplicative advisory fees. THE "HYPOTHETICAL EXAMPLE" IS NOT A
REPRESENTATION OF PAST OR FUTURE EXPENSES. THE FUND'S ACTUAL EXPENSES MAY BE
MORE OR LESS THAN THOSE SHOWN. The table and the assumption in the
Hypothetical Example of a 5% annual return are required by regulation of the
SEC applicable to all mutual funds. The 5% annual return is not a prediction
of and does not represent the Fund's projected or actual performance.
(2) Expenses are based on the Fund's fiscal year ended October 31, 1996. "Other
Expenses" include custody, transfer agent, legal audit and other expenses.
See "Management" herein and the Statement of Additional Information for more
information.
Prospectus Page 6
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The tables below provide condensed information concerning income and capital
changes for one share of each class of shares of each Fund for the periods
shown. This information is supplemented by the financial statements and
accompanying notes appearing in the Statement of Additional Information. The
financial statements and notes, for the fiscal year ended October 31, 1996, have
been audited by Coopers & Lybrand L.L.P., independent accountants, whose report
thereon also is included in the Statement of Additional Information.
GT GLOBAL EMERGING MARKETS FUND
<TABLE>
<CAPTION>
CLASS A+
--------------------------------------------------------
MAY 18, 1992
YEAR ENDED OCTOBER 31, (COMMENCEMENT OF
-------------------------------------- OPERATIONS) TO
1996 1995(E) 1994 1993 OCTOBER 31, 1992
-------- -------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of period.... $ $ 18.81 $ 14.42 $ 11.10 $ 11.43
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income (loss)............ 0.13 (0.02) 0.02* 0.07*
Net realized and unrealized gain (loss)
on investments........................ (4.32) 4.68 3.38 (0.40)
-------- -------- -------- -------- --------
Net increase (decrease) from investment
operations............................ (4.19) 4.66 3.40 (0.33)
-------- -------- -------- -------- --------
Distributions:
Net investment income................. -- (0.01) (0.08) --
Net realized gain on investments...... (0.77) (0.26) -- --
-------- -------- -------- -------- --------
Total distributions................. (0.77) (0.27) (0.08) --
-------- -------- -------- -------- --------
Net asset value, end of period.......... $ 13.85 $ 18.81 $ 14.42 $ 11.10
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total investment return (c)............. (23.04)% 32.58% 30.90% (2.90)%(a)
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Ratios and supplemental data:
Net assets, end of period (in 000's).... $252,457 $417,322 $187,808 $84,558
Ratio of net investment income (loss) to
average net assets.................... 0.89% (0.11)% 0.1%* 1.7%*(b)
Ratio of expenses to average net assets:
With expense reductions............... 2.12% 2.06% 2.4 (b) 2.4%*(b)
Without expense reductions............ 2.14% -- (d) -- (d) --%(d)
Portfolio turnover rate +++............. 114% 100% 99% 32%(b)
</TABLE>
- --------------
+ All capital shares issued and outstanding as of March 31, 1993 were
reclassified as Class A shares.
++ Commencing April 1, 1993, the Fund began offering Class B shares.
+++ Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
* Includes reimbursement by the Manager of Fund operating expenses of $0.02
for the year ended October 31, 1993 and for the period from May 18, 1992
(commencement of operations) to October 31, 1992, respectively. Without such
reimbursements, the expense ratios would have been 2.61% and 2.91% and the
ratio of net investment income to average net assets would have been 0.36%
and 1.21% for the year ended October 31, 1993 and for the period from May
18, 1992 (commencement of operations) to October 31, 1992, respectively.
** Includes reimbursement by the Manager of Fund operating expenses of $0.02.
Without such reimbursements, the expense ratio would have been 3.63% and the
ratio of net investment income to average net assets would have been
(0.76)%.
*** Commencing June 1, 1995, the Fund began offering Advisor Class shares.
(a) Not annualized.
(b) Annualized.
(c) Total investment return does not include sales charges.
(d) Calculation of "Ratio of expenses to average net assets" was made without
considering the effect of expense reductions, if any.
(e) These selected per share data were calculated based upon weighted average
shares outstanding during the period.
Prospectus Page 7
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
GT GLOBAL EMERGING MARKETS FUND
(CONTINUED)
<TABLE>
<CAPTION>
CLASS B++ ADVISOR CLASS***
----------------------------------------- ----------------------
APRIL 1, YEAR JUNE 1, 1995
YEAR ENDED OCTOBER 31, 1993 TO ENDED TO
---------------------------- OCTOBER 31, OCTOBER OCTOBER 31,
1996 1995(E) 1994 1993 31, 1996 1995
-------- -------- -------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance:
Net asset value, beginning of period.... $ $ 18.68 $ 14.39 $ 11.47 $ $14.71
-------- -------- -------- ----------- -------- ------------
Income from investment operations:
Net investment income (loss)............ 0.06 (0.12) 0.00** 0.08
Net realized and unrealized gain (loss)
on investments........................ (4.29) 4.67 2.92 (0.91)
-------- -------- -------- ----------- -------- ------------
Net increase (decrease) from investment
operations............................ (4.23) 4.55 2.92 (0.83)
-------- -------- -------- ----------- -------- ------------
Distributions:
Net investment income................. -- -- -- --
Net realized gain on investments...... (0.77) (0.26) -- --
-------- -------- -------- ----------- -------- ------------
Total distributions................. (0.77) (0.26) -- --
-------- -------- -------- ----------- -------- ------------
Net asset value, end of period.......... $ 13.68 $ 18.68 $ 14.39 $13.88
-------- -------- -------- ----------- -------- ------------
-------- -------- -------- ----------- -------- ------------
Total investment return (c)............. (23.37)% 31.77% 25.50%(a) (5.71)%(a)
-------- -------- -------- ----------- -------- ------------
-------- -------- -------- ----------- -------- ------------
Ratios and supplemental data:
Net assets, end of period (in 000's).... $225,861 $291,289 $32,218 $1,675
Ratio of net investment income (loss) to
average net assets.................... 0.39% (0.61)% (0.4)% *(b) 1.39%(b)
Ratio of expenses to average net assets:
With expense reductions............... 2.62% 2.56% 2.9%**(b) 1.62%(b)
Without expense reductions............ 2.64% -- (d) --%(d) 1.64%(b)
Portfolio turnover rate +++............. 114% 100% 99% 114%
</TABLE>
- --------------
+ All capital shares issued and outstanding as of March 31, 1993 were
reclassified as Class A shares.
++ Commencing April 1, 1993, the Fund began offering Class B shares.
+++ Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
* Includes reimbursement by the Manager of Fund operating expenses of $0.02
for the year ended October 31, 1993 and for the period from May 18, 1992
(commencement of operations) to October 31, 1992, respectively. Without such
reimbursements, the expense ratios would have been 2.61% and 2.91% and the
ratio of net investment income to average net assets would have been 0.36%
and 1.21% for the year ended October 31, 1993 and for the period from May
18, 1992 (commencement of operations) to October 31, 1992, respectively.
** Includes reimbursement by the Manager of Fund operating expenses of $0.02.
Without such reimbursements, the expense ratio would have been 3.63% and the
ratio of net investment income to average net assets would have been
(0.76)%.
*** Commencing June 1, 1995, the Fund began offering Advisor Class shares.
(a) Not annualized.
(b) Annualized.
(c) Total investment return does not include sales charges.
(d) Calculation of "Ratio of expenses to average net assets" was made without
considering the effect of expense reductions, if any.
(e) These selected per share data were calculated based upon weighted average
shares outstanding during the period.
Prospectus Page 8
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
GT GLOBAL LATIN AMERICA GROWTH FUND
<TABLE>
<CAPTION>
CLASS A+
-----------------------------------------------
AUGUST 13, 1991
YEAR ENDED OCTOBER 31, (COMMENCEMENT OF
----------------------------------------------- OPERATIONS) TO
1996 1995(A) 1994(A) 1993(A) 1992 OCTOBER 31, 1991
-------- -------- -------- -------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ $26.11 $19.78 $15.59 $16.45 $14.29
-------- -------- -------- -------- ------- ----------------
Income from investment operations:
Net investment income (loss)............ 0.15 (0.08) 0.18 0.25 0.01
Net realized and unrealized gain (loss)
on investments........................ (9.28) 6.75 5.21 (0.98) 2.15
-------- -------- -------- -------- ------- ----------------
Net increase (decrease) from investment
operations............................ (9.13) 6.67 5.39 (0.73) 2.16
-------- -------- -------- -------- ------- ----------------
Distributions:
Net investment income................. 0.00 (0.19) (0.12) (0.13) 0.00
Net realized gain on investments...... (1.60) (0.15) (1.08) (0.00) 0.00
-------- -------- -------- -------- ------- ----------------
Total distributions................. (1.60) (0.34) (1.20) (0.13) 0.00
-------- -------- -------- -------- ------- ----------------
Net asset value, end of period.......... $15.38 $26.11 $19.78 $15.59 $16.45
-------- -------- -------- -------- ------- ----------------
-------- -------- -------- -------- ------- ----------------
Total investment return (d)............. (37.16)% 34.10% 37.10% (4.50)% 15.10%(b)
-------- -------- -------- -------- ------- ----------------
-------- -------- -------- -------- ------- ----------------
Ratios and supplemental data:
Net assets, end of period (in 000's).... $182,462 $336,960 $129,280 $94,085 $125,038
Ratio of net investment income (loss) to
average net assets.................... 0.86% (0.29)% 1.30%* 1.30%* 1.20%*(c)
Ratio of expenses to average net assets:
With expense reductions............... 2.11% 2.04% 2.40%* 2.40%* 2.40%*(c)
Without expense reductions............ 2.12% -- (e) -- (e) -- (e) --%(e)
Portfolio turnover rate +++............. 125% 155% 112% 159% none
</TABLE>
- --------------
+ All capital shares issued and outstanding as of March 31, 1993 were
reclassified as Class A shares.
++ Commencing April 1, 1993, the Fund began offering Class B shares.
+++ Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
* Includes reimbursement by the Manager of Fund operating expenses of $0.02,
$0.04 and $0.01 for the years ended October 31, 1993 and 1992 and for the
period from August 13, 1991 to October 31, 1991, respectively. Without such
reimbursements, the expense ratios would have been 2.49%, 2.62% and 3.42%
and the ratios of net investment income to average net assets would have
been 1.25%, 1.07% and 0.l5% for the years ended October 31, 1993 and 1992
and for the period from August 31, 1991 to October 31, 1991, respectively.
** Commencing June 1, 1995, the Fund began offering Advisor Class shares.
(a) These selected per share data were calculated based upon weighted average
shares outstanding during the period.
(b) Not annualized.
(c) Annualized.
(d) Total investment return does not include sales charges.
(e) Calculation of "Ratio of expenses to average net assets" was made without
considering the effect of expense reductions, if any.
Prospectus Page 9
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
(CONTINUED)
<TABLE>
<CAPTION>
ADVISOR
CLASS B++ CLASS**
----------------------------------------- ----------------------
APRIL 1, YEAR JUNE 1, 1995
YEAR ENDED OCTOBER 31, 1993 TO ENDED TO
---------------------------- OCTOBER 31, OCTOBER OCTOBER 31,
1996 1995(A) 1994(A) 1993(A) 31, 1996 1995
-------- -------- -------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period.... $ $25.94 $19.75 $16.26 $ $15.95
-------- -------- -------- ----------- -------- ------
Income from investment operations:
Net investment income (loss)............ 0.06 (0.22) (0.07) 0.09
Net realized and unrealized gain (loss)
on investments........................ (9.19) 6.74 3.56 (0.64)
-------- -------- -------- ----------- -------- ------
Net increase (decrease) from investment
operations............................ (9.13) 6.52 3.49 (0.55)
-------- -------- -------- ----------- -------- ------
Distributions:
Net investment income................. 0.00 (0.18) 0.00 0.00
Net realized gain on investments...... (1.60) (0.15) 0.00 0.00
-------- -------- -------- ----------- -------- ------
Total distributions................. (1.60) (0.33) 0.00 0.00
-------- -------- -------- ----------- -------- ------
Net asset value, end of period.......... $15.21 $25.94 $19.75 $15.40
-------- -------- -------- ----------- -------- ------
-------- -------- -------- ----------- -------- ------
Total investment return (d)............. (37.42)% 33.33% 21.50%(b) (3.45)%(b)
-------- -------- -------- ----------- -------- ------
-------- -------- -------- ----------- -------- ------
Ratios and supplemental data:
Net assets, end of period (in 000's).... $134,527 $211,673 $13,576 $ 369
Ratio of net investment income (loss) to
average net assets.................... 0.36% (0.79)% (0.70)%(c) 1.36%(c)
Ratio of expenses to average net assets:
With expense reductions............... 2.61% 2.54% 2.90%(c) 1.61%(c)
Without expense reductions............ 2.62% -- (e) --%(e) 1.62%(c)
Portfolio turnover rate +++............. 125% 155% 112% 125%
</TABLE>
- --------------
+ All capital shares issued and outstanding as of March 31, 1993 were
reclassified as Class A shares.
++ Commencing April 1, 1993, the Fund began offering Class B shares.
+++ Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
* Includes reimbursement by the Manager of Fund operating expenses of $0.02,
$0.04 and $0.01 for the years ended October 31, 1993 and 1992 and for the
period from August 13, 1991 to October 31, 1991, respectively. Without such
reimbursements, the expense ratios would have been 2.49%, 2.62% and 3.42%
and the ratios of net investment income to average net assets would have
been 1.25%, 1.07% and 0.l5% for the years ended October 31, 1993 and 1992
and for the period from August 31, 1991 to October 31, 1991, respectively.
** Commencing June 1, 1995, the Fund began offering Advisor Class shares.
(a) These selected per share data were calculated based upon weighted average
shares outstanding during the period.
(b) Not annualized.
(c) Annualized.
(d) Total investment return does not include sales charges.
(e) Calculation of "Ratio of expenses to average net assets" was made without
considering the effect of expense reductions, if any.
Prospectus Page 10
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
INVESTMENT OBJECTIVES
AND POLICIES
- --------------------------------------------------------------------------------
EMERGING MARKETS FUND
The Emerging Markets Fund's investment objective is long-term growth of capital.
Under normal circumstances, the Emerging Markets Fund seeks its objective by
investing at least 65% of its total assets in equity securities of companies in
emerging markets. The Emerging Markets Fund may invest in the following types of
equity securities: common stock, preferred stock, securities convertible into
common stock, rights and warrants to acquire such securities and substantially
similar forms of equity with comparable risk characteristics.
For purposes of the Emerging Markets Fund's operations, "emerging markets" will
consist of all countries determined by the Manager to have developing or
emerging economies and markets. These countries generally include every country
in the world except the United States, Canada, Japan, Australia, New Zealand and
most countries located in Western Europe. See "Investment Objective and
Policies" in the Statement of Additional Information for a complete list of all
the countries which the Emerging Markets Fund does not consider to be emerging
markets.
For purposes of the Emerging Markets Fund's policy of normally investing at
least 65% of its total assets in equity securities of issuers in emerging
markets, the Emerging Markets Fund will consider investment in the following
emerging markets:
<TABLE>
<S> <C> <C>
Argentina Indonesia Portugal
Bolivia Israel Republic of
Botswana Jamaica Slovakia
Brazil Jordan Russia
Chile Kenya Singapore
China Malaysia Slovenia
Colombia Mauritius South Africa
Cyprus Mexico South Korea
Czech Morocco Sri Lanka
Republic Nigeria Swaziland
Ecuador Oman Taiwan
Egypt Pakistan Thailand
Ghana Panama Turkey
Greece Paraguay Uruguay
Hong Kong Peru Venezuela
Hungary Philippines Zambia
India Poland Zimbabwe
</TABLE>
Although the Emerging Markets Fund considers each of the above-listed countries
eligible for investment, the Emerging Markets Fund will not be invested in all
such markets at all times. Moreover, investing in some of those markets
currently may not be desirable or feasible, due to the lack of adequate custody
arrangements for the Emerging Markets Fund's assets, overly burdensome
repatriation and similar restrictions, the lack of organized and liquid
securities markets, unacceptable political risks or for other reasons.
As used in this Prospectus, an issuer in an emerging market is an entity: (i)
for which the principal securities trading market is an emerging market, as
defined above; (ii) that (alone or on a consolidated basis) derives 50% or more
of its total revenues from business in emerging markets, provided that, in the
Manager's view, the value of such issuer's securities will tend to reflect
emerging market development to a greater extent than developments elsewhere; or
(iii) organized under the laws of, or with a principal office in, an emerging
market.
The Emerging Markets Fund may also invest up to 35% of its total assets in (i)
debt securities of government or corporate issuers in emerging markets; (ii)
equity and debt securities of issuers in developed countries, including the
United States; (iii) securities of issuers in emerging markets not included in
the list of emerging markets above, if investing therein becomes feasible and
desirable subsequent to the date of this Prospectus; and (iv) cash and money
market instruments.
In selecting investments, the Manager seeks to identify those countries and
industries where economic and political factors, including currency movements,
are likely to produce above-average growth rates. The Manager then invests in
those companies in such countries and industries that are best positioned and
managed to take advantage of these economic and political factors. The assets of
the Emerging Markets Fund ordinarily will be invested in the securities of
issuers in at least three different emerging markets. In evaluating investments
in securities of issuers in developed markets, the
Prospectus Page 11
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
Manager will consider, among other things, the business activities of the issuer
in emerging markets and the impact that developments in emerging markets are
likely to have on the issuer.
The Manager believes that the issuers of securities in emerging markets often
have sales and earnings growth rates which exceed those in developed countries
and that such growth rates may in turn be reflected in more rapid share price
appreciation. Accordingly, the Manager believes that the Emerging Markets Fund's
policy of investing in equity securities of companies in emerging markets may
enable the Emerging Markets Fund to achieve results superior to those produced
by mutual funds with similar objectives to those of the Emerging Markets Fund
that invest solely in equity securities of issuers domiciled in the U.S. and/or
in other developed markets.
The Emerging Markets Fund invests in those emerging markets which the Manager
believes have strongly developing economies and in which the markets are
becoming more sophisticated.
INVESTMENTS IN DEBT SECURITIES. The Emerging Markets Fund may invest in debt
securities of governmental and corporate issuers in emerging markets. Emerging
market debt securities often are rated below investment grade or not rated by
U.S. rating agencies. The Emerging Markets Fund may invest up to 20% of its
total assets in debt securities rated below investment grade. Investment in
below investment grade debt securities involves a high degree of risk and can be
speculative. These debt securities are the equivalent of high yield, high risk
bonds, commonly known as "junk bonds." See "Risk Factors -- Risks Associated
with Debt Securities".
If the rating of any of the debt securities drops below a minimum rating
considered acceptable by the Manager, the Fund will dispose of any such security
as soon as practicable and consistent with the best interests of the Emerging
Markets Fund and its shareholders.
Growth of capital in debt securities may arise as a result of favorable changes
in relative foreign exchange rates, in relative interest rate levels and/ or in
the creditworthiness of issuers. The receipt of income from debt securities
owned by the Emerging Markets Fund is incidental to the Emerging Markets Fund's
objective of long-term growth of capital.
TEMPORARY DEFENSIVE STRATEGIES. In the interest of preserving shareholders'
capital, 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. Pursuant to such a defensive strategy, the Emerging Markets Fund
temporarily may invest up to 100% of its assets in cash (U.S. dollars, foreign
currencies, multinational currency units) and/or high quality debt securities or
money market instruments of U.S. or foreign issuers, and most or all of the
Emerging Markets Fund's investments may be made in the United States and
denominated in U.S. dollars. To the extent the Emerging Markets Fund employs a
temporary defensive strategy, it will not be invested so as to achieve directly
its investment objective.
In addition, pending investment of proceeds from new sales of Emerging Markets
Fund shares or to meet ordinary daily cash needs, the Emerging Markets Fund
temporarily may hold cash (U.S. dollars, foreign currencies or multinational
currency units) and may invest any portion of its assets in money market
instruments.
The Emerging Markets Fund may invest in the following types of money market
instruments (i.e., debt instruments with less than 12 months remaining until
maturity) denominated in U.S. dollars or other currencies: (a) obligations
issued or guaranteed by the U.S. or foreign governments, their agencies,
instrumentalities or municipalities; (b) obligations of international
organizations designed or supported by multiple foreign governmental entities to
promote economic reconstruction or development; (c) finance company obligations,
corporate commercial paper and other short-term commercial obligations; (d) bank
obligations (including certificates of deposit, time deposits, demand deposits
and bankers' acceptances); (e) repurchase agreements with respect to the
foregoing; and (f) other substantially similar short-term debt securities with
comparable characteristics.
The Emerging Markets Fund may invest in commercial paper rated as low as A-3 by
S&P or P-3 by Moody's or, if not rated, determined by the Manager to be of
comparable quality. These securities may be more vulnerable to adverse effects
of changes in circumstances than obligations carrying higher designations.
Prospectus Page 12
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
LATIN AMERICA GROWTH FUND
The Latin America Growth Fund's investment objective is capital appreciation.
The Latin America Growth Fund normally invests at least 65% of its total assets
in the securities of a broad range of Latin American issuers. The Latin America
Growth Fund may invest in common stock, preferred stock, rights, warrants and
securities convertible into common stock, and other substantially similar forms
of equity securities with comparable risk characteristics, as well as bonds,
notes, debentures or other forms of indebtedness that may be developed in the
future. Normally, the Latin America Growth Fund will invest a majority of its
assets in equity securities. The Fund may also invest up to 35% of its total
assets in a combination of equity and debt securities of U.S. issuers.
For purposes of this Prospectus, unless otherwise indicated, the Latin America
Growth Fund defines Latin America to include the following countries: Argentina,
the Bahamas, Barbados, Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica,
Dominican Republic, Ecuador, El Salvador, French Guiana, Guatemala, Guyana,
Haiti, Honduras, Jamaica, Mexico, the Netherlands Antilles, Nicaragua, Panama,
Paraguay, Peru, Suriname, Trinidad and Tobago, Uruguay and Venezuela. Under
current market conditions the Latin America Growth Fund expects to invest
primarily in equity and debt securities issued by companies and governments in
Mexico, Chile, Brazil and Argentina. The Latin America Growth Fund may invest
more than 25% of its total assets in any of these four countries but does not
expect to invest more than 60% of its total assets in any one country.
The Latin America Growth Fund defines securities of Latin American issuers to
include: (a) securities of companies organized under the laws of, or having a
principal office located in, a Latin American country; (b) securities of
companies that derive 50% or more of their total revenues from business in Latin
America, provided that, in the Manager's view, the value of such issuers'
securities reflect Latin American developments to a greater extent than
developments elsewhere; (c) securities issued or guaranteed by the government of
a country in Latin America, its agencies or instrumentalities, or
municipalities, or the central bank of such country; (d) U.S. dollar-denominated
securities or securities denominated in a Latin American currency issued by
companies to finance operations in Latin America; and (e) securities of Latin
American issuers, as defined herein, in the form of depositary shares. For
purposes of the foregoing definition, the Latin America Growth Fund's purchases
of securities issued by companies outside of Latin America to finance their
Latin American operations will be limited to securities the performance of which
is materially related to such company's Latin American activities.
In allocating investments among the various Latin American countries, the
Manager looks principally at the stage of industrialization, potential for
productivity gains through economic deregulation, the impact of financial
liberalization and monetary conditions and the political outlook in each
country. In allocating assets between equity and debt securities, the Manager
will consider, among other factors, the level and anticipated direction of
interest rates; expected rates of economic growth and corporate profits growth;
changes in Latin American government policy including regulation governing
industry, trade, financial markets, foreign and domestic investment; substance
and likely development of government finances; and the condition of the balance
of payments and changes in the terms of trade.
Under normal circumstances, the Latin America Growth Fund may invest up to 35%
of its total assets in a combination of equity and debt securities of U.S.
issuers. In evaluating investments in securities of U.S. issuers, the Manager
will consider, among other things, the issuer's Latin American business
activities and the impact that development in Latin America may have on the
issuer's operations and financial condition.
The Latin America Growth Fund may also use instruments (including forward
contracts) often referred to as "derivatives." See "Options, Futures and Forward
Currency Transactions."
Certain sectors of the economies of certain Latin American countries are closed
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 in certain Latin American countries, the Latin
America Growth Fund may be able to invest in such countries solely or primarily
through governmentally approved investment vehicles or companies. In addition,
the portion of Latin America Growth Fund's assets invested directy in Chile may
be less than the portion invested in other Latin American countries because at
present capital directly invested in Chile normally cannot be repatriated for at
least one year. As a result, the
Prospectus Page 13
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
Latin America Growth Fund currently intends to limit most of its Chilean
investments to indirect investments through American Depositary Receipts
("ADRs") and established Chilean investment companies, the shares of which are
not subject to repatriation restrictions.
INVESTMENTS IN DEBT SECURITIES. Under normal circumstances, the Latin America
Growth Fund may invest up to 50% of its total assets in debt securities. There
is no limitation on the percentage of the Latin America Growth Fund's assets
which may be invested in debt securities which are rated below investment grade.
Investment in below investment grade securities involves a high degree of risk
and can be speculative. These debt securities are the equivalent of high yield,
high risk bonds, commonly known as "junk bonds." Most debt securities in which
the Latin America Growth Fund will invest are not rated; if rated, it is
expected that such ratings would be below investment grade. However, the Latin
America Growth Fund will not invest in debt securities that are in default in
payment as to principal or interest. See "Risk Factors -- Risks Associated with
Debt Securities."
During 1990, the Mexican external debt markets experienced significant changes
with the completion of the "Brady Plan" restructurings in those markets. The
restructurings provided for the exchange of loans and cash for newly issued
bonds ("Brady Bonds"). Brady Bonds fall into two categories: collateralized
Brady Bonds and bearer Brady Bonds. Both types of Brady Bonds are issued in
various currencies, primarily the U.S. dollar. Brady Bonds are actively traded
in the OTC secondary market for Latin American debt. U.S. dollar-denominated
collateralized bonds, which may be fixed par bonds or floating rate discount
bonds, are collateralized in full as to principal by U.S. Treasury Zero Coupon
bonds having the same maturity. At least one year of rolling interest payments
are collateralized by cash or other investments. Brady Bonds have been issued
by, among others, Albania, Argentina, Brazil, Bulgaria, Costa Rica, Dominican
Republic, Ecuador, Jordan, Mexico, Nigeria, Philippines, Poland, Uruguay,
Venezuela and are expected to be issued by Panama, Peru and other emerging
market countries. Approximately $139 billion in principal amount of Brady Bonds
are outstanding, the largest proportion having been issued by Brazil, Argentina
and Mexico. Brady Bonds issued by Brazil, Argentina and Mexico currently are
rated below investment grade.
Capital appreciation in debt securities may arise as a result of a favorable
change in relative foreign exchange rates, in relative interest rate levels, or
in the creditworthiness of issuers. The receipt of income from such debt
securities is incidental to the Latin America Growth Fund's objective of capital
appreciation.
TEMPORARY DEFENSIVE STRATEGIES. The Latin America Growth Fund may invest up to
100% of its assets in cash (U.S. dollars, foreign currencies, multinational
units) and/or high quality debt securities or money market instruments to
generate income to defray Latin America Growth Fund expenses, for temporary
defensive purposes and pending investment in accordance with the Latin America
Growth Fund's investment objective and policies. In addition, the Latin America
Growth Fund reserves the right to be primarily invested in U.S. securities for
temporary defensive purposes or pending investment of the proceeds of sales of
new shares of the Fund. The Latin America Growth Fund may assume a temporary
defensive position when, due to political, market or other factors broadly
affecting Latin American markets, the Manager determines that opportunities for
capital appreciation in those markets would be significantly limited over an
extended period, or that investing in those markets presents undue risk of loss.
Prospectus Page 14
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
The Latin America Growth Fund may invest in the following types of money market
securities (i.e., debt instruments with less than 12 months remaining until
maturity) denominated in U.S. dollars or in the currency of any Latin American
country, which consist of: (a) obligations issued or guaranteed by (i) the U.S.
government or the government of a Latin American country, their agencies or
instrumentalities, or municipalities; or (ii) international organizations
designed or supported by multiple foreign governmental entities to promote
economic reconstruction or development ("supranational entities"); (b) finance
company obligations, corporate commercial paper and other short-term commercial
obligations; (c) bank obligations (including certificates of deposit, time
deposits, demand deposits and bankers' acceptances); (d) repurchase agreements
with respect to the foregoing; and (e) other substantially similar short-term
debt securities with comparable risk characteristics.
The Latin America Growth Fund may invest in commercial paper rated as low as A-3
by S&P or P-3 by Moody's or, if not rated, determined by the Manager to be of
comparable quality. These securities may be more vulnerable to adverse effects
or changes in circumstances than obligations carrying higher designations.
ADDITIONAL INVESTMENT POLICIES OF EMERGING MARKETS FUND AND LATIN AMERICA GROWTH
FUND
INVESTMENT IN OTHER INVESTMENT COMPANIES OR VEHICLES. The Funds may be able to
invest in certain emerging markets solely or primarily through governmentally
authorized investment vehicles or companies. Pursuant to the 1940 Act, a Fund
generally may invest up to 10% of its total assets in the aggregate in shares of
other investment companies and up to 5% of its total assets in any one
investment company, as long as each investment does not represent more than 3%
of the outstanding voting stock of the acquired investment company at the time
of investment.
Investment in other investment companies may involve the payment of substantial
premiums above the value of such investment companies' portfolio securities, and
is subject to limitations under the 1940 Act and market availability. The Funds
do not intend to invest in such investment companies unless, in the judgment of
the Manager, the potential benefits of such investment justify the payment of
any applicable premium or sales charge. As a shareholder in an investment
company, the Fund would bear its ratable share of that investment company's
expenses, including its advisory and administration fees. At the same time the
Fund would continue to pay its own management fees and other expenses.
SECURITIES LENDING. The Funds may lend their portfolio securities to
broker/dealers or to other institutional investors. Securities lending allows
the Fund to retain ownership of the securities loaned and, at the same time earn
additional income that may be used to offset the Fund's custody fees. At all
times a loan is outstanding, the Funds borrower must maintain with the Funds'
custodian collateral consisting of cash, U.S. government securities or certain
irrevocable letters of credit equal to the value of the borrowed securities,
plus any accrued interest. The Funds limit their loans of portfolio securities
to an aggregate of 30% of the value of its total assets, measured at the time
any such loan is made. 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 loaned securities and possible loss of rights
in the collateral should the borrower fail financially.
PRIVATIZATIONS. The governments in some emerging markets and Latin American
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 Funds in privatizations in
appropriate circumstances. In certain emerging markets and Latin American
countries, the ability of foreign entities such as the Funds to participate in
privatizations may be limited by local law and/or the terms on which the Funds
may be permitted to participate may be less advantageous than those afforded
local investors. There can be no assurance that Latin American governments and
governments in emerging markets will continue to sell companies currently owned
or controlled by them or that privatization programs will be successful.
BORROWING. It is a fundamental policy of each Fund that it may borrow an amount
up to 33 1/3% of its total assets in order to meet redemption requests.
Borrowing may cause greater fluctuation in the value of the Funds' shares than
would be the case if the Funds did not borrow, but also may enable the Emerging
Markets Fund to retain favorable securities positions rather than liquidating
such positions to meet redemptions. The Emerging
Prospectus Page 15
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GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
Markets Fund will not borrow to leverage its portfolio. It is a nonfundamental
policy of the Emerging Markets Fund and a fundamental policy of the Latin
America Growth Fund, that the Funds will not purchase securities during times
when outstanding borrowings represent 5% or more of its total assets.
WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES. The Funds may purchase debt
securities on a "when-issued" basis and may purchase or sell such securities on
a "forward commitment" basis in order to hedge against anticipated changes in
interest rates and prices. The price, which is generally expressed in yield
terms, is fixed at the time the commitment is made, but delivery and payment for
the securities take place at a later date. When-issued securities and forward
commitments may be sold prior to the settlement date, but the Funds will
purchase or sell when-issued securities and forward commitments only with the
intention of actually receiving or delivering the securities, as the case may
be. No income accrues on securities which have been purchased pursuant to a
forward commitment or on a when-issued basis prior to delivery to the Funds. If
the Funds dispose of the right to acquire a when-issued security prior to its
acquisition or disposes of its right to deliver or receive against a forward
commitment, it may incur a gain or loss. At the time the Funds enter into a
transaction on a when-issued or forward commitment basis, a segregated account
consisting of cash or liquid securities equal to the value of the when-issued or
forward commitment securities will be established and maintained with that
Fund's custodian bank and will be marked to market daily. There is a risk that
the securities may not be delivered and that the Funds may incur a loss.
OPTIONS, FUTURES AND FORWARD CURRENCY TRANSACTIONS. Both Funds may use forward
currency contracts, futures contracts, options on securities, options on
indices, options on currencies, and options on futures contracts to attempt to
hedge its Portfolio, i.e., reduce the overall level of investment risk normally
associated with the portfolio. These instruments are often referred to as
"derivatives," which may be defined as financial instruments whose performance
is derived, at least in part, from the performance of another asset (such as a
security, currency or an index of securities). Each Fund may enter into such
instruments up to the full value of its portfolio assets. See "Risk Factors --
Options, Futures and Forward Currency Strategies" in the Statement of Additional
Information.
Only a limited market, if any, currently exists for options and futures
transactions relating to currencies of most emerging markets and most Latin
American markets, to securities denominated in such currencies or to securities
of issuers domiciled or principally engaged in business in such emerging
markets. To the extent that such a market does not exist, the Manager may not be
able to effectively hedge its investment in such Latin American and emerging
markets.
Each Fund may purchase and sell put and call options on securities to hedge
against the risk of fluctuations in the prices of securities held by the Fund or
that the Manager intends to include in the Fund's portfolio. The Funds also may
purchase and sell put and call options on indices to hedge against overall
fluctuations in the securities markets or market sectors generally.
Further, the Funds may sell index futures contracts and may purchase put options
or write call options on such futures contracts to protect against a general
market or market sector decline that could adversely affect the Fund's
portfolio. The Funds also may purchase index futures contracts and purchase call
options or write put options on such contracts to hedge against a general market
or market sector advance and thereby attempt to lessen the cost of future
securities acquisitions. A Fund may use interest rate futures contracts and
options thereon to hedge against changes in the general level of interest rates.
To attempt to hedge against adverse movements in exchange rates between
currencies, the Funds may enter into forward currency contracts for the purchase
or sale of a specified currency at a specified future date. Such contracts may
involve the purchase or sale of a foreign currency against the U.S. dollar or
may involve two foreign currencies. The Funds may each enter into forward
currency contracts either with respect to specific transactions or with respect
to its portfolio positions. The Funds may also purchase put or call options on
currencies, futures contracts on currencies and options and options on futures
contracts on currencies to hedge against movements in exchange rates.
Prospectus Page 16
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GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
RISK FACTORS
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GENERAL. Each Fund's net asset value will fluctuate, reflecting fluctuations in
the market value of its portfolio positions and its net currency exposure. There
is no assurance that either Fund will achieve its investment objective.
Investing in either Fund entails a substantial degree of risk, and an investment
in either Fund should be considered speculative. Investors are strongly advised
to consider carefully the special risks involved in emerging markets and Latin
America, which are in addition to the usual risks of investing in developed
markets around the world.
EMERGING MARKETS FUND. Investing in emerging markets involves risks relating to
potential political and economic instability within such markets and the risks
of expropriation, nationalization, confiscation of assets and property or the
imposition of restrictions on foreign investment and on repatriation of capital
invested. In the event of such expropriation, nationalization or other
confiscation, the Emerging Markets Fund could lose its entire investment in that
market.
Economies in individual emerging markets may differ favorably or unfavorably
from the U.S. economy in such respects as growth of gross domestic product,
rates of inflation, currency depreciation, capital reinvestment, resource self-
sufficiency and balance of payments positions. Many emerging market countries
have experienced 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 countries with
emerging markets.
Emerging markets generally are dependent heavily upon international trade and,
accordingly, have been and may continue to be affected adversely by trade
barriers, exchange controls, managed adjustments in relative currency values and
other protectionist measures imposed or negotiated by the countries with which
they trade.
Disclosure and regulatory standards in many respects are less stringent than in
the U.S. and other major markets. There also may be a lower level of monitoring
and regulation of emerging markets and the activities of investors in such
markets, and enforcement of existing regulations has been extremely limited. In
addition, the securities of non-U.S. issuers generally are not registered with
the SEC, nor are the issuers thereof usually subject to the SEC's reporting
requirements. Accordingly, there may be less publicly available information
about foreign securities and issuers than is available with respect to U.S.
securities and issuers. Foreign companies generally are not subject to uniform
accounting, auditing and financial reporting standards, practices and
requirements comparable to those applicable to U.S. companies. The Emerging
Markets Fund's net investment income and/or capital gains from its foreign
investment activities may be subject to non-U.S. withholding taxes.
In addition, brokerage commissions, custodial services and other costs relating
to investment in foreign markets generally are more expensive than in the United
States, particularly with respect to emerging markets. Such markets have
different settlement and clearance procedures. In certain markets there have
been times when settlements have been unable to keep pace with the volume of
securities transactions, making it difficult to conduct such transactions. The
inability of the Emerging Markets Fund to make intended securities purchases due
to settlement problems could cause the Emerging Markets Fund to miss attractive
investment opportunities. Inability to dispose of a portfolio security caused by
settlement problems could result either in losses to the Emerging Markets Fund
due to subsequent declines in value of the portfolio security or, if the
Emerging Markets Fund has entered into a contract to sell the security, could
result in possible liability to the purchaser.
The securities markets of emerging countries are substantially smaller, less
developed, less liquid and more volatile than the securities markets of
developed countries. The risk also exists that an emergency situation may arise
in one or more emerging markets as a result of which trading of securities may
cease or may be substantially curtailed and prices for the Emerging Markets
Fund's portfolio securities in such markets may not be readily available.
Section 22(e) of the 1940 Act permits a registered investment company, such as
Prospectus Page 17
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GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
the Emerging Markets Fund, to suspend redemption of its shares for any period
during which an emergency exists, as determined by the SEC. Accordingly, when
the Emerging Markets Fund believes that circumstances dictate, it will promptly
apply to the SEC for a determination that such an emergency exists within the
naming of Section 22(e) of the 1940 Act. During the period commencing from the
Emerging Markets Fund's identification of such conditions until the date of any
SEC action, the Emerging Markets Fund's portfolio securities in the affected
markets will be valued at fair value determined in good faith by or under the
direction of the Company's Board of Directors.
LATIN AMERICA GROWTH FUND. The Latin America Growth Fund's classification as a
non-diversified investment company allows it, with respect to 50% of its assets,
to invest more than 5% of its total assets in the securities of any issuer.
Consequently, as the Latin America Growth Fund may be invested in the securities
of a limited number of Latin American issuers, the performance of any single
issuer may have a more significant effect upon the overall performance of the
Latin America Growth Fund than if the Latin America Growth Fund was a
diversified investment company.
Investing in securities of Latin American issuers may risks relating to
potential political and economic instability of certain Latin American countries
and the risks of expropriation, nationalization, confiscation of asets and
property or the imposition of restrictions on foreign investment and on
repatriation of capital invested. In the event of such expropriation,
nationalization or other confiscation, the Latin America Growth Fund could lose
its entire investment in any such country.
The securities markets of Latin American countries are substantially smaller,
less developed, less liquid and more volatile than the major securities markets
in the United States. Disclosure and regulatory standards are in many respects
less stringent than U.S. standards. Furthermore, there is a lower level of
monitoring and regulation of the markets and the activities of investors in such
markets, and enforcement of existing regulations has been extremely limited.
The limited size of many Latin American securities markets and limited trading
volume in issuers compared to 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.
Further, there is a risk that an emergency situation may arise in one or more
Latin American markets as a result of which prices for portfolio securities in
such markets may not be readily available. Accordingly, when the Latin America
Growth Fund believes that circumstances dictate, it will follow the procedures
as described above concerning the Emerging Markets Fund.
The economies of individual Latin American countries may differ favorably or
unfavorably from the U.S. economy in such respects as the rate of growth of
gross domestic product, the rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position. 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. Furthermore, certain
Latin American countries may impose withholding taxes on dividends payable to
the Latin America Growth Fund at a higher rate than those imposed by other
foreign countries. This may reduce the Latin America Growth Fund's investment
income available for distribution to shareholders.
Companies in Latin America are subject to accounting, auditing and financial
standards and requirements that differ, in some cases significantly, from those
applicable to U.S. companies. There is substantially less publicly available
information about Latin American companies and the governments of Latin American
countries than there is about U.S. companies and the U.S. Government.
Certain Latin American countries are among the largest debtors to commercial
banks and foreign governments. Currently, Brazil is the largest debtor among
developing countries, Mexico is the second largest and Argentina the third. At
times certain Latin American countries have declared moratoria on the payment of
principal and/or interest on external debt.
Prospectus Page 18
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GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
The Fund may invest in debt securities, invest, including Brady Bonds, issued as
part of debt restructurings and such debt is to be considered speculative. There
is a history of defaults with respect to commercial bank loans by public and
private entities issuing Brady Bonds.
RISKS ASSOCIATED WITH DEBT SECURITIES. The value of the debt securities held by
the Emerging Markets Fund or by the Latin America Growth Fund generally will
vary inversely with market interest rates. If interest rates in a market fall,
the Funds' debt securities issued by governments or companies in that market
ordinarily will increase in value. If market interest rates increase, however,
the debt securities owned by the Funds in that market will likely decrease in
value.
The Emerging Markets Fund may invest up to 20% of its total assets in debt
securities rated below investment grade and the Latin America Growth Fund may
invest up to 50% of its total assets in debt securities of any rating. Such
investments involve a high degree of risk.
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. 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 are also generally considered to be subject to greater
risk than securities with higher ratings with regard to a deterioration of
general economic conditions. These foreign 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. Similarly, certain emerging market and Latin American governments
that issue lower quality debt securities are among the largest debtors to
commercial banks, foreign governments and supranational organizations such as
the World Bank and may not be able or willing to make principal and/or interest
repayments as they come due. 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 frequently have call or buy-back features which
would permit an issuer to call or repurchase the security from the Funds. In
addition, the Funds 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 either Fund 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 Funds to obtain accurate market quotations for purposes of
valuing the Funds' portfolios. The Funds may also acquire lower quality debt
securities during an initial underwriting or which are sold without registration
under
Prospectus Page 19
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GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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 Funds 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.
A Fund 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 its portfolio
holdings, and a Fund may have limited legal recourse in the event of a default.
Debt securities issued by governments in emerging or Latin American markets can
differ from debt obligations issued by private entities in that remedies from
defaults generally must be pursued in the courts of the defaulting government,
and legal recourse is therefore somewhat diminished. Political conditions, in
terms of a government's willingness to meet the terms of its debt obligations,
also are of considerable significance. There can be no assurance that the
holders of commercial bank debt may not contest payments to the holders of debt
securities issued by governments in emerging or Latin American markets in the
event of default by the governments under commercial bank loan agreements.
ILLIQUID SECURITIES. The Emerging Markets Fund may invest up to 15% of its net
assets, and the Latin America Fund may invest up to 10% of its net assets in
securities for which no readily available market exists, so-called "Illiquid
Securities." The Manager believes that carefully selected investments in joint
ventures, cooperatives, partnerships and state enterprises and other similar
vehicles which are illiquid (collectively, "Special Situations") could enable
each Fund to achieve capital appreciation substantially exceeding the
appreciation each Fund would realize if it did not make such investments.
However, in order to limit investment risk, the Latin America Growth Fund will
invest no more than 5% of it total assets in Special Situations.
Illiquid securities may be more difficult to value than liquid securities and
the sale of illiquid securities generally will require more time and result in
higher brokerage charges or dealer discounts and other selling expenses than the
sale of liquid securities. Moreover, illiquid restricted securities often sell
at a price lower than similar securities that are not subject to restrictions on
resale.
CURRENCY RISK. Since the Emerging Markets Fund and the Latin America Growth Fund
may invest substantially in securities denominated in currencies other than the
U.S. dollar, and since the Funds may hold foreign currencies, each Fund will be
affected favorably or unfavorably by exchange control regulations or changes in
the exchange rates between such currencies and the U.S. dollar. Changes in
currency exchange rates will influence the value of each Fund's shares, and also
may affect the value of dividends and interest earned by the Funds and gains and
losses realized by the Funds. Currencies generally are evaluated on the basis of
fundamental economic criteria (e.g., relative inflation and interest rate levels
and trends, growth rate forecasts, balance of payments status and economic
policies) as well as technical and political data. Exchange rates are determined
by the forces of supply and demand in the foreign exchange markets. These forces
are affected by the international balance of payments and other economic and
financial conditions, government intervention, speculation and other factors. If
the currency in which a security is denominated appreciates against the U.S.
dollar, the dollar value of the security will increase. Conversely, a decline in
the exchange rate of the currency would adversely affect the value of the
security expressed in dollars.
Many of the currencies of emerging market and Latin American countries have
experienced steady devaluations relative to the U.S. dollar, and major
devaluations have historically occurred in certain countries. Any devaluations
in the currencies in which a Fund's portfolio securities are denominated may
have a detrimental impact on the Fund.
Some countries also may have fixed currencies whose values against the U.S.
dollar are not independently determined. In addition, there is a risk that
certain countries may restrict the free conversion of their currencies into
other currencies. Further, certain currencies may not be internationally traded.
Although either Fund is authorized to enter into options, futures and forward
currency transactions, a Fund might not enter into any such transactions.
Options, futures and forward currency transactions involve certain risks, which
include: (1) dependence on the Manager's ability to predict movements in the
prices of individual securities, fluctuations in the general securities markets
and movements in interest rates and currency markets; (2) imperfect correlation,
or even no correlation, between movements in the price of forward
Prospectus Page 20
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GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
contracts, options, futures contracts or options thereon and movements in the
price of the currency or security hedged or used for cover; (3) the fact that
skills and techniques needed to trade options, futures contracts and options
thereon or to use forward currency contracts are different from those needed to
select the securities in which the Funds invest; (4) lack of assurance that a
liquid secondary market will exist for any particular option, futures contract
or option thereon at any particular time; (5) the possible loss of principal
under certain conditions; (6) the possible inability of a Fund to purchase or
sell a portfolio security at a time when it would otherwise be favorable for it
to do so, or the possible need for a Fund to sell a security at a
disadvantageous time, due to the need for the Fund to maintain "cover" or to set
aside securities in connection with hedging transactions; and (7) the possible
need of a Fund to defer closing out of certain options, futures contracts and
options thereon and forward currency contracts in order to qualify or continue
to qualify for the beneficial tax treatment afforded regulated investment
companies under the Internal Revenue Code of 1986, as amended ("Code"). See
"Dividends, Other Distributions and Federal Income Taxation" herein and "Taxes"
in the Statement of Additional Information.
OTHER INFORMATION. The investment objective of the Emerging Markets Fund and of
the Latin America Growth Fund may not be changed without the approval of a
majority of the respective Fund's outstanding voting securities. A "majority of
the Fund's outstanding voting securities" means the lesser of (i) 67% of the
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 Emerging Markets Fund and the Latin America Growth Fund each have adopted
certain investment limitations as fundamental policies which also may not be
changed without shareholder approval. A complete description of these
limitations is included in the Statement of Additional Information. Unless
specifically noted, the Emerging Markets Fund's and the Latin America Growth
Fund's investment policies described in this Prospectus and in the Statement of
Additional Information are not fundamental policies and may be changed by a vote
of a majority of the Company's Board of Directors without shareholder approval.
Prospectus Page 21
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GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
HOW TO INVEST
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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 a
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 comprising or affiliated with Liechtenstein
Global Trust; and (e) any of the companies comprising 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." 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 and 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
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 Funds and GT Global reserve the right to
reject any purchase order and to suspend the offering of shares for a period of
time.
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 contact your
Financial Advisor or GT Global.
PURCHASES BY BANK WIRE. Shares of the Funds 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. Accordingly, a bank wire
received by the close of regular trading on the NYSE, on a Business Day, will be
effected that day. A wire investment is considered received when the Transfer
Agent is notified that the bank wire has been credited to a Fund. Prior
telephonic or facsimile notice that a bank wire is being sent must be provided
to the Transfer Agent. An investor's bank may charge a service fee for wiring
money to the Funds. 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 a Fund's shares will not be
issued unless an investor submits a written request to the Transfer Agent, or
unless the investor's Financial Advisor requests that the Transfer Agent provide
certificates. Shares of a 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 FUNDS 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 their holdings of GT Global Mutual Funds to the established
allocation on a periodic basis. Under the
Prospectus Page 22
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GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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) 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 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 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
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 brokers may charge a
fee for establishing accounts relating to the Program.
Prospectus Page 23
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GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
HOW TO MAKE EXCHANGES
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Advisor Class shares of any Fund may only be exchanged for Advisor Class shares
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'S 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 Funds, the GT Global Mutual Funds currently include:
-- GT GLOBAL AMERICA SMALL CAP
GROWTH FUND
-- GT GLOBAL AMERICA MID CAP
GROWTH FUND
-- GT GLOBAL AMERICA VALUE FUND
-- GT GLOBAL CONSUMER PRODUCTS AND
SERVICES FUND
-- GT GLOBAL DOLLAR FUND
-- GT GLOBAL EUROPE GROWTH FUND
-- GT GLOBAL FINANCIAL SERVICES FUND
-- GT GLOBAL GOVERNMENT INCOME FUND
-- GT GLOBAL GROWTH & INCOME FUND
-- GT GLOBAL HEALTH CARE FUND
-- GT GLOBAL HIGH INCOME FUND
-- GT GLOBAL INFRASTRUCTURE FUND
-- GT GLOBAL INTERNATIONAL GROWTH FUND
-- GT GLOBAL JAPAN GROWTH FUND
-- GT GLOBAL NATURAL RESOURCES FUND
-- GT GLOBAL NEW PACIFIC GROWTH FUND
-- GT GLOBAL STRATEGIC INCOME FUND
-- GT GLOBAL TELECOMMUNICATIONS FUND
-- GT GLOBAL WORLDWIDE GROWTH 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.
EXCHANGES BY TELEPHONE. A shareholder may give exchange instructions 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 previously have been deposited.
Shareholders automatically have telephone privileges to authorize exchanges. The
Funds, 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 Funds employ reasonable procedures to
confirm that instructions communicated by telephone are genuine, including
requiring some form of personal identification prior to acting upon instructions
received by telephone, providing written confirmation of such transactions,
and/or tape recording of telephone instructions.
Investors in Wrap Fee Accounts and Advisory Accounts interested in making an
exchange should contact their Financial Advisor 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.
OTHER INFORMATION ABOUT EXCHANGES. Purchases, redemptions and exchanges should
be made for investment purposes only. A pattern of frequent exchanges, purchases
and sales is not acceptable and can be limited by a Fund's or GT Global's
refusal to accept further purchase and exchange orders. The terms of the
exchange offer described above may be modified at any time, on 60 days' prior
written notice.
Prospectus Page 24
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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.
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 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 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 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 on 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 OF RECORD.
Shareholders automatically have telephone privileges to authorize redemptions.
The Funds, 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
believed to be genuine. The Funds employ reasonable procedures to confirm that
instructions communicated by telephone are genuine, including requiring some
form of personal identification prior to acting upon instructions received by
telephone, 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 preceeding thirty days, a signature guarantee
is required. Redemptions of shares for which certificates have been issued must
be accompanied by properly endorsed share certificates.
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 a Wrap Fee Account or Advisory Account who is in doubt
as to what documents are required should contact his Financial Advisor.
Prospectus Page 25
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
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 a Fund has not yet
received good payment, the Fund may delay payment of redemption proceeds until
it 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 Global 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 Fund shares, see the Shareholder
Account Manual in this Prospectus or contact your Financial Advisor.
Prospectus Page 26
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
SHAREHOLDER ACCOUNT MANUAL
- --------------------------------------------------------------------------------
Purchase, exchange and redemption orders should be placed in accordance with
this Manual. 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.
Each Fund's Transfer Agent is GT GLOBAL INVESTOR SERVICES, INC.
INVESTMENTS BY MAIL
Send 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 7345
San Francisco, California 94120-7345
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 MUST BE SENT 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. 4023-050701
EXCHANGES BY TELEPHONE
Call GT Global at 1-800-223-2138
EXCHANGES BY MAIL
Send complete instructions, including name of Fund exchanging from, 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, California 94120-7893
REDEMPTIONS BY TELEPHONE
Call GT Global at 1-800-223-2138
REDEMPTIONS BY MAIL
Send complete instructions, including name of Fund, class of shares, amount of
redemption, shareholder's registered name and account number, to:
GT Global
P.O. Box 7893
San Francisco, California 94120-7893
OVERNIGHT MAIL
Overnight mail services do not deliver to post office boxes. To send purchase,
exchange or redemption orders by overnight mail, comply with the above
instructions but send to the following:
GT Global Investor Services
California Plaza
2121 N. California Boulevard
Suite 450
Walnut Creek, California 94596
ADDITIONAL QUESTIONS
Shareholders with additional questions regarding purchase, exchange and
redemption procedures may call GT Global at 1-800-223-2138.
Prospectus Page 27
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
CALCULATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
Each 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), each Business Day. Each
Fund's asset value per share is computed by determining the value of its total
assets (the securities it holds plus any cash or other assets, including
interest and dividends accrued but not yet received), subtracting all of its
liabilities (including accrued expenses), and dividing the result by the total
number of shares outstanding at such time. Net asset value is determined
separately for each class of shares of each Fund.
Equity securities held by a Fund are valued at the last sale price on the
exchange or in the OTC market in which such securities are primarily traded, as
of the close of business on the day the securities are being valued or, lacking
any sales, at the last available bid price. Long-term debt obligations are
valued at the mean of representative quoted bid or asked prices for such
securities, or, if such prices are not available, at prices for securities of
comparable maturity, quality and type; however, when the Manager deems it
appropriate, prices obtained from a bond pricing service will be used.
Short-term debt investments are amortized to maturity based on their cost,
adjusted for foreign exchange translation and market fluctuations, provided that
such valuations represent fair value. When market quotations for futures and
options positions held by a Fund are readily available, those positions are
valued based upon such quotations.
Securities and other assets for which market quotations are not readily
available are valued at fair value determined in good faith by or under
direction of the Company's Board of Directors. Securities and other assets
quoted in foreign currencies are valued in U.S. dollars based on the prevailing
exchange rates on that day.
Each Fund's portfolio securities, from time to time, may be listed primarily on
foreign exchanges or OTC markets which trade on days when the NYSE is closed
(such as Saturday). As a result, the net asset values of the Funds may be
affected significantly by such trading on days when shareholders cannot purchase
or redeem shares of the Fund.
- --------------------------------------------------------------------------------
DIVIDENDS, OTHER DISTRIBUTIONS
AND FEDERAL INCOME TAXATION
- --------------------------------------------------------------------------------
DIVIDENDS AND OTHER DISTRIBUTIONS. Each Fund annually declares as a dividend all
its net investment income, if any, which includes dividends, accrued interest
and earned discount (including both original issue and market discounts) less
applicable expenses. Each Fund also normally 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. Each 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 each 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 a Fund will be higher than the
per share income dividends on shares of other classes of that Fund as a result
of the service and distribution fees applicable to those other shares.
SHAREHOLDERS MAY ELECT:
/ / to have all dividends and other distributions automatically reinvested in
additional Advisor Class shares of the distributing Fund (or other GT Global
Mutual Funds); or
/ / to receive dividends in cash and have other distributions automatically
reinvested in additional Advisor Class shares of the distributing Fund (or
other GT Global Mutual Funds); or
/ / to receive other distributions in cash and have dividends automatically
reinvested in additional
Prospectus Page 28
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
Advisor Class shares of the distributing Fund (or other GT Global Mutual
Funds); or
/ / 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 REINVESTED
AUTOMATICALLY IN ADDITIONAL ADVISOR CLASS SHARES OF THE DISTRIBUTING 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 STATUS OF DIVIDENDS AND OTHER
DISTRIBUTIONS IS THE SAME WHETHER THEY ARE RECEIVED IN CASH OR REINVESTED IN
ADDITIONAL SHARES.
Any dividend or other distribution paid by a 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. Each Fund intends to continue to qualify for treatment as a regulated
investment company under the Code. In each taxable year that a 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, net gains from certain foreign currency
transactions and net short-term capital gain) and net capital gain that is
distributed to its shareholders.
Dividends from a Fund's investment company taxable income (whether paid in cash
or reinvested in additional shares) are taxable to shareholders as ordinary
income to the extent of the Fund's earnings and profits. Distributions of a
Fund's net capital gain, when designated as such, are taxable to its
shareholders as long-term capital gain regardless of how long they have held
their Fund shares and whether paid in cash or reinvested in additional Fund
shares.
Each 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, the shareholders' respective
shares of any foreign taxes paid by the Fund, in which event each shareholder
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.
Each 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 a
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 (including another Fund)
generally will have similar tax consequences. In addition, if shares of a Fund
are purchased within 90 days before or after redeeming other shares of that 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 each 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.
Prospectus Page 29
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
MANAGEMENT
- --------------------------------------------------------------------------------
The Company's Board of Directors has overall responsibility for the operation of
the Funds. Pursuant to such responsibility, the Board has approved contracts
with various financial organizations to provide, among other things, day to day
management services required by the Funds. See "Directors and Executive
Officers" in the Statement of Additional Information for a complete description
of the Directors of the Funds.
INVESTMENT MANAGEMENT AND ADMINISTRATION. Services provided by Chancellor LGT
Asset Management, Inc. (the "Manager") as each Fund's investment manager and
administrator include, but are not limited to, determining the composition of
the Fund's portfolio and placing orders to buy, sell or hold particular
securities; furnishing corporate officers and clerical staff; providing office
space, services and equipment; and supervising all matters relating to the
Fund's operation. For these services, each of the Funds pays the Manager
investment management and administration fees, computed daily and paid monthly,
based on its average daily net assets, at the annualized rate of .975% on the
first $500 million, .95% on the next $500 million, .925% on the next $500
million, and .90% on amounts thereafter. These rates are higher than those paid
by most mutual funds. The Manager has undertaken to limit each Fund's expenses
exclusive of brokerage commissions, taxes, interest and extraordinary expenses
to the annual rate of 1.90% of the average daily net assets of the Fund's
Advisor Class shares.
The Manager also serves as each Fund's pricing and accounting agent. For these
services the Manager receives a fee at an annual rate derived by applying 0.03%
to the first $5 billion of assets of GT Global Mutual Funds and 0.02% to the
assets in excess of $5 billion, and allocating the result according to each
Fund's, average daily net assets.
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
U.S. offices of the Manager are located at 50 California Street, 27th Floor, San
Francisco, CA 94111 and 1166 Avenue of the Americas, New York, NY 10036.
The Manager and its worldwide affiliates, including LGT Bank in Liechtenstein,
formerly Bank in Liechtenstein, comprise 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 a 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 , 1997, the Manager and its worldwide asset management
affiliates manage approximately $ billion. In the United States, as of
, 1997, the Manager manages or administers approximately $ billion
of GT Global Mutual Funds. As of , 1997, assets entrusted to
Liechtenstein Global Trust total approximately $ billion.
On , 1997, Chancellor Capital Management, Inc. ("Chancellor
Capital") merged with LGT Asset Management, Inc. As of , 1997,
Chancellor Capital and its affiliates, based in New York, were the th largest
independent investment manager in the United States with approximately $
billion in assets under management. Chancellor Capital specialized in public and
private U.S. equity and bond portfolio management for over U.S. institutional
clients.
On October 31, 1996, Chancellor Capital Management, Inc. ("Chancellor Capital")
merged with LGT Asset Management, Inc. As of September 30, 1996, Chancellor
Capital and its affiliates, based in New York, were the 15th largest independent
investment manager in the United States with approximately $33 billion in assets
under management. Chancellor Capital specialized in public and private U.S.
equity and bond portfolio management for over 300 U.S. institutional clients.
In addition to the investment resources of its San Francisco and New York
offices, the Manager draws upon the expertise, personnel, data and systems of
other offices of Liechtenstein Global Trust, including investment offices in
Frankfurt, Hong Kong, London, Singapore, Sydney, Tokyo,
Prospectus Page 30
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
and Toronto. In managing the GT Global Mutual Funds, the Manager employs a team
approach, taking advantage of its investment resources around the world in
seeking to achieve each Fund's investment objective. Many of the GT Global
Mutual Funds' portfolio managers are natives of the countries in which they
invest, speak local languages and/or live or work in the markets they follow.
The investment professionals primarily responsible for the portfolio management
of the Funds are as follows:
EMERGING MARKETS FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND LAST FIVE YEARS
- -------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Jonathan Chew Portfolio Manager since Fund inception Portfolio Manager for the Manager
London in 1992 since 1990; Portfolio Manager for LGT
Asset Management Ltd. (Hong Kong)
since 1988.
James M. Bogin Portfolio Manager since 1993 Portfolio Manager for the Manager
San Francisco since 1993; From 1989 to 1993, Mr.
Bogin was a Fund Manager at Nomura
Investment Management Co. (Tokyo).
John R. Legat Portfolio Manager since 1995 Portfolio Manager for the Manager and
London LGT Asset Management PLC (London).
</TABLE>
LATIN AMERICA GROWTH FUND
<TABLE>
<CAPTION>
RESPONSIBILITIES FOR BUSINESS EXPERIENCE
NAME/OFFICE THE FUND LAST FIVE YEARS
- -------------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Soraya M. Betterton Portfolio Manager since Fund inception Portfolio Manager for the Manager.
San Francisco in 1991
</TABLE>
------------------------
In placing securities orders for the Funds' portfolio transactions, the Manager
seeks to obtain the best net results. Consistent with its obligation to obtain
the best net results, the Manager may consider a broker/dealer's sale of shares
of the GT Global Mutual Funds as a factor in considering through whom portfolio
transactions will be effected. Brokerage transactions may be executed through
any Liechtenstein Global Trust affiliate. High portfolio turnover involves
correspondingly greater transaction costs in the form of brokerage commissions
or dealer spreads and other costs that a Fund will bear directly, and could
result in the realization of net capital gain, which would be taxable when
distributed to shareholders.
DISTRIBUTION OF FUND SHARES. GT Global is the distributor of each 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,
California 94111.
The Latin America Growth Fund has previously suspended the offering of its
shares upon the advice of the Manager that doing so was in the best interests of
the portfolio management process. As of the date of this Prospectus, the Latin
America Growth Fund has resumed sales of its shares based upon the Manager's
advice that it is consistent with prudent portfolio management to do so.
However, the Latin America Growth Fund reserves the right to suspend sales again
and Emerging Markets Fund reserves the right to suspend sales in the future
based upon the foregoing portfolio considerations.
The Manager or an affiliate thereof may make ongoing payments to Financial
Advisors and others that facilitate the administration and servicing of Advisor
Class shareholder accounts.
GT Global, at its own expense, may also provide promotional incentives to
broker/dealers that sell shares of the Funds and/or shares of the other GT
Global Mutual Funds. In some instances compensation or promotional incentives
may be offered to brokers/dealers that have sold or may sell significant amounts
of shares during specified periods of
Prospectus Page 31
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
time. Such compensation and incentives may include, but are not limited to,
cash, merchandise, trips and financial assistance to broker/dealers 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. Banks and broker/ dealer affiliates of banks also may
execute dealer agreements with GT Global for the purpose of selling shares of
the Funds. While the matter is not free from doubt, the Board of Directors
believes that such laws should not preclude a bank from providing administration
or shareholder servicing support or preclude a bank's affiliates from acting as
a broker/dealer. However, judicial or administrative decisions or
interpretations of such laws, as well as changes in either federal or state
statutes or regulations relating to the permissible activities of banks or their
subsidiaries or affiliates, could prevent a bank and its affiliates from
continuing to perform all or part of its servicing or broker/dealer activities.
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.
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
CONFIRMATIONS AND REPORTS TO SHAREHOLDERS. Each time a transaction is made that
affects a shareholder's account in a Fund. The shareholder will receive from the
Transfer Agent a confirmation statement reflecting the transaction.
Confirmations for transactions effected pursuant to a Fund's automatic dividend
reinvestment program may be provided quarterly. Shortly after the end of the
Funds' fiscal year on October 31 and fiscal half-year on April 30 of each year,
shareholders will receive an annual and semiannual report, respectively. In
addition, the federal income tax status of distributions made by the relevant
Fund(s) to shareholders will be reported after the end of the fiscal year on
Form 1099-DIV. Under certain circumstances, duplicate mailings of the foregoing
reports to the same household may be consolidated.
ORGANIZATION OF THE COMPANY. The Company was organized as a Maryland corporation
on October 29, 1987. From time to time, the Company has and may continue to
establish other funds, each corresponding to a distinct investment portfolio and
a distinct series of the Company's common stock. Shares of the Emerging Markets
Fund and the Latin America Growth Fund 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 each Fund will be
voted by that Fund's shareholders individually when the matter affects the
specific interest of that Fund only, such as approval of that Fund's investment
management arrangements. In addition, each class of shares of a Fund has
exclusive voting rights with respect to its distribution plan. The shares of all
the Company's Funds will be voted in the aggregate on other matters, such as the
election of Directors and ratification of the Board of Directors' selection of
the Company's independent accountants.
The Company normally will not hold annual meetings of shareholders, except as
required under the 1940 Act. The Company would be required to hold a
shareholders meeting in the event that at any time less than a majority of the
Directors holding office had been elected by shareholders. Directors shall
continue to hold office until their successors are elected and have qualified.
Shares of the Company's Funds do not have cumulative voting rights, which means
that the holders of a majority of the shares voting for the election of
Directors can elect all the Directors. A Director
Prospectus Page 32
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
may be removed upon a majority vote of the shareholders qualified to vote in the
election. Shareholders holding 10% of the Company's outstanding voting
securities may call a meeting of shareholders for the purpose of voting upon the
question of removal of any Director or for any other purpose. The 1940 Act
requires the Company to assist shareholders in calling such a meeting.
Advisor Class shares are offered through this Prospectus to certain enumerated
investors. There are two other classes of shares offered to investors through a
separate prospectus: Class A shares and Class B shares.
CLASS A. Class A shares 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. Class A
shares of each Fund also bear annual service and distribution fees of up to
0.50% of the average daily net assets of that class. For the fiscal year ended
October 31, 1995, total operating expenses for the Class A shares were 2.14% for
the Emerging Markets Fund and 2.12% for the Latin America Growth Fund,
respectively, of average net assets.
CLASS B. Class B shares are sold at net asset value with no initial sales charge
at the time of purchase. Class B shares bear annual service and distribution
fees of up to 1.00% of the average daily net assets of that class, and investors
pay a contingent deferred sales charge of up to 5% of the lesser of the original
purchase price or the net asset value of such shares at the time of redemption.
This deferred sales charge is waived for certain redemptions and is reduced for
shares held more than one year. For the fiscal year ended October 31, 1995,
total operating expenses for the Class B shares were 2.64% for the Emerging
Markets Fund and 2.62% for the Latin America Growth Fund, respectively, of
average net assets.
The different expenses borne by each class of shares will result in different
net asset values and dividends. The per share net asset value of the Advisor
Class shares of a Fund generally will be higher than that of the Class A and B
shares of that Fund because of the higher expenses borne by the Class A and B
shares. The per share dividends on Advisor Class shares of a Fund will generally
be higher than the per share dividends on Class A and B shares of that Fund as a
result of the service and distribution fees applicable with respect to Class A
and B shares. Consequently, during comparable periods, the Funds expect that the
total return on an investment in shares of the Advisor Class will be higher than
the total return on Class A or B shares.
Pursuant to the Company's Articles of Incorporation, it may issue six billion
shares. Of this number, 300 million shares have been classified as shares of
each Fund. One hundred million shares have been classified as Class A shares of
each Fund, one hundred million shares have been classified as Class B shares of
each Fund, and one hundred million shares have been classified as Advisor Class
shares of each Fund. This amount may be increased from time to time in the
discretion of the Board of Directors. Each share of the Fund represents an
interest in that Fund only, has a par value of $0.0001 per share, represents an
equal proportionate interest 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 Directors. Each Class A, Class B and Advisor Class
share of the Fund is equal as to earnings, assets and voting privileges, 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.
Emerging Markets Fund is classified as a "diversified" fund under the 1940 Act
which means that, with respect to 75% of the Fund's total assets, no more than
5% will be invested in the securities of any one issuer, and the Fund will
purchase no more than 10% of the outstanding voting securities of any one
issuer.
The Latin America Growth Fund is classified as a "non-diversified" fund under
the 1940 Act which means that with respect to 50% of its total assets, no more
than 50% will be invested in the securities of any one issuer, and the Fund will
purchase no more than 10% of the outstanding voting securities of any one
issuer.
Because the Funds employ a Combined Prospectus, it is possible that a Fund might
become liable for a misstatement with respect to the other Fund in this Combined
Prospectus. The Board of Directors of the Company have considered this in
approving the use of a Combined Prospectus.
SHAREHOLDER INQUIRIES. Shareholder inquiries may be made by calling the Funds
toll free at (800) 223-2138 or by writing to the Funds at P.O. Box 7893, San
Francisco, California 94120-7893.
PERFORMANCE INFORMATION. Each Fund, from time to time, may include information
on its investment results and/or comparisons of their investment results to
various unmanaged indices or results of other mutual funds or groups of mutual
funds in
Prospectus Page 33
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
advertisements, sales literature or reports furnished to present or prospective
shareholders.
In such materials, a Fund may quote its average annual total return
("Standardized Return"). Standardized Return is calculated separately for each
class of shares of each 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-, 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 at net
asset value on the reinvestment date established by the Board of Directors.
In addition, in order to more completely represent a Fund's performance or more
accurately compare such performance to other measures of investment return, a
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); it
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.
Each Fund's performance data reflects past performance and is not necessarily
indicative of future results. A Fund's investment results will vary from time to
time depending upon market conditions, the composition of its portfolio and its
operating expenses. These factors and possible differences in calculation
methods should be considered when comparing a Fund's investment results with
those published for other investment companies, other investment vehicles and
unmanaged indices. A 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.
Each Fund's annual report contains additional information with respect to its
performance. The annual report is available to investors upon request and free
of charge.
TRANSFER AGENT. Shareholder servicing, reporting and general transfer agent
functions for the Funds are performed by GT Global Investor Services, Inc. The
Transfer Agent is an affiliate of the Manager and GT Global and a subsidiary of
Liechtenstein Global Trust, and maintains its offices at California Plaza, 2121
N. California Boulevard, Suite 450, Walnut Creek, California 94596.
CUSTODIAN. State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110 is custodian of each Fund's assets.
COUNSEL. The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue,
N.W., Washington, D.C. 20036-1800, acts as counsel to the Company and the Funds.
Kirkpatrick & Lockhart LLP also acts as counsel to the Manager, GT Global and GT
Global Investor Services, Inc. in connection with other matters.
INDEPENDENT ACCOUNTANTS. The Company's and each Fund's independent accountants
are Coopers & Lybrand L.L.P., One Post Office Square, Boston, Massachusetts
02109. Coopers & Lybrand L.L.P., will conduct an annual audit of each Fund,
assist in the preparation of each Fund's federal and state income tax returns
and consult with the Company, or Trust, as applicable, and each 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 34
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
NOTES
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Prospectus Page 35
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
NOTES
- --------------------------------------------------------------------------------
Prospectus Page 36
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
NOTES
- --------------------------------------------------------------------------------
Prospectus Page 37
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL LATIN AMERICA GROWTH FUND
NOTES
- --------------------------------------------------------------------------------
Prospectus Page 38
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT LATIN AMERICA GROWTH FUND
GT GLOBAL MUTUAL FUNDS
GT GLOBAL OFFERS A BROAD RANGE OF MUTUAL FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY GT GLOBAL MUTUAL
FUND, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR CALL GT GLOBAL DIRECTLY AT
1-800-824-1580.
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL WORLDWIDE GROWTH FUND
Invests around the world, including the U.S.
GT GLOBAL INTERNATIONAL GROWTH FUND
Provides portfolio diversity by investing outside
the U.S.
GT GLOBAL EMERGING MARKETS FUND
Gives access to the growth potential of developing economies
/ / GLOBAL THEME FUNDS
GT GLOBAL CONSUMER PRODUCTS AND
SERVICES FUND
Invests in companies that manufacture, market, retail or distribute consumer
products or services
GT GLOBAL FINANCIAL SERVICES FUND
Focuses on the worldwide opportunities from the demand for financial services
and products
GT GLOBAL HEALTH CARE FUND
Invests in growing health care industries worldwide
GT GLOBAL INFRASTRUCTURE FUND
Seeks companies that build, improve or maintain a country's infrastructure
GT GLOBAL NATURAL RESOURCES FUND
Concentrates on companies that own, explore or develop natural resources
GT GLOBAL TELECOMMUNICATIONS FUND
Invests in companies worldwide that develop, manufacture or sell
telecommunications services or equipment
/ / REGIONALLY DIVERSIFIED FUNDS
GT GLOBAL NEW PACIFIC GROWTH FUND
Offers access to the emerging and established markets of the Pacific Rim,
excluding Japan
GT GLOBAL EUROPE GROWTH FUND
Focuses on investment opportunities in the new, unified Europe
GT GLOBAL LATIN AMERICA GROWTH FUND
Invests in the emerging markets of Latin America
/ / SINGLE COUNTRY FUNDS
GT GLOBAL AMERICA SMALL CAP GROWTH FUND
Invests in equity securities of small U.S. companies
GT GLOBAL AMERICA MID CAP GROWTH FUND
Concentrates on medium-sized companies in the U.S.
GT GLOBAL AMERICA VALUE FUND
Concentrates on equity securities of large cap U.S. companies believed to be
undervalued
GT GLOBAL JAPAN GROWTH FUND
Provides U.S. investors with direct access to the Japanese market
GROWTH AND INCOME FUND
GT GLOBAL GROWTH & INCOME FUND
Invests in blue-chip stocks and government bonds from around the world
INCOME FUNDS
GT GLOBAL GOVERNMENT INCOME FUND
Earns monthly income from global government securities
GT GLOBAL STRATEGIC INCOME FUND
Allocates its assets among debt securities from the U.S., developed foreign
countries and emerging markets
GT GLOBAL HIGH INCOME FUND
Invests in debt securities in emerging markets
MONEY MARKET FUND
GT GLOBAL DOLLAR FUND
Invests in high quality, U.S. dollar-denominated money market securities
worldwide for stability and preservation of capital
[LOGO]
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY G.T. GLOBAL GROWTH SERIES,
G.T. INVESTMENT FUNDS, INC., GT GLOBAL EMERGING MARKETS FUND, GT GLOBAL
LATIN AMERICA GROWTH FUND, CHANCELLOR LGT ASSET MANAGEMENT, INC. OR GT
GLOBAL, INC. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION.
LEMPV610000MC
<PAGE>
GT GLOBAL THEME FUNDS
50 California Street, 27th Floor
San Francisco, California 94111
(415) 392-6181
Toll Free: (800) 824-1580
Statement of Additional Information
March 1, 1997
- --------------------------------------------------------------------------------
This Statement of Additional Information relates to the Class A and Class B
shares of GT Global Financial Services Fund ("Financial Services Fund"), GT
Global Infrastructure Fund ("Infrastructure Fund"), GT Global Natural Resources
Fund ("Natural Resources Fund"), GT Global Consumer Products and Services Fund
("Consumer Products and Services Fund"), GT Global Health Care Fund ("Health
Care Fund") and GT Global Telecommunications Fund ("Telecommunications Fund")
(individually, "Fund" or "Theme Fund," collectively, "Funds" or "Theme Funds").
Each Fund is a diversified series of GT Investment Funds, Inc. ("Company"), a
registered open-end management investment company. The Financial Services Fund,
Infrastructure Fund, Natural Resources Fund and Consumer Products and Services
Fund (individually, "Feeder Fund," collectively, "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 (individually, "Portfolio," collectively,
"Portfolios"), respectively. This Statement of Additional Information, which is
not a prospectus, supplements and should be read in conjunction with the GT
Global Theme Funds' current Class A and Class B Prospectus dated March 1, 1997,
a copy of which is available without charge by writing to the above address or
calling the Funds at the toll-free telephone number printed above.
Chancellor LGT Asset Management, Inc. (the "Manager") serves as the investment
manager of and administrator for the Health Care Fund, Telecommunications Fund
and the Portfolios (each a "Theme Portfolio"), and also serves as the
administrator for each Feeder Fund. The principal underwriter and distributor of
the Funds' shares is GT Global, Inc. ("GT Global"). The Funds' transfer agent is
GT Global Investor Services, Inc. ("GT Services" or "Transfer Agent").
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Investment Objectives and Policies....................................................................................... 2
Options, Futures and Currency Strategies................................................................................. 6
Risk Factors............................................................................................................. 14
Investment Limitations................................................................................................... 18
Execution of Portfolio Transactions...................................................................................... 22
Directors and Executive Officers......................................................................................... 24
Management............................................................................................................... 26
Valuation of Fund Shares................................................................................................. 31
Information Relating to Sales and Redemptions............................................................................ 32
Taxes.................................................................................................................... 34
Additional Information................................................................................................... 37
Investment Results....................................................................................................... 38
Description of Debt Ratings.............................................................................................. 48
Financial Statements..................................................................................................... 50
</TABLE>
[LOGO]
Statement of Additional Information Page 1
<PAGE>
GT GLOBAL THEME FUNDS
INVESTMENT OBJECTIVES
AND POLICIES
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES
The investment objective of each Feeder Fund is long-term capital growth. The
investment objective of the GT Global Health Care Fund and Telecommunications
Fund is long-term capital appreciation and long-term growth of capital,
respectively.
The Financial Services Fund, Infrastructure Fund, Natural Resources Fund and
Consumer Products and Services Fund each seeks to achieve its investment
objective by investing all of its investable assets in the Financial Services
Portfolio, Infrastructure Portfolio, Natural Resources Portfolio and Consumer
Products and Services Portfolio, respectively, each of which 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 Fund. Whenever the phrase "all of the Funds' investable assets" is
used herein and in the Prospectus, it means that the only investment securities
that will be held by a Feeder Fund will be that Fund's 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 such 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 described below and in the Prospectus
with respect to its corresponding Portfolio.
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 Funds, 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 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 United States, or a foreign government. A portion of
each 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 Fund shares to provide for ongoing expenses and to satisfy
redemptions.
For each 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 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
Statement of Additional Information Page 2
<PAGE>
GT GLOBAL THEME FUNDS
substantially impair the operations of the Theme Portfolios as described in the
Prospectus and this Statement of Additional Information. Restrictions may in the
future, however, make it undesirable to invest in certain countries. None of the
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 Theme Portfolio with substantial or total loss
of its investment in such country or market.
INVESTMENTS IN OTHER INVESTMENT COMPANIES
Each 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 Theme Portfolio may
purchase shares of an investment company unless (a) such a purchase would cause
a 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
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 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
A 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 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 Theme Portfolio's investment policies, a 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
Theme Portfolios may invest in both sponsored and unsponsored ADRs.
WARRANTS OR RIGHTS
Warrants or rights may be acquired by a Theme Portfolio in connection with other
securities or separately and provide the Theme Portfolio with the right to
purchase at a later date other securities of the issuer.
LENDING OF PORTFOLIO SECURITIES
For the purpose of realizing additional income, each 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
Statement of Additional Information Page 3
<PAGE>
GT GLOBAL THEME FUNDS
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 Theme Portfolios
may pay reasonable administrative and custodial fees in connection with the
loans of their securities. While the securities loan is outstanding, a 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. A Theme Portfolio will have a right
to call each loan and obtain the securities on five business days' notice. A
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. The
risks in lending portfolio securities, as with other extensions of secured
credit, consist of possible delay in receiving additional collateral or in
recovery of the securities or possible loss of rights in the collateral should
the borrower fail financially. 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.
COMMERCIAL BANK OBLIGATIONS
For the purposes of each 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 Theme Portfolio to
investment risks that are different in some respects from those of investments
in obligations of U.S. issuers. Although each 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 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
Repurchase agreements are transactions in which a 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 Theme
Portfolio if the other party to the repurchase agreement becomes bankrupt, the
Theme Portfolios intend to enter 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 a
Portfolio's Board of Trustees, as applicable. The Manager will review and
monitor the creditworthiness of such institutions under the applicable Board's
general supervision.
Each 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, a
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 a Theme Portfolio's ability to sell the collateral and a 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 Theme Portfolio intends to comply with provisions under such Code
that would allow the immediate resale of such collateral. Each 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 Theme Portfolio's borrowings will not exceed 33 1/3% of its total assets,
i.e., the 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
a Theme Portfolio's securities holdings or other factors cause the ratio of a
Theme Portfolio's total assets to outstanding borrowings to fall below 300%,
within three days (excluding Sundays and holidays) of such event that 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 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 a Theme Portfolio may cause greater fluctuation in the value of its
shares than would be the case if that Theme Portfolio did not borrow.
Each Theme Portfolio's fundamental investment limitations permit the Theme
Portfolio to borrow money for leveraging purposes. However, each Theme Portfolio
(except the Health Care Fund) is currently prohibited, pursuant to a non-
Statement of Additional Information Page 4
<PAGE>
GT GLOBAL THEME FUNDS
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 Portfolios' Board of Trustees, as
applicable. In the event that a 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 a Theme
Portfolio. When the income and gains on securities purchased with the proceeds
of borrowings exceed the costs of such borrowings, a Theme Portfolio's earnings
or a 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, a Theme
Portfolio's earnings or a Fund's net asset value would decline faster than would
otherwise be the case.
Each Theme Portfolio may enter into reverse repurchase agreements, which involve
the sale of a security by a Theme Portfolio and its agreement to repurchase the
security at a specified time and price. Each Theme Portfolio may also engage in
"roll" transactions, which involve the sale of Government National Mortgage
Association certificates or other securities together with a commitment (for
which the Theme Portfolio may receive a fee) to purchase similar, but not
identical, securities at a future date. Each Theme Portfolio will maintain, in a
segregated account with a custodian, cash or other 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 Theme Portfolio (except the Health Care Fund) is authorized to make short
sales of securities. A short sale is a transaction in which a Theme Portfolio
sells a security in anticipation that the market price of that security will
decline. A 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 a 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 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.
A 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 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 Theme Portfolio on such security, a 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 a Theme Portfolio replaces the borrowed security, that Theme
Portfolio will incur a loss; conversely, if the price declines, the Theme
Portfolio will realize a gain. Any gain will be decreased, and any loss
increased, by the transaction costs associated with the transaction. Although a
Theme Portfolio's gain is limited by the price at which it sold the security
short, its potential loss theoretically is unlimited.
No 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 Theme Portfolio's aggregate short sales of the securities of
any one issuer exceed the lesser of 2% of the Theme Portfolio's net assets or 2%
of the securities of any class of the issuer. Moreover, a Theme Portfolio may
engage in short sales only with respect to securities listed on a national
securities exchange. A 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 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.
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OPTIONS, FUTURES AND CURRENCY
STRATEGIES
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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 a Theme Portfolio
entered into a short hedge because the Manager projected a decline in the
price of a security in the 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 Theme Portfolio could suffer a
loss. In either such case, the Theme Portfolio would have been in a better
position had it not hedged at all.
(4) As described below, the 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 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 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 Theme Portfolio sell a portfolio security at a
disadvantageous time. The 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 Theme Portfolio.
WRITING CALL OPTIONS
Each 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 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.
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GT GLOBAL THEME FUNDS
Portfolio securities or currencies on which call options may be written will be
purchased solely on the basis of investment considerations consistent with each
Theme Portfolio's investment objective. When writing a call option, a 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,
a 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 a Theme Portfolio
has written expires, the 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 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 Theme Portfolio does not consider a security or
currency covered by a call option to be "pledged" as that term is used in that
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 a Theme Portfolio will be
obligated to sell the security or currency at less than its market value.
The premium that a Theme Portfolio receives for writing a call option is deemed
to constitute the market value of an option. The premium the 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 a 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 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, a 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.
A 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 a Theme Portfolio.
WRITING PUT OPTIONS
Each 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.
A Theme Portfolio generally would write put options in circumstances where the
Manager wishes to purchase the underlying security or currency for a Theme
Portfolio's holdings at a price lower than the current market price of the
security or currency. In such event, a 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 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.
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GT GLOBAL THEME FUNDS
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 a Theme Portfolio will be
obligated to purchase the security or currency at greater than its market value.
PURCHASING PUT OPTIONS
Each Theme Portfolio may purchase put options on securities, indices and
currencies. As the holder of a put option, a 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. A Theme
Portfolio may enter into closing sale transactions with respect to such options,
exercise such option or permit such option to expire.
Each Theme Portfolio may purchase a put option on an underlying security or
currency ("protective put") owned by the 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
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.
A 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 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 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 Theme Portfolio may purchase call options on securities, indices and
currencies. As the holder of a call option, the 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. A
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 a 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 a 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 a 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 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.
A 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 Theme Portfolio's
current return. For example, where a 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 Theme Portfolio,
an increase in the market price could result in the exercise of the call option
written by the Theme Portfolio and the realization of a loss on the underlying
security or currency. Accordingly, the Theme Portfolio could purchase a call
option on the same underlying security or currency, which could be exercised to
fulfill the Theme Portfolio's delivery obligations under its written call (if it
is exercised). This strategy could allow the Theme Portfolio to avoid selling
the portfolio security or currency at a time when it has an unrealized loss;
however, the 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
Theme Portfolio's total assets at the time of each purchase.
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GT GLOBAL THEME FUNDS
A 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 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 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. A 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 a 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 a Theme
Portfolio anticipates purchasing securities.
Options may be either listed on an exchange or traded over-the-counter ("OTC
options"). 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. A 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. A 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 Theme Portfolio. The assets used as
cover for OTC options written by a Theme Portfolio will be considered illiquid
unless the OTC options are sold to qualified dealers who agree that the 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.
A Theme Portfolio's ability to establish and close out positions in
exchange-listed options depends on the existence of a liquid market. A 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 a Theme Portfolio will enter into OTC options only with contra
parties that are expected to be capable of entering into closing transactions
with the Theme Portfolio, there is no assurance that the 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 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 a 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 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 a 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 a 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 Theme
Portfolio's exercise of the put, to deliver to the 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 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 Theme Portfolio to deliver to it an amount of
cash
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GT GLOBAL THEME FUNDS
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 a 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. A
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, a 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 a 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 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 a 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 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 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 Theme Portfolio. A 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 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 a Theme Portfolio's exposure to interest rate, currency exchange
rate and stock market fluctuations, that 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
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GT GLOBAL THEME FUNDS
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 Theme Portfolio realizes a gain;
if it is more, the Theme Portfolio realizes a loss. Conversely, if the
offsetting sale price is more than the original purchase price, the Theme
Portfolio realizes a gain; if it is less, the Theme Portfolio realizes a loss.
The transaction costs must also be included in these calculations. There can be
no assurance, however, that a Theme Portfolio will be able to enter into an
offsetting transaction with respect to a particular Futures Contract at a
particular time. If a Theme Portfolio is not able to enter into an offsetting
transaction, that 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 Theme
Portfolio.
Each 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 a Theme Portfolio owns, or Futures
Contracts will be purchased to protect the 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 a Theme Portfolio in order to initiate Futures trading and maintain
the 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 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 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 a 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.
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If a 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 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 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 a 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.
A 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 a 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 Theme Portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the 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 Portfolio's Board of Trustees, as applicable, without
a shareholder vote. This limitation does not limit the percentage of a 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. A Theme Portfolio
either may
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accept or make delivery of the currency at the maturity of the Forward Contract.
A 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.
A Theme Portfolio engages in forward currency transactions in anticipation of,
or to protect itself against, fluctuations in exchange rates. A 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,
a 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, a 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 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 Portfolios' Board of Trustees or the
Company's Board of Directors, as applicable.
A Theme Portfolio may enter into Forward Contracts either with respect to
specific transactions or with respect to overall investments of that 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 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 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 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 a Theme Portfolio to sustain
losses on these contracts and transaction costs.
At or before the maturity of a Forward Contract requiring a Theme Portfolio to
sell a currency, that 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 Theme Portfolio will obtain, on the same maturity
date, the same amount of the currency that it is obligated to deliver.
Similarly, a 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. A 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 a 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 a 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
A 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
Theme Portfolio's securities are denominated. Such currency hedges can protect
against price movements in a security that the 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.
A 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 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
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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 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 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 a Theme Portfolio has purchased) expose the Theme Portfolio to an
obligation to another party. A 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 Theme Portfolio will comply with SEC guidelines
regarding cover for these instruments and, if the guidelines so require, set
aside cash or other 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 a Theme Portfolio's assets is used for cover or otherwise set aside, it could
affect portfolio management or the Theme Portfolio's ability to meet redemption
requests or other current obligations.
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RISK FACTORS
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ILLIQUID SECURITIES. Each 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 a Theme
Portfolio cannot reasonably expect within seven days to sell the securities for
approximately the amount at which that Theme Portfolio values such securities.
See "Investment Limitations." 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, a 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 Theme Portfolio may be permitted
to sell a security under an effective registration statement. If, during
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GT GLOBAL THEME FUNDS
such a period, adverse market conditions were to develop, the 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
a Theme Portfolio, however, could affect adversely the marketability of such
portfolio securities and the 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 Theme Portfolio and periodically reports such determinations to the
Portfolios' Board of Trustees or the Company's Board of Directors, as
applicable.
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, a Theme Portfolio could lose its entire investment
in any such country.
RELIGIOUS, POLITICAL AND ETHNIC INSTABILITY. Certain countries in which a
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 a 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 a Theme
Portfolio invests and adversely affect the value of a 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 a Theme Portfolio. These
restrictions or controls may at times limit or preclude investments in certain
securities and may increase the cost and expenses of a 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. A Theme Portfolio could be
adversely affected by
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GT GLOBAL THEME FUNDS
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 a 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 a 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 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 a 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 Theme Portfolio's holdings of securities and cash
denominated in such currency and, therefore, will cause an overall decline in
the appropriate 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 that Fund. Moreover, if the value of the foreign currencies in
which a Theme Portfolio receives its income falls relative to the U.S. dollar
between receipt of the income and the making of Theme Portfolio distributions,
the Theme Portfolio may be required to liquidate securities in order to make
distributions if the 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 Theme Portfolio values its assets daily in terms of U.S. dollars,
the Portfolios do not intend to convert their holdings of foreign currencies
into U.S. dollars on a daily basis. Each 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 a Portfolio at one rate, while offering a lesser rate of exchange
should a 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 a Theme Portfolio
are uninvested and no return is earned thereon. The inability of a Theme
Portfolio to make intended security purchases due to settlement problems could
cause that 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 Theme Portfolio due to subsequent declines in
value of the portfolio security or, if that 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 a Theme Portfolio's assets, although the Manager does not believe
that such difficulties will have a material adverse effect on a Theme
Portfolio's portfolio trading activities.
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Each 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 Theme Portfolio's investments; and possible difficulties in
obtaining and enforcing judgments against such custodians.
WITHHOLDING TAXES. Each Theme Portfolio's net investment income from foreign
issuers may be subject to withholding taxes by the foreign issuer's country,
thereby reducing that Theme Portfolio's net investment income or delaying the
receipt of income where those taxes may be recaptured. See "Taxes."
SPECIAL CONSIDERATIONS AFFECTING EUROPE. 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 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 or the emerging European markets, it is impossible to predict the
long-term impact of the implementation of these programs on the securities owned
by a Theme Portfolio.
SPECIAL CONSIDERATIONS AFFECTING JAPAN AND HONG KONG. The concentration of
investments by a Theme Portfolio in Japan means that the Portfolio may be more
volatile than a fund that is broadly diversified geographically. Overseas trade
is important to Japan's economy. Japan has few natural resources and must export
to pay for its imports of these basic requirements. Because of the concentration
of Japanese exports in highly visible products, 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 or other
protectionist measures could impact Japan adversely in both the short and the
long term. 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.
Hong Kong is a British colony which will transfer sovereignty to the Peoples
Republic of China in 1997. China has espoused policies antagonistic to free
enterprise, capitalism and democracy. There can be no guarantee that property
rights will continue to be safeguarded in Hong Kong after 1997, although
recently China has moved toward free enterprise, and has established stock
exchanges of its own.
SPECIAL CONSIDERATIONS AFFECTING EMERGING MARKETS. Investing in the
securities of companies in emerging markets, including the markets of Latin
America and certain Asian markets such as Taiwan, Malaysia and Indonesia, 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 into U.S. dollars and on
repatriation of capital invested. In the event of such expropriation,
nationalization or other confiscation by any country, a 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
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.
DIVERSIFICATION REQUIREMENTS UNDER INTERNAL REVENUE CODE. The investment
flexibility of each Theme Portfolio may be restricted by the necessity of
satisfying certain diversification requirements in order to maintain the
qualification of the Theme Portfolio as a regulated investment company within
the meaning of the Internal Revenue Code of 1986, as amended (the "Code").
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INVESTMENT LIMITATIONS
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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 Portfolio,
Infrastructure Portfolio, Natural Resources Portfolio and Consumer Products and
Services Portfolio, respectively:
Notwithstanding any other investment policy of the Fund, the 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 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 Portfolio and
its Board of Trustees, it applies equally to each Feeder Fund and its Board of
Directors.
Each 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 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 Fund will hold a meeting of its shareholders and
will cast its votes as instructed by its shareholders.
Each Portfolio may not:
(1) Buy or sell real estate (including real estate limited
partnerships); however, each 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
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 Securities Act
of 1933;
(4) Make loans, except that each 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 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 33 1/3% of the value
of each Portfolio's total assets, (including the amount borrowed), less all
liabilities and indebtedness (other than the borrowing). This restriction
shall not prevent any Portfolio from entering into reverse repurchase
agreements, provided that reverse repurchase agreements, and any other
transactions constituting borrowing by a Portfolio may not exceed one-third
of that Portfolio's total assets. Transactions involving options, futures
contracts, options on futures contracts and forward currency contracts, as
described in the Prospectus and 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 Portfolio may invest in
the securities of companies that engage in these activities.
Statement of Additional Information Page 18
<PAGE>
GT GLOBAL THEME FUNDS
In addition, each 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 Portfolio's total assets, no more than 5% will be
invested in the securities of any one issuer, and the 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
Portfolio's outstanding voting securities as defined above and in the
Prospectus.
The following investment policies of each Portfolio are not fundamental policies
and may be changed by vote of the Portfolios' Board of Trustees without
shareholder approval. No Portfolio may:
(1) Invest in securities of an issuer if the investment would cause the
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 Portfolio, the 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 Portfolio's portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the
Portfolio has entered into;
(7) Borrow money except for temporary or emergency purposes (not for
leveraging) in excess of 33 1/3% of the value of the Portfolio's total
assets (while borrowings exceed 5% of the Infrastructure Portfolio's and
Natural Resources Portfolio's total assets, such 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 Prospectus for further information with respect to
the investment objective of each Feeder Fund, which may not be changed without
the approval of Fund shareholders, and its corresponding 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 the Health Care
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.
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;
Statement of Additional Information Page 19
<PAGE>
GT GLOBAL THEME FUNDS
(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;
(6) Make loans, except through loans of portfolio securities as
authorized by the Health Care Fund's 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 the
Health Care Fund 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 the Health Care Fund's 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 the Health Care Fund's total assets, no more than 5% will
be invested in the securities of any one issuer, and the Health Care Fund 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 Prospectus.
Investors should refer to the 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 the
Telecommunications 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.
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 Securities Act of 1933;
(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;
Statement of Additional Information Page 20
<PAGE>
GT GLOBAL THEME FUNDS
(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 the
Telecommunications Fund may not exceed one-third of the Telecommunications
Fund's total assets. Transactions involving options, futures contracts,
options on futures contracts and forward currency contracts, as described in
the Prospectus and 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 the Telecommunications Fund's total assets, no more
than 5% will be invested in the securities of any one issuer, and the
Telecommunications Fund 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 Prospectus.
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 Fund's portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the Fund
has entered into; or
(7) Borrow money except for temporary or emergency purposes (not for
leveraging) not in excess of 33 1/3% 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 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.
Statement of Additional Information Page 21
<PAGE>
GT GLOBAL THEME FUNDS
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 a Fund's or Portfolio's investment policies or
restrictions. A Fund or 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 Fund's or Portfolio's
investment policies and restrictions. The original cost of the securities so
acquired will be included in any subsequent determination of a Fund's or
Portfolio's compliance with the investment percentage limitations referred to
above and in the Prospectus.
- --------------------------------------------------------------------------------
EXECUTION OF PORTFOLIO
TRANSACTIONS
- --------------------------------------------------------------------------------
Subject to policies established by the Company's Board of Directors and the
Portfolios' Board of Trustees, the Manager is responsible for the execution of
each Theme Portfolio's securities transactions and the selection of
broker/dealers who execute such transactions on behalf of each Theme Portfolio.
In executing portfolio transactions, the Manager seeks the best net results for
each 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 Theme Portfolio may engage in
soft dollar arrangements for research services, as described below, each 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 Theme Portfolio, the Manager may select
broker/dealers to execute that 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 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 Theme Portfolio and its other
clients and that the total commissions paid by the Theme Portfolio will be
reasonable in relation to the benefits received by that Theme Portfolio over the
long term. Research services may also be received from dealers who execute Theme
Portfolio transactions in over-the-counter-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 a Theme Portfolio toward payment of that Theme
Portfolio's expenses, such as custodian fees.
Investment decisions for a 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 a 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 a 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 Theme
Portfolio.
Under a policy adopted by the Company's Board of Directors and the 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 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 Funds and such
other portfolios.
Statement of Additional Information Page 22
<PAGE>
GT GLOBAL THEME FUNDS
Each 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 a 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
over-the-counter 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 a Theme Portfolio may invest are generally traded in
the over-the-counter markets.
A 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 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 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.
For the fiscal years ended October 31, 1996, 1995 and 1994, the Health Care Fund
paid aggregate brokerage commissions of $
- -------, $545,743 and $480,241, respectively. For the fiscal years ended October
31, 1996, 1995 and 1994, the Telecommunications Fund paid aggregate brokerage
commissions of $
- --------, $2,253,982 and $5,674,965, respectively. For the fiscal years ended
October 31, 1996 and 1995, and for the fiscal period May 31, 1994 (commencement
of operations) to October 31, 1994, the Financial Services Portfolio,
Infrastructure Portfolio and Natural Resources Portfolio paid aggregate
brokerage commissions of $
- ------, $38,814 and $
- ------, $18,145; $122,399 and $
- ------, $111,512; and $
- ------, $98,462 and $132,572, respectively. For the fiscal year ended October
31, 1996 and the fiscal period December 30, 1994 (commencement of operations) to
October 31, 1995, the Consumer Products and Services Portfolio paid aggregate
brokerage commissions of $
- ------ and $17,605.
THEME PORTFOLIO TRADING AND TURNOVER
Although each Theme Portfolio does not intend generally to trade for short-term
profits, the securities held by that Theme Portfolio will be sold whenever
management believes it is appropriate to do so, without regard to the length of
time a particular security may have been held. Portfolio turnover rate is
calculated by dividing the lesser of sales or purchases of portfolio securities
by each Theme Portfolio's average month-end portfolio value, excluding
short-term investments. For purposes of this calculation, portfolio securities
exclude purchases and sales of debt securities having a maturity at the date of
purchase of one year or less. The portfolio turnover rate will not be a limiting
factor when management deems portfolio changes appropriate. Higher portfolio
turnover involves correspondingly greater brokerage commissions and other
transaction costs that the Theme Portfolio will bear directly, and may result in
the realization of net capital gains that are taxable when distributed to each
Fund's shareholders. For the fiscal years ended October 31, 1995 and 1996, the
Telecommunications Fund's portfolio turnover rates were 62% and
- --%, respectively. For the fiscal years ended October 31, 1995 and 1996, the
Health Care Fund's portfolio turnover rates were 99% and
- --%, respectively. For the fiscal years ended October 31, 1995 and 1996, the
portfolio turnover rates for the Financial Services Portfolio, Infrastructure
Portfolio and Natural Resources Portfolio were 170% and
- --%, 45% and
- --%, and 87% and
- --%, respectively. For the fiscal period December 30, 1994 (commencement of
operations) to October 31, 1995, and for the fiscal year ended October 31, 1996,
the portfolio turnover rates for the Consumer Products and Services Portfolio
were 240% and
- --%, respectively.
Statement of Additional Information Page 23
<PAGE>
GT GLOBAL THEME FUNDS
DIRECTORS AND EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
The Company's Directors and Executive Officers and the Portfolios' Trustees and
Executive Officers are listed below. The term "Directors" as used below refers
to the Company's Directors and the Portfolios' Trustees collectively.
<TABLE>
<CAPTION>
NAME, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY AND ADDRESS EXPERIENCE FOR THE PAST 5 YEARS
- --------------------------------------- ------------------------------------------------------------------------------------------
<S> <C>
David A. Minella,* 43 Chairman, the Manager since October 1996; Director, Liechtenstein Global Trust (holding
Director, Chairman of the Board and company of the various international LGT companies) since 1990; President, Asset
President Management Division, Liechtenstein Global Trust since 1995; Director and President, LGT
1166 Avenue of the Americas Asset Management, Inc. ("LGT Asset Management"), formerly LGT Asset Management Holdings,
New York, NY 10036 Inc., since 1988; Director and President, the Manager from 1989 to October 1996; Director,
GT Global since 1987 and President, GT Global from 1987 to 1995; Director, GT Services
since 1990; President, GT Services from 1990 to 1995; Director, G.T. Global Insurance
Agency, Inc. ("G.T. Insurance") since 1992; and President, G.T. Insurance from 1992 to
1995. Mr. Minella also is a director or trustee of each of the other investment companies
registered under the 1940 Act that is managed or administered by the Manager.
C. Derek Anderson, 54 Chief Executive Officer, Anderson Capital Management, Inc.; Chairman and Chief Executive
Director Officer, Plantagenet Holdings, Ltd. from 1991 to present; Director, Munsingwear, Inc.; and
220 Sansome Street Director, American Heritage Group Inc. and various other companies. Mr. Anderson also is a
Suite 400 director or trustee of each of the other investment companies registered under the 1940
San Francisco, CA 94104 Act that is managed or administered by the Manager.
Frank S. Bayley, 56 Partner, Baker & McKenzie (a law firm); and Director and Chairman, C.D. Stimson Company (a
Director private investment company). Mr. Bayley also is a director or trustee of each of the other
Two Embarcadero Center investment companies registered under the 1940 Act that is managed or administered by the
Suite 2400 Manager.
San Francisco, CA 94111
Arthur C. Patterson, 52 Managing Partner, Accel Partners (a venture capital firm). He also serves as a director of
Director various computing and software companies. Mr. Patterson also is a director or trustee of
One Embarcadero Center each of the other investment companies registered under the 1940 Act that is managed or
Suite 3820 administered by the Manager.
San Francisco, CA 94111
Ruth H. Quigley, 60 Private investor; and President, Quigley Friedlander & Co., Inc. (a financial advisory
Director services firm) from 1984 to 1986. Ms. Quigley also is a director or trustee of each of the
1055 California Street other investment companies registered under the 1940 Act that is managed or administered
San Francisco, CA 94108 by the Manager.
</TABLE>
- --------------
* Mr. Minella is an "interested person" of the Company as defined by the 1940
Act due to his affiliation with the LGT companies.
Statement of Additional Information Page 24
<PAGE>
GT GLOBAL THEME FUNDS
<TABLE>
<CAPTION>
NAME, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY AND ADDRESS EXPERIENCE FOR THE PAST 5 YEARS
- --------------------------------------- ------------------------------------------------------------------------------------------
<S> <C>
James R. Tufts, 37 Chief Information Officer for the Manager since October 1996; President,
Vice President and GT Services since 1995; Senior Vice President of Finance and
Chief Financial Officer Administration, GT Global, GT Services and G.T. Insurance from 1994 to
50 California Street 1995; Senior Vice President of Finance and Administration, LGT Asset
San Francisco, CA 94111 Management and the Manager from 1994 to October 1996; Vice President of
Finance, LGT Asset Management, the Manager, GT Global and GT Services
from 1990 to 1994; Vice President of Finance, G.T. Insurance from 1992
to 1994; and Director, the Manager, GT Global and GT Services since
1991.
Kenneth W. Chancey, 50 Vice President of Mutual Fund Accounting, the Manager since 1992; and
Vice President and Principal Vice President, Putnam Fiduciary Trust Company from 1989 to 1992.
Accounting Officer
50 California Street
San Francisco, CA 94111
Helge K. Lee, 49 Executive Vice President, Asset Management Division, Liechtenstein
Vice President and Secretary Global Trust since October 1996; Senior Vice President, LGT Asset
50 California Street Management, the Manager, GT Global, GT Services and G.T. Insurance from
San Francisco, CA 94111 February 1996 to October 1996; Vice President, LGT Asset Management, the
Manager, GT Global, GT Services and G.T. Insurance from May 1994 to
February 1996; General Counsel, LGT Asset Management, the Manager, GT
Global, GT Services and G.T. Insurance from May 1994 to October 1996;
Secretary, the Manager, since May 1994; Secretary, LGT Asset Management,
GT Global, GT Services and G.T. Insurance from May 1994 to October 1996;
Senior Vice President, General Counsel and Secretary, Strong/Corneliuson
Management, Inc.; and Secretary, each of the Strong Funds from October
1991 to May 1994.
</TABLE>
------------------------------
The Board of Directors has a Nominating and Audit Committee, comprised of Ms.
Quigley and Messrs. Anderson, Bayley and Patterson, which is responsible for
nominating persons to serve as Directors, reviewing audits of the Company and
its funds and recommending firms to serve as independent auditors of the
Company. Each of the Directors and Officers of the Company is also a Director
and Officer of G.T. Global Developing Markets Fund, Inc. and G.T. Global
Floating Rate Fund, Inc. and a Trustee and officer of G.T. Global Growth Series,
G.T. Greater Europe Fund, GT Global Variable Investment Trust, G.T. Global
Variable Investment Series, Global Investment Portfolio (of which the Portfolios
are subtrusts), Growth Portfolio and Global High Income Portfolio, which also
are registered investment companies managed by the Manager, and
- ---------- Portfolio, administered by the Manager. Each Director and Officer
serves in total as a Director and/or Trustee and Officer, respectively, of __
registered investment companies with __ series managed or administered by the
Manager. The Company pays each Director who is not a director, officer or
employee of the Manager or any affiliated company $5,000 a year, plus $300 per
Fund for each meeting of the Board attended by the Director, and reimburses
travel and other expenses incurred in connection with attending Board meetings.
Other Directors and Officers receive no compensation or expense reimbursement
from the Company. For the fiscal year ended October 31, 1996, Mr. Anderson, Mr.
Bayley, Mr. Patterson and Ms. Quigley, who are not directors, officers or
employees of the Manager or any affiliated company, received total compensation
of $______, $______, $______ and $______, respectively, from the Company for
their services as Directors. For the fiscal year ended October 31, 1996, Mr.
Anderson, Mr. Bayley, Mr. Patterson and Ms. Quigley, received total compensation
of $______, $______, $______ and $______, respectively, from the 40 investment
companies managed or administered by the Manager for which he or she serves as a
Director or Trustee. Fees and expenses disbursed to the Directors contained no
accrued or payable pension or retirement benefits. As of ____________, 1997, the
Officers and Directors and their families as a group owned in the aggregate
beneficially or of record less than 1% of the outstanding shares of each Fund or
of all the Company's funds in the aggregate, with the exception of the Financial
Services Fund and the Consumer Products and Services Fund. As of February 22,
1996, the Officers and Directors and their families as a group owned in the
aggregate beneficially or of record ___% of the outstanding shares of the
Financial Services Fund and ___% of the Consumer Products and Services Fund.
Statement of Additional Information Page 25
<PAGE>
GT GLOBAL THEME FUNDS
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES RELATING TO THE FEEDER FUNDS
AND THE PORTFOLIOS
Chancellor LGT Asset Management, Inc. (the "Manager") serves as each Portfolio's
investment manager and administrator under an Investment Management and
Administration Contract between each Portfolio and the Manager ("Portfolio
Management Contract"). The Manager serves as administrator to each Feeder Fund
under an administration contract between the Company and the Manager
("Administration Contract"). The Administration Contract will not be deemed an
advisory contract, as defined under the 1940 Act. As investment manager and
administrator, the Manager makes all investment decisions for each Portfolio
and, as administrator, administers each Portfolio's and each Feeder Fund's
affairs. Among other things, the Manager furnishes the services and pays the
compensation and travel expenses of persons who perform the executive,
administrative, clerical and bookkeeping functions of each Portfolio and each
Feeder Fund and provides suitable office space, necessary small office equipment
and utilities. For these services, each Feeder Fund pays administration fees,
computed daily and paid monthly, to the Manager at the annualized rate of 0.25%
of the Fund's average daily net assets. In addition, each Feeder Fund bears a
pro rata portion of the investment management and administration fee paid by its
corresponding Portfolio to the Manager. Each Portfolio pays such fees based on
its average daily net assets, also computed daily and paid monthly, at the
annualized rate of 0.725% on the first $500 million, .70% on the next $500
million, .675% on the next $500 million, and .65% on all amounts thereafter.
The Portfolio Management Contract may be renewed with respect to a Portfolio for
additional one-year terms, provided that any such renewal has been specifically
approved at least annually by (i) the Portfolios' Board of Trustees or the vote
of a majority of the Portfolio's outstanding voting securities (as defined in
the 1940 Act) and (ii) a majority of Trustees who are not parties to the
Portfolio Management Contract or "interested persons" of any such party (as
defined in the 1940 Act), cast in person at a meeting called for the specific
purpose of voting on such approval. The Portfolio Management Contract provides
that with respect to each Portfolio, and the Administration Contract provides
that with respect to each Feeder Fund, either the Company, each Portfolio or the
Manager may terminate the Contract without penalty upon sixty days' written
notice to the other party. The Portfolio Management Contract terminates
automatically in the event of its assignment (as defined in the 1940 Act).
The Manager and GT Global have voluntarily undertaken to limit the Class A and
Class B expenses of each Feeder Fund (exclusive of brokerage commissions,
interest, taxes and extraordinary items) to the maximum annual level of 2.40%
and 2.90%, respectively, of the average daily net assets of the respective
classes of the Fund during each fiscal year, and the Manager has agreed to
reimburse each Feeder Fund if its expenses exceed that amount.
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES RELATING TO THE HEALTH CARE
FUND AND TELECOMMUNICATIONS FUND
The Manager serves as the investment manager and administrator to the Health
Care Fund and Telecommunications Fund under an Investment Management and
Administration Contract ("Management Contract") between the Company and the
Manager. As investment manager and administrator, the Manager makes all
investment decisions for the Health Care Fund and Telecommunications Fund and
administers the Health Care Fund's and Telecommunications Fund's affairs. Among
other things, the Manager furnishes the services and pays the compensation and
travel expenses of persons who perform the executive, administrative, clerical
and bookkeeping functions of the Company and the Health Care Fund and
Telecommunications Fund, and provides suitable office space, necessary small
office equipment and utilities. For these services, the Health Care Fund and
Telecommunications Fund each pays the Manager investment management and
administration fees, based on the Health Care Fund and Telecommunications Fund's
average daily net assets, computed daily and paid monthly, at the annualized
rate of .975% on the first $500 million, .95% on the next $500 million, .925% on
the next $500 million, and .90% on all amounts thereafter.
The Management Contract may be renewed for additional one-year terms with
respect to the Health Care Fund and Telecommunications Fund, provided that any
such renewal has been specifically approved at least annually by: (i) the
Company's Board of Directors, or by the vote of a majority of the Health Care
Fund and Telecommunications Fund's outstanding voting securities (as defined in
the 1940 Act), and (ii) a majority of Directors who are not parties to the
Management Contract or "interested persons" of any such party (as defined in the
1940 Act), cast in person at a meeting
Statement of Additional Information Page 26
<PAGE>
GT GLOBAL THEME FUNDS
called for the specific purpose of voting on such approval. The Management
Contract provides that with respect to the Health Care Fund and
Telecommunications Fund either the Company or the Manager may terminate the
Contract without penalty upon sixty (60) days' written notice to the other
party. The Management Contract terminates automatically in the event of its
assignment (as defined in the 1940 Act).
GT Global and the Manager have voluntarily undertaken to limit the Health Care
Fund's and Telecommunications Fund's Class A and Class B share expenses
(exclusive of brokerage commissions, taxes, interest and extraordinary expenses)
to the annual level of 2.40% and 2.90% of the average daily net assets of the
Class A and Class B shares, respectively, during each fiscal year, and the
Manager has agreed to reimburse the Health Care Fund and Telecommunications Fund
if the Health Care Fund's and Telecommunications Fund's expenses exceed that
amount.
The following table discloses the amount of investment management and
administration fees paid by the Theme Portfolios to the Manager during the
periods shown:
HEALTH CARE FUND
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, AMOUNT PAID
- ---------------------------------------------------------------------------------------------------------- --------------
<S> <C>
1996...................................................................................................... $
1995...................................................................................................... 4,453,857
1994...................................................................................................... 4,353,688
</TABLE>
TELECOMMUNICATIONS FUND
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, AMOUNT PAID
- ---------------------------------------------------------------------------------------------------------- --------------
<S> <C>
1996...................................................................................................... $
1995...................................................................................................... 23,861,460
1994...................................................................................................... 21,926,187
</TABLE>
FINANCIAL SERVICES PORTFOLIO
<TABLE>
<CAPTION>
AMOUNT PAID
--------------
<S> <C>
Year ended October 31, 1996............................................................................... $
Year ended October 31, 1995............................................................................... 51,353
May 31, 1994 (commencement of operations) to October 31, 1994............................................. 8,249
</TABLE>
INFRASTRUCTURE PORTFOLIO
<TABLE>
<CAPTION>
AMOUNT PAID
--------------
<S> <C>
Year ended October 31, 1996............................................................................... $
Year ended October 31, 1995............................................................................... 601,421
May 31, 1994 (commencement of operations) to October 31, 1994............................................. 51,922
</TABLE>
NATURAL RESOURCES PORTFOLIO
<TABLE>
<CAPTION>
AMOUNT PAID
--------------
<S> <C>
Year ended October 31, 1996............................................................................... $
Year ended October 31, 1995............................................................................... 213,856
May 31, 1994 (commencement of operations) to October 31, 1994............................................. 28,500
</TABLE>
CONSUMER PRODUCTS AND SERVICES PORTFOLIO
<TABLE>
<CAPTION>
AMOUNT PAID
--------------
<S> <C>
Year ended October 31, 1996............................................................................... $
December 30, 1994 (commencement of operations) to October 31, 1995........................................ 16,284
</TABLE>
For the fiscal period May 31, 1994 (commencement of operations) to October 31,
1994, and for the fiscal years ended October 31, 1995, and 1996, the Manager
reimbursed the Financial Services Portfolio, Infrastructure Portfolio and
Natural Resources Portfolio for their respective investment management and
administration fees in the amounts of $8,249, $51,353 and $
- ------; $48,901, $0 and $ ; and $28,500, $213,856 and $ ,
respectively. For the same periods, the Financial Services Fund, Infrastructure
Fund and Natural Resources Fund paid administration fees of $3,029, $18,756 and
$
- ------; $19,370, $208,892 and $
- ------; and $10,436, $74,485 and $
- ------, respectively. However, the Manager reimbursed those Funds for such fees
in the amounts of $3,029, $18,756 and $ ; $19,370, $177,376 and $ ;
and $10,436, $74,485 and $ , respectively. (Accordingly, the Manager
reimbursed the Financial Services Fund, Infrastructure Fund and Natural
Resources Fund and their respective Portfolios investment management and
Statement of Additional Information Page 27
<PAGE>
GT GLOBAL THEME FUNDS
administration fees in the aggregate amounts of $11,278, $70,109 and $
- ------; $68,271, $177,376 and $ ; and $38,936, $288,341 and $
- ------, respectively.) For the fiscal period December 30, 1994 (commencement of
operations) to October 31, 1995, and for the fiscal year ended October 31, 1996,
the Manager reimbursed the Consumer Products and Services Portfolio for
investment management and administration fees in the amounts of $16,284 and $
- ------, respectively. For the same period, the Consumer Products and Services
Fund paid $5,933 and $
- ------, respectively, in administration fees; however, the Manager reimbursed
the Fund in the amounts of $5,933 and $ , respectively. Accordingly, the
Manager reimbursed the Consumer Products and Services Fund and its Portfolio
investment management and administration fees in the aggregate amounts of
$22,217 and $
- ------, respectively.
For the fiscal year ended October 31, 1996, the Manager, pursuant to a voluntary
expense undertaking to limit expenses to the maximum annual level of % and
%, respectively, of average daily net assets of the Class A shares and Class
B shares of the Funds, reimbursed the Financial Services Fund, Natural Resources
Fund, and Consumer Products and Services Fund for expenses in the additional
amounts of $ , $ and $ , respectively.
DISTRIBUTION SERVICES RELATING TO EACH FUND
Each Fund's Class A and Class B shares are offered continuously through each
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 separate Distribution
Plans with respect to Class A and Class B shares of the Funds in accordance with
the provisions of Rule 12b-1 under the 1940 Act ("Class A Plan" and "Class B
Plan") (collectively, "Plans"). The rate of payments by the Funds 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 the Class A Plan will have been
incurred within one year of such reimbursement. The following table discloses
payments made by the Theme Funds to GT Global under each Fund's Class A Plan and
Class B Plan for the Fund's fiscal year ended October 31, 1996:
<TABLE>
<CAPTION>
CLASS A CLASS B
AMOUNT PAID AMOUNT PAID
------------- --------------
<S> <C> <C>
Health Care Fund.......................................................................... $ $
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B
AMOUNT PAID AMOUNT PAID
------------- --------------
<S> <C> <C>
Telecommunications Fund................................................................... $ $
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B
AMOUNT PAID AMOUNT PAID
------------- --------------
<S> <C> <C>
Financial Services Fund................................................................... $ $
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B
AMOUNT PAID AMOUNT PAID
------------- --------------
<S> <C> <C>
Infrastructure Fund....................................................................... $ $
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B
AMOUNT PAID AMOUNT PAID
------------- --------------
<S> <C> <C>
Natural Resources Fund.................................................................... $ $
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B
AMOUNT PAID AMOUNT PAID
------------- --------------
<S> <C> <C>
Consumer Products and Services Fund....................................................... $ $
</TABLE>
In approving the Plans, the Directors determined that the adoption of the Plans
was in the best interests of the shareholders of that Fund. Agreements related
to the Plans must also be approved by such vote of the Directors, including a
majority of Directors who are not "interested persons" of the Company (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.
Each Plan requires that, at least quarterly, the Directors 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
Directors who are not "interested persons" of the Company will be committed to
the discretion of the Directors who are not "interested persons" of the Company,
as defined in the 1940 Act.
As discussed in the Prospectus, GT Global collects sales charges on sales of
Class A shares of each Fund, retains certain amounts of such charges and
reallows other amounts of such charges to broker/dealers that sell shares. The
following table
Statement of Additional Information Page 28
<PAGE>
GT GLOBAL THEME FUNDS
reviews the extent of such activity during the Health Care Fund's last three
fiscal years:
<TABLE>
<CAPTION>
SALES CHARGES AMOUNT AMOUNTS
YEAR ENDED OCTOBER 31, COLLECTED RETAINED REALLOWED
- -------------------------------------------------------------------------- -------------- ------------- --------------
<S> <C> <C> <C>
1996...................................................................... $ $ $
1995...................................................................... 469,186 67,325 401,861
1994...................................................................... 1,544,456 131,040 1,413,416
</TABLE>
The following table reviews the extent of such activity during the
Telecommunications Fund's fiscal year ended October 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
SALES CHARGES AMOUNT AMOUNTS
YEAR ENDED OCTOBER 31, COLLECTED RETAINED REALLOWED
- -------------------------------------------------------------------------- -------------- ------------- --------------
<S> <C> <C> <C>
1996...................................................................... $ $ $
1995...................................................................... 4,151,523 578,450 3,573,073
1994...................................................................... 15,634,626 2,477,493 13,157,133
</TABLE>
The following table reviews the extent of such activity for the Financial
Services Fund, Infrastructure Fund and Natural Resources Fund for each Fund's
fiscal year ended October 31, 1996 and 1995 and for the fiscal period May 31,
1994 (commencement of operations) to October 31, 1994:
<TABLE>
<CAPTION>
SALES CHARGES AMOUNT AMOUNTS
YEAR ENDED OCTOBER 31, 1996 COLLECTED RETAINED REALLOWED
- -------------------------------------------------------------------------- -------------- ------------- --------------
<S> <C> <C> <C>
Financial Services Fund................................................... $ $ $
Infrastructure Fund.......................................................
Natural Resources Fund....................................................
<CAPTION>
YEAR ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Financial Services Fund................................................... $ 50,104 $ 6,892 $ 43,212
Infrastructure Fund....................................................... 584,424 67,021 517,403
Natural Resources Fund.................................................... 143,672 16,516 127,156
<CAPTION>
MAY 31, 1994 TO OCTOBER 31, 1994
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Financial Services Fund................................................... $ 53,670 $ 4,672 $ 48,998
Infrastructure Fund....................................................... 494,689 51,215 443,474
Natural Resources Fund.................................................... 203,926 14,471 189,455
</TABLE>
The following table reviews the extent of such activity for the Consumer
Products and Services Fund for the fiscal year ended October 31, 1996 and for
the fiscal period December 30, 1994 (commencement of operations) to October 31,
1995:
<TABLE>
<CAPTION>
SALES
CHARGES AMOUNT AMOUNTS
COLLECTED RETAINED REALLOWED
----------- ---------- -----------
<S> <C> <C> <C>
Year ended October 31, 1996................................ $ $ $
December 30, 1994 to October 31, 1995...................... 28,566 3,380 25,186
</TABLE>
GT Global receives no compensation or reimbursements relating to its
distribution efforts with respect to the Class A shares other than as described
above. GT Global receives any contingent deferred sales charges ("CDSCs")
payable with respect to redemptions of Class B shares. The following table
discloses the amount of CDSCs collected by GT Global with regard to the GT
Global Theme Funds for the periods shown.
HEALTH CARE FUND
<TABLE>
<CAPTION>
CDSCS COLLECTED
----------------
<S> <C>
Year ended October 31, 1996............................................................................. $
Year ended October 31, 1995............................................................................. 178,859
Year ended October 31, 1994............................................................................. 49,801
</TABLE>
TELECOMMUNICATIONS FUND
<TABLE>
<CAPTION>
CDSCS COLLECTED
----------------
<S> <C>
Year ended October 31, 1996............................................................................. $
Year ended October 31, 1995............................................................................. 4,770,375
Year ended October 31, 1994............................................................................. 1,731,244
</TABLE>
FINANCIAL SERVICES FUND
<TABLE>
<CAPTION>
CDSCS COLLECTED
----------------
<S> <C>
Year ended October 31, 1996............................................................................. $
Year ended October 31, 1995............................................................................. 7,543
May 31, 1994 (commencement of operations) to October 31, 1994........................................... 847
</TABLE>
Statement of Additional Information Page 29
<PAGE>
GT GLOBAL THEME FUNDS
INFRASTRUCTURE FUND
<TABLE>
<CAPTION>
CDSCS COLLECTED
----------------
<S> <C>
Year ended October 31, 1996............................................................................. $
Year ended October 31, 1995............................................................................. 193,268
May 31, 1994 (commencement of operations) to October 31, 1994........................................... 1,528
</TABLE>
NATURAL RESOURCES FUND
<TABLE>
<CAPTION>
CDSCS COLLECTED
----------------
<S> <C>
Year ended October 31, 1996............................................................................. $
Year ended October 31, 1995............................................................................. 73,935
May 31, 1994 (commencement of operations) to October 31, 1994........................................... 779
</TABLE>
CONSUMER PRODUCTS AND SERVICES FUND
<TABLE>
<CAPTION>
CDSCS COLLECTED
----------------
<S> <C>
Year ended October 31, 1996............................................................................. $
December 30, 1994 (commencement of operations) to October 31, 1994...................................... 986
</TABLE>
TRANSFER AGENCY AND ACCOUNTING AGENCY SERVICES
GT Services, the Funds' Transfer Agent, has been retained by the Funds to
perform shareholder servicing, reporting and general transfer agent functions
for the Funds. 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 Funds for
its out-of-pocket expenses for such items as postage, forms, telephone charges,
stationery and office supplies.
As of October 31, 1996, the Health Care Fund, Telecommunications Fund, Financial
Services Fund, Infrastructure Fund, Natural Resources Fund and Consumer Products
and Services Fund paid the Manager fees of $
- ------, $
- -------, $
- ---, $
- ----, $
- ---- and $
- ---, respectively, for accounting services.
EXPENSES OF THE FUNDS AND OF THE PORTFOLIOS
Each Fund and each Portfolio pays all expenses not assumed by the Manager, GT
Global and other agents. These expenses include, in addition to the advisory,
administration, distribution, transfer agency, pricing and accounting agency and
brokerage fees discussed above, legal and audit expenses, custodian fees,
trustees' fees, organizational fees, fidelity bond and other insurance premiums,
taxes, extraordinary expenses and expenses of reports and prospectuses sent to
existing investors. The allocation of general Company expenses and expenses
shared among the Funds and other funds organized as series of the Company are
allocated on a basis deemed fair and equitable, which may be based on the
relative net assets of the Funds or the nature of the service performed and
relative applicability to the Funds. Expenditures, including costs incurred in
connection with the purchase or sale of portfolio securities, which are
capitalized in accordance with generally accepted accounting principles
applicable to investment companies, are accounted for as capital items and not
as expenses. The ratio of each Fund's expenses to its relative net assets can be
expected to be higher than the expense ratios of funds investing solely in
domestic securities, since the cost of maintaining the custody of foreign
securities and the rate of investment management fees paid by the Funds or the
Portfolios generally are higher than the comparable expenses of such other
funds.
Statement of Additional Information Page 30
<PAGE>
GT GLOBAL THEME FUNDS
VALUATION OF FUND SHARES
- --------------------------------------------------------------------------------
As described in the Prospectus, each 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.
Each Theme Portfolio's securities and other assets are valued as follows:
Equity securities, including ADRs, ADSs and EDRs, which are traded on stock
exchanges, are valued at the last sale price on the exchange on which such
securities are traded, as of the close of business on the day the securities are
being valued or, lacking any sales, at the last available bid price. In cases
where securities are traded on more than one exchange, the securities are valued
on the exchange determined by the Manager to be the primary market. Securities
traded in the OTC market are valued at the last available sale price prior to
the time of valuation.
Long-term debt obligations are valued at the mean of representative quoted bid
or asked prices for such securities or, if such prices are not available, at
prices for securities of comparable maturity, quality and type; however, when
the Manager deems it appropriate, prices obtained for the day of valuation from
a bond pricing service will be used. Short-term debt investments are amortized
to maturity based on their cost, adjusted for foreign exchange translation.
Options on indices, securities and currencies purchased by the Theme Portfolios
are valued at their last bid price in the case of listed options or at the
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. When market quotations for futures and options
on futures held by a Theme Portfolio are readily available, those positions will
be valued based upon such quotations.
Securities and other assets for which market quotations are not readily
available (including restricted securities that are subject to limitations as to
their sale) are valued at fair value as determined in good faith by or under the
direction of the Portfolios' Board of Trustees or the Company's Board of
Directors, as applicable. The valuation procedures applied in any specific
instance are likely to vary from case to case. However, consideration is
generally given to the financial position of the issuer and other fundamental
analytical data relating to the investment and to the nature of the restrictions
on disposition of the securities (including any registration expenses that might
be borne by the Theme Portfolios in connection with such disposition). In
addition, other factors, such as the cost of the investment, the market value of
any unrestricted securities of the same class (both at the time of purchase and
at the time of valuation), the size of the holding, the prices of any recent
transactions or offers with respect to such securities and any available
analysts' reports regarding the issuer, generally are considered.
The fair value of any other assets is added to the value of all securities
positions to arrive at the value of each Fund's total assets (which, for each
Feeder Fund is the value of its investment in its corresponding Portfolio). Each
Fund's liabilities, including accruals for expenses, are deducted from its total
assets. Once the total value of a Fund's net assets is so determined, that value
is then divided by the total number of shares outstanding (excluding treasury
shares), and the result, rounded to the nearer cent, is the net asset value per
share.
Any assets or liabilities initially expressed in terms of foreign currencies are
translated into U.S. dollars at the official exchange rate or, alternatively, at
the mean of the current bid and asked prices of such currencies against the U.S.
dollar last quoted by a major bank that is a regular participant in the foreign
exchange market or on the basis of a pricing service that takes into account the
quotes provided by a number of such major banks. If none of these alternatives
are available or none are deemed to provide a suitable methodology for
converting a foreign currency into U.S. dollars, the Portfolios' Board of
Trustees or the Company's Board of Directors, as applicable, in good faith, will
establish a conversion rate for such currency.
European, Far Eastern, or Latin American securities trading may not take place
on all days on which the NYSE is open. Further, trading takes place in various
foreign markets on days on which the NYSE is not open. Trading in securities on
Statement of Additional Information Page 31
<PAGE>
GT GLOBAL THEME FUNDS
European and Far Eastern securities exchanges and OTC markets generally is
completed well before the close of business in New York. Consequently, the
calculation of each Fund's net asset value may not always take place
contemporaneously with the determination of the prices of securities held by
each Fund. Events affecting the values of securities held by the Theme
Portfolios that occur between the time their prices are determined and the close
of normal trading on the NYSE will not be reflected in a Fund's net asset value
unless the Manager, under the supervision of the Company's Board of Directors or
the Portfolios' Board of Trustees, as applicable, determines that the particular
event would materially affect net asset value. As a result, a Fund's net asset
value may be significantly affected by such trading on days when a shareholder
has no access to that Fund.
- --------------------------------------------------------------------------------
INFORMATION RELATING TO SALES
AND REDEMPTIONS
- --------------------------------------------------------------------------------
PAYMENT AND TERMS OF OFFERING
Payment for Class A or Class B shares of a 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 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.
Each 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 a 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, each 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
Statement of Additional Information Page 32
<PAGE>
GT GLOBAL THEME FUNDS
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.
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 (IRA)
Class A or Class B shares of a Fund may be purchased as the underlying
investment for an IRA meeting the requirements of section 408(a) of the Internal
Revenue Code of 1986, as amended ("Code"). IRA applications are available from
brokers or GT Global.
EXCHANGES BETWEEN FUNDS
Shares of a 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 a
Fund may be exchanged only for Class A shares of other GT Global Mutual Funds.
Class B shares of a 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 that Fund. Proceeds of less than $1,000 will be mailed to
the shareholder's registered address of record. The Funds 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 a 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 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 an SWP established in Class B shares only, 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
Statement of Additional Information Page 33
<PAGE>
GT GLOBAL THEME FUNDS
Agent. Applications and further details regarding establishment of an SWP are
provided at the back of the Fund's Prospectus.
SUSPENSION OF REDEMPTION PRIVILEGES
Each 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 Funds or the 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 Company's Board of Directors, make it undesirable for a 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 a 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 Company has filed
with the SEC an election pursuant to Rule 18f-1 under the 1940 Act. This means
that each 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
a 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 FUNDS
Each Fund is treated as a separate corporation for federal income tax purposes.
In order to continue to qualify for treatment as a regulated investment company
("RIC") under the Code, each 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, net short-term capital gain and net gains
from certain foreign currency transactions) ("Distribution Requirement") and
must meet several additional requirements. With respect to each 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 foreign currencies, or other income (including gains from options, Futures or
Forward Contracts) derived with respect to its business of investing in
securities or those currencies ("Income Requirement"); (2) 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 -- options or Futures (other than those on foreign currencies), or
foreign currencies (or options, Futures or Forward Contracts thereon) that are
not directly related to the Fund's principal business of investing in securities
(or options and Futures with respect to securities) ("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. Each
Feeder Fund, as an investor in its corresponding Portfolio, is deemed to own a
proportionate share of the Portfolio's assets, and to earn a proportionate share
of the Portfolio's income, for purposes of determining whether the Fund
satisfies all the requirements described above to qualify as a RIC.
Each 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.
Statement of Additional Information Page 34
<PAGE>
GT GLOBAL THEME FUNDS
See the next section for a discussion of the tax consequences to each Feeder
Fund of hedging transactions engaged in, and investments in passive foreign
investment companies ("PFICs") and other foreign securities by, its
corresponding Portfolio and to the Health Care Fund and Telecommunications Fund
of those transactions and investments.
TAXATION OF THE THEME PORTFOLIOS
THE PORTFOLIOS AND THEIR RELATIONSHIP TO THE FEEDER FUNDS. Each Portfolio is
treated as a separate partnership for federal income tax purposes and is not a
"publicly traded partnership." As a result, each Portfolio is not subject to
federal income tax; instead, each Feeder Fund, as an investor in its
corresponding Portfolio, is required to take into account in determining its
federal income tax liability its share of the Portfolio's income, gains, losses,
deductions and credits, without regard to whether it has received any cash
distributions from the Portfolio. Each Portfolio also is not subject to New York
income or franchise tax.
Because, as noted above, each Feeder Fund is deemed to own a proportionate share
of its corresponding Portfolio's assets, and to earn a proportionate share of
its corresponding Portfolio's income, for purposes of determining whether the
Fund satisfies the requirements to qualify as a RIC, each Portfolio intends to
conduct its operations so that its corresponding Fund will be able to satisfy
all those requirements.
Distributions to each Feeder Fund from its corresponding Portfolio (whether
pursuant to a partial or complete withdrawal or otherwise) will not result in
the Fund's recognition of any gain or loss for federal income tax purposes,
except that (1) gain will be recognized to the extent any cash that is
distributed exceeds the Fund's basis for its interest in the Portfolio before
the distribution, (2) income or gain will be recognized if the distribution is
in liquidation of the Fund's entire interest in its Portfolio and includes a
disproportionate share of any unrealized receivables held by the Portfolio, and
(3) loss will be recognized if a liquidation distribution consists solely of
cash and/or unrealized receivables. Each Feeder Fund's basis for its interest in
its corresponding Portfolio generally will equal the amount of cash and the
basis of any property the Fund invests in the Portfolio, increased by the Fund's
share of the Portfolio's net income and gains and decreased by (a) the amount of
cash and the basis of any property the Portfolio distributes to the Fund and (b)
the Fund's share of the Portfolio's losses.
FOREIGN TAXES. Dividends and interest received by a Theme Portfolio may be
subject to income, withholding or other taxes imposed by foreign countries and
U.S. possessions that would reduce the yield on its securities. Tax conventions
between certain countries and the United States may reduce or eliminate these
foreign taxes, however, and many foreign countries do not impose taxes on
capital gains in respect of investments by foreign investors. If more than 50%
of the value of a Fund's total assets (taking into account, in the case of a
Feeder Fund, its proportionate share of its corresponding Portfolio's assets) at
the close of its taxable year consists of securities of foreign corporations,
the Fund will be eligible to, and may, file an election with the Internal
Revenue Service that will enable its shareholders, in effect, to receive the
benefit of the foreign tax credit with respect to any foreign income taxes paid
by it (taking into account, in the case of a Feeder Fund, its proportionate
share of those taxes paid by its corresponding Portfolio). Pursuant to the
election, a Fund will treat those taxes as dividends paid to its shareholders
and each shareholder will be required to (1) include in gross income, and treat
as paid by him, his proportionate share of those taxes, (2) treat his share of
those taxes and of any dividend paid by the Fund that represents income from
foreign sources as his own income from those sources, and (3) either deduct the
taxes deemed paid by him in computing his taxable income or, alternatively, use
the foregoing information in calculating the foreign tax credit against his
federal income tax. Each Fund will report to its shareholders shortly after each
taxable year their respective shares of the Fund's income (taking into account,
in the case of a Feeder Fund, its proportionate share of its corresponding
Portfolio's income) from sources within, and taxes paid to, foreign countries
and U.S. possessions if it makes this election.
PASSIVE FOREIGN INVESTMENT COMPANIES. Each Theme Portfolio may invest in the
stock of PFICs. A PFIC is a foreign corporation that, in general, meets either
of the following tests: (1) at least 75% of its gross income is passive or (2)
an average of at least 50% of its assets produce, or are held for the production
of, passive income. Under certain circumstances, a Fund will be subject to
federal income tax on a part (or, in the case of a Feeder Fund, its
proportionate share of a part) of any "excess distribution" received by it (or,
in the case of a Feeder Fund, by its corresponding Portfolio) on the stock of a
PFIC or of any gain on the Fund's (or, in the case of a Feeder Fund, its
corresponding Portfolio's) disposition of that stock (collectively, "PFIC
income"), plus interest thereon, even if the Fund distributes the PFIC income as
a taxable dividend to its shareholders. The balance of the PFIC income will be
included in the Fund's investment company taxable income and, accordingly, will
not be taxable to it to the extent that income is distributed to its
shareholders.
If a Theme Portfolio invests in a PFIC and elects to treat the PFIC as a
"qualified electing fund" ("QEF"), then in lieu of the foregoing tax and
interest obligation, the Theme Portfolio (or, in the case of a Portfolio, its
corresponding Feeder
Statement of Additional Information Page 35
<PAGE>
GT GLOBAL THEME FUNDS
Fund) will be required to include in income each year its pro rata share of the
QEF's annual ordinary earnings and net capital gain (the excess of net long-term
capital gain over net short-term capital loss) -- which most likely would have
to be distributed by that Theme Portfolio (or, in the case of a Portfolio, its
corresponding Feeder Fund) to satisfy the Distribution Requirement and to avoid
imposition of the Excise Tax -- even if those earnings and gain were not
received thereby. In most instances it will be very difficult, if not
impossible, to make this election because of certain requirements thereof.
Pursuant to proposed regulations, open-end RICs, such as the Funds, would be
entitled to elect to "mark-to-market" their stock in certain PFICs.
"Marking-to-market," in this context, means recognizing as gain for each taxable
year the excess, as of the end of that year, of the fair market value of each
such PFIC's stock over the adjusted basis in that stock (including
mark-to-market gain for each prior year for which an election was in effect).
OPTIONS, FUTURES AND FOREIGN CURRENCY TRANSACTIONS. The Theme Portfolios'
use of hedging transactions, such as selling (writing) and purchasing options
and Futures and entering into Forward Contracts, involves complex rules that
will determine, for federal income tax purposes, the character and timing of
recognition of the gains and losses a Theme Portfolio realizes in connection
therewith. Gains from foreign currencies (except certain gains that may be
excluded by future regulations), and gains from the disposition of options,
Futures and Forward Contracts derived by a Theme Portfolio with respect to its
business of investing in securities or foreign currencies, will qualify as
permissible income under the Income Requirement for that Theme Portfolio (or, in
the case of a Portfolio, its corresponding Feeder Fund). However, income from
the disposition by a Theme Portfolio of options and Futures (other than those on
foreign currencies) will be subject to the Short-Short Limitation for that Theme
Portfolio (or, in the case of a Portfolio, its corresponding Feeder Fund) if
they are held for less than three months. Income from the disposition by a Theme
Portfolio of foreign currencies, and options, Futures and Forward Contracts on
foreign currencies, that are not directly related to its principal business of
investing in securities (or options and Futures with respect thereto) also will
be subject to the Short-Short Limitation for that Theme Portfolio (or, in the
case of a Portfolio, its corresponding Feeder Fund) if they are held for less
than three months.
If a Theme Portfolio satisfies certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any decrease in
value (whether realized or not) of the offsetting hedging position during the
period of the hedge for purposes of determining whether that Theme Portfolio
(or, in the case of a Portfolio, its corresponding Feeder Fund) satisfies the
Short-Short Limitation. Thus, only the net gain (if any) from the designated
hedge will be included in gross income for purposes of that limitation. Each
Theme Portfolio intends that, when it engages in hedging transactions, it will
qualify for this treatment, but at the present time it is not clear whether this
treatment will be available for all of those transactions. To the extent this
treatment is not available, a Theme Portfolio may be forced to defer the closing
out of certain options, Futures, Forward Contracts or foreign currency positions
beyond the time when it otherwise would be advantageous to do so, in order for
that Theme Portfolio (or, in the case of a Portfolio, its corresponding Feeder
Fund) to continue to qualify as a RIC.
Futures and Forward Contracts that are subject to section 1256 of the Code
(other than those that are part of a "mixed straddle") ("Section 1256
Contracts") and that are held by a Theme Portfolio at the end of its taxable
year generally will be deemed to have been sold at market value for federal
income tax purposes. Sixty percent of any net gain or loss recognized on these
deemed sales, and 60% of any net gain or loss realized from any actual sales of
Section 1256 Contracts, will be treated as long-term capital gain or loss, and
the balance will be treated as short-term capital gain or loss. Section 988 of
the Code also may apply to gains or losses from transactions in foreign
currencies, foreign-currency-denominated debt securities and options, Futures
and Forward Contracts on foreign currencies ("Section 988" gains or losses).
Each Section 988 gain or loss generally is computed separately and treated as
ordinary income or loss. In the case of overlap between Sections 1256 and 988,
special provisions determine the character and timing of any income, gain or
loss. Each Theme Portfolio attempts to monitor Section 988 transactions to
minimize any adverse tax impact.
TAXATION OF THE FUNDS' SHAREHOLDERS
Dividends and other distributions declared by a 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 a 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 a Fund (directly or through a
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.
Statement of Additional Information Page 36
<PAGE>
GT GLOBAL THEME FUNDS
If 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 a 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 a Fund to a foreign shareholder
is "effectively connected with the conduct of a 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 income tax
considerations affecting the Funds, their shareholders and the Portfolios.
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 a 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, located 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. located in
Singapore; LGT Asset Management Ltd., formerly G.T. Management (Australia) Ltd.,
located in Sydney; and LGT Asset Management GmbH, formerly BIL Asset Management
GmbH, located in Frankfurt, Germany.
CUSTODIAN
State Street Bank and Trust Company ("State Street"), 225 Franklin Street,
Boston, Massachusetts 02110, acts as custodian of the Theme Portfolios' assets.
State Street is authorized to establish and has established separate accounts in
foreign currencies and to cause securities of the Theme Portfolios to be held in
separate accounts outside the United States in the custody of non-U.S. banks.
INDEPENDENT ACCOUNTANTS
The Company's and Global Investment Portfolio'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 Portfolios' and the
Funds' financial statements, assists in the preparation of each Portfolio's and
each Fund's federal and state income tax returns and consults with the Company
and Global Investment Portfolio as to matters of accounting, regulatory filings,
and federal and state income taxation.
The audited financial statements of the Company 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 said firm as experts in accounting and
auditing.
USE OF NAME
The Manager has granted the Company 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 Company at any time or to grant the use of such names to any other
company.
Statement of Additional Information Page 37
<PAGE>
GT GLOBAL THEME FUNDS
INVESTMENT RESULTS
- --------------------------------------------------------------------------------
Each Fund's "Standardized Return," 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 each Fund, as follows: Standardized
Return ("T") is computed by using the value at the end of the period ("EV") 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)P(1+T)to the
power of n = EV. 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 Board; and (4) a complete redemption at the end of any period
illustrated.
The Standardized Returns for the Class A shares of Health Care Fund and
Telecommunications Fund, stated as average annualized total returns for the
periods shown, were:
<TABLE>
<CAPTION>
HEALTH CARE
PERIOD FUND
- ------------------------------------------------------------------------------------------------------ -------------
<S> <C>
Fiscal year ended October 31, 1996.................................................................... %
January 27, 1992 through October 31, 1996............................................................. n/a
November 1, 1991 through October 31, 1996............................................................. %
August 7, 1989 through October 31, 1996............................................................... %
<CAPTION>
TELECOMMUNI-
PERIOD CATIONS FUND
- ------------------------------------------------------------------------------------------------------ --------------
<S> <C>
Fiscal year ended October 31, 1996.................................................................... %
January 27, 1992 through October 31, 1996............................................................. %
November 1, 1991 through October 31, 1996............................................................. n/a
August 7, 1989 through October 31, 1996............................................................... n/a
</TABLE>
The Standardized Returns for the Class B shares of the Health Care Fund and
Telecommunications Fund, which were first offered April 1, 1993, stated as
aggregate returns for the periods shown, were:
<TABLE>
<CAPTION>
HEALTH CARE
PERIOD FUND
- ------------------------------------------------------------------------------------------------------ -------------
<S> <C>
Fiscal year ended October 31, 1996.................................................................... %
April 1, 1993 through October 31, 1996................................................................ %
<CAPTION>
TELECOMMUNI-
PERIOD CATIONS FUND
- ------------------------------------------------------------------------------------------------------ --------------
<S> <C>
Fiscal year ended October 31, 1996.................................................................... %
April 1, 1993 through October 31, 1996................................................................ %
</TABLE>
The Standarized Returns for the Class B Shares of the Health Care Fund and
Telecommunications Fund, which were first offered April 1, 1993, stated as
average annualized total returns for the periods shown, were:
<TABLE>
<CAPTION>
HEALTH CARE
PERIOD FUND
- ------------------------------------------------------------------------------------------------------ -------------
<S> <C>
Fiscal year ended October 31, 1996.................................................................... %
April 1, 1993 through October 31, 1996................................................................ %
<CAPTION>
TELECOMMUNI-
PERIOD CATIONS FUND
- ------------------------------------------------------------------------------------------------------ --------------
<S> <C>
Fiscal year ended October 31, 1996.................................................................... %
April 1, 1993 through October 31, 1996................................................................ %
</TABLE>
As discussed in the Prospectus, each Fund may quote Non-Standardized Total
Returns that do not reflect the effect of sales charges. Non-Standardized
Returns may be quoted for the same or different time periods for which
Standardized Returns are quoted. The Non-Standardized Returns for the Class A
shares of the Health Care Fund and Telecommunications Fund, stated as aggregate
total returns for the periods shown, were:
<TABLE>
<CAPTION>
HEALTH CARE TELECOMMUNI-
PERIOD FUND CATIONS FUND
- ------------------------------------------------------------------------------------------------------ ------------ --------------
<S> <C> <C>
Fiscal year ended October 31, 1996.................................................................... % %
January 27, 1992 through October 31, 1996............................................................. n/a %
August 7, 1989 through October 31, 1996............................................................... % n/a
</TABLE>
The Non-Standardized Returns for the Class B shares of the Health Care Fund and
Telecommunications Fund, which were first offered on April 1, 1993, stated as
aggregate total returns for the periods shown, were:
<TABLE>
<CAPTION>
HEALTH CARE
PERIOD FUND
- ------------------------------------------------------------------------------------------------------ -------------
<S> <C>
Fiscal year ended October 31, 1996.................................................................... %
April 1, 1993 through October 31, 1996................................................................ %
<CAPTION>
TELECOMMUNI-
PERIOD CATIONS FUND
- ------------------------------------------------------------------------------------------------------ --------------
<S> <C>
Fiscal year ended October 31, 1996.................................................................... %
April 1, 1993 through October 31, 1996................................................................ %
</TABLE>
Statement of Additional Information Page 38
<PAGE>
GT GLOBAL THEME FUNDS
The Non-Standardized Returns for the Class A shares of the Health Care Fund and
Telecommunications Fund, stated as average annualized total returns for the
periods shown, were:
<TABLE>
<CAPTION>
HEALTH CARE
PERIOD FUND
- ------------------------------------------------------------------------------------------------------ -------------
<S> <C>
Fiscal year ended October 31, 1996.................................................................... %
January 27, 1992 through October 31, 1996............................................................. n/a
November 1, 1991 through October 31, 1996............................................................. %
August 7, 1989 through October 31, 1996............................................................... %
<CAPTION>
TELECOMMUNI-
PERIOD CATIONS FUND
- ------------------------------------------------------------------------------------------------------ --------------
<S> <C>
Fiscal year ended October 31, 1996.................................................................... %
January 27, 1992 through October 31, 1996............................................................. %
November 1, 1991 through October 31, 1996............................................................. n/a
August 7, 1989 through October 31, 1996............................................................... n/a
</TABLE>
The Non-Standardized Returns for the Class B shares of the Health Care Fund and
Telecommunications Fund, stated as average annualized total returns for the
periods shown, were:
<TABLE>
<CAPTION>
HEALTH CARE
PERIOD FUND
- ------------------------------------------------------------------------------------------------------ -------------
<S> <C>
Fiscal year ended October 31, 1996.................................................................... %
April 1, 1993 through October 31, 1996................................................................ %
<CAPTION>
TELECOMMUNI-
PERIOD CATIONS FUND
- ------------------------------------------------------------------------------------------------------ --------------
<S> <C>
Fiscal year ended October 31, 1996.................................................................... %
April 1, 1993 through October 31, 1996................................................................ %
</TABLE>
The Financial Services Fund, Infrastructure Fund and Natural Resources Fund
Standardized Returns for their Class A shares, stated as average annualized
total returns for the periods shown, were:
<TABLE>
<CAPTION>
FINANCIAL
SERVICES INFRASTRUCTURE NATURAL RESOURCES
PERIOD FUND FUND FUND
- ----------------------------------------------------------------------------- ----------------- ------------- ------------------
<S> <C> <C> <C>
Year ended October 31, 1996.................................................. % % %
May 31, 1994 through October 31, 1996........................................ % % %
</TABLE>
The Financial Services Fund, Infrastructure Fund and Natural Resources Fund
Standardized Returns for their Class A shares, stated as aggregate total returns
for the periods shown, were:
<TABLE>
<CAPTION>
FINANCIAL
SERVICES INFRASTRUCTURE NATURAL RESOURCES
PERIOD FUND FUND FUND
- ----------------------------------------------------------------------------- ----------------- ------------- ------------------
<S> <C> <C> <C>
Year ended October 31, 1996.................................................. % % %
May 31, 1994 through October 31, 1996........................................ % % %
</TABLE>
The Financial Services Fund, Infrastructure Fund and Natural Resources Fund
Standardized Returns for their Class B shares, stated as aggregate total returns
for the periods shown, were:
<TABLE>
<CAPTION>
FINANCIAL
SERVICES INFRASTRUCTURE NATURAL RESOURCES
PERIOD FUND FUND FUND
- ----------------------------------------------------------------------------- ----------------- ------------- ------------------
<S> <C> <C> <C>
Year ended October 31, 1996.................................................. % % %
May 31, 1994 through October 31, 1996........................................ % % %
</TABLE>
The Standardized Returns for the Class B shares of Financial Services Fund,
Infrastructure Fund and Natural Resources Fund, stated as average annualized
total returns for the periods shown, were:
<TABLE>
<CAPTION>
FINANCIAL
SERVICES INFRASTRUCTURE NATURAL RESOURCES
PERIOD FUND FUND FUND
- ----------------------------------------------------------------------------- ----------------- ------------- ------------------
<S> <C> <C> <C>
Year ended October 31, 1996.................................................. % % %
May 31, 1994 through October 31, 1996........................................ % % %
</TABLE>
The Non-Standardized Returns for the Class A shares of Financial Services Fund,
Infrastructure Fund and Natural Resources Fund, stated as aggregate total
returns for the periods shown, were:
<TABLE>
<CAPTION>
FINANCIAL SERVICES INFRASTRUCTURE
PERIOD FUND FUND
- ----------------------------------------------------------------------------- ------------------- -------------
<S> <C> <C>
Year ended October 31, 1996.................................................. % %
May 31, 1994 through October 31, 1996........................................ % %
<CAPTION>
NATURAL RESOURCES
PERIOD FUND
- ----------------------------------------------------------------------------- ------------------
<S> <C>
Year ended October 31, 1996.................................................. %
May 31, 1994 through October 31, 1996........................................ %
</TABLE>
The Non-Standardized Returns for the Class B shares of Financial Services Fund,
Infrastructure Fund and Natural Resources Fund, stated as aggregate total
returns for the periods shown, were:
<TABLE>
<CAPTION>
FINANCIAL SERVICES INFRASTRUCTURE
PERIOD FUND FUND
- ----------------------------------------------------------------------------- ------------------- -------------
<S> <C> <C>
Year ended October 31, 1996.................................................. % %
May 31, 1994 through October 31, 1996........................................ % %
<CAPTION>
NATURAL RESOURCES
PERIOD FUND
- ----------------------------------------------------------------------------- ------------------
<S> <C>
Year ended October 31, 1996.................................................. %
May 31, 1994 through October 31, 1996........................................ %
</TABLE>
Statement of Additional Information Page 39
<PAGE>
GT GLOBAL THEME FUNDS
The Non-Standardized Returns for the Class A shares of Financial Services Fund,
Infrastructure Fund and Natural Resources Fund, stated as average annualized
total returns for the periods shown, were:
<TABLE>
<CAPTION>
FINANCIAL SERVICES INFRASTRUCTURE
PERIOD FUND FUND
- ----------------------------------------------------------------------------- ------------------- -------------
<S> <C> <C>
Year ended October 31, 1996.................................................. % %
May 31, 1994 through October 31, 1996........................................ % %
<CAPTION>
NATURAL RESOURCES
PERIOD FUND
- ----------------------------------------------------------------------------- ------------------
<S> <C>
Year ended October 31, 1996.................................................. %
May 31, 1994 through October 31, 1996........................................ %
</TABLE>
The Non-Standardized Returns for the Class B shares of Financial Services Fund,
Infrastructure Fund and Natural Resources Fund, stated as average annualized
total returns for the periods shown, were:
<TABLE>
<CAPTION>
FINANCIAL SERVICES INFRASTRUCTURE
PERIOD FUND FUND
- ----------------------------------------------------------------------------- ------------------- -------------
<S> <C> <C>
Year ended October 31, 1996.................................................. % %
May 31, 1994 through October 31, 1996........................................ % %
<CAPTION>
NATURAL RESOURCES
PERIOD FUND
- ----------------------------------------------------------------------------- ------------------
<S> <C>
Year ended October 31, 1996.................................................. %
May 31, 1994 through October 31, 1996........................................ %
</TABLE>
The Standardized Return for the Class A shares of Consumer Products and Services
Fund stated as aggregate total return for the year ended October 31, 1996 and
for the period December 30, 1994 (commencement of operations) to October 31,
1996 was
- ----% and 21.58%, respectively. Standardized Return for Consumer Products and
Service Fund's Class B shares, stated as aggregate total return, for the same
periods was
- ----% and 22.12%, respectively.
The Non-Standardized Return for the Class A shares of Consumer Products and
Services Fund stated as aggregate total return for the year ended October 31,
1996 and for the period December 30, 1994 (commencement of operations) to
October 31, 1996 was
- ----% and 27.65%. Non-Standardized Return for such Fund's Class B shares for the
same period, stated as aggregate return, was
- ----% and 27.12%, respectively.
Each Fund's investment results will vary from time to time depending upon market
conditions, the composition of each Fund's portfolio and operating expenses of
each Fund, so that current or past yield or total return should not be
considered representative of what an investment in each 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 each Fund's
investment results with those published for other investment companies and other
investment vehicles. Each Fund's results also should be considered relative to
the risks associated with such Fund's investment objective and policies.
IMPORTANT POINTS TO NOTE ABOUT DATA RELATING TO WORLD EQUITY AND BOND MARKET
Each Fund and GT Global may from time to time in advertisements, sales
literature and reports furnished to present or prospective shareholders compare
a 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 (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 Fund may be compared to the 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
Fund's performance may be compared to mutual fund performance indices
prepared by Lipper. Morningstar is a mutual fund rating service that
Statement of Additional Information Page 40
<PAGE>
GT GLOBAL THEME FUNDS
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 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 of 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 Investors Service, Inc., Fitch Investor's Service, Inc.,
Standard & Poor's.
(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
Statement of Additional Information Page 41
<PAGE>
GT GLOBAL THEME FUNDS
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, 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. Each 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 Company
or GT Global. The authors and publishers of such material are not to be
considered as "experts" under the Securities Act of 1933, 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 any of these Funds, nor is it a
prediction of such performance. The performance of the Funds will differ from
the historical performance of relevant indices. The performance of indices does
not take expenses into account, while each Fund incurs expenses in its
operations, which will reduce performance. Each Fund is actively managed, I.E.,
the Manager, as each Fund's investment manager, actively purchases and sells
securities in seeking each Fund's investment objective. Moreover, each Fund may
invest a portion of its assets in corporate bonds, while certain indices relate
only to government bonds. Each of these factors will cause the performance of
each Fund to differ from relevant indices.
From time to time, each Fund and GT Global may refer to the number of
shareholders in the Funds or the aggregate number of shareholders in all GT
Global Mutual Funds or the dollar amount of each Fund's assets under management
or rankings by DALBAR Surveys, Inc. in advertising materials.
GT Global believes each 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. Each Fund does not
represent a complete investment program and the investors should consider each
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.
Each Fund may quote various measures of volatility and benchmark correlation
such as beta, standard deviation and R(2) in advertising. In addition, each Fund
may compare these measures to those of other funds. Measures of volatility seek
to compare each 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.
Each 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
Statement of Additional Information Page 42
<PAGE>
GT GLOBAL THEME FUNDS
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.
Each Fund may be available for purchase through retirement plans of 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.
Each Fund may describe in its sales material and advertisements how an investor
may invest in GT Global Mutual Funds through various retirement accounts and
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 Funds may
also discuss these accounts and plans, which include:
INDIVIDUAL RETIREMENT ACCOUNTS (IRAS): Any individual who receives earned income
from employment (including self-employment) can contribute up to $2,000 (or, if
less, 100% of compensation) each year to an IRA. If your spouse is not employed,
a total of $2,250 may be contributed each year to IRAs set up for you and your
spouse (subject to the maximum of $2,000 to either IRA). 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 roll over 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 roll over 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 AND SALARY-REDUCTION SEP-IRAS: Simplified employee pension plans
("SEPs" or "SEP-IRAs") and salary-reduction SEPs 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.
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 CODE SECTION 401(K)) AND MONEY PURCHASE PENSION
PLANS: Corporations can sponsor these qualified defined contribution plans for
their employees. A Code 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).
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 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 Funds and GT Global will quote certain data regarding
industries, individual countries, regions, world stock exchanges, and economic
and demographic statistics from sources GT Global deems reliable, including but
not limited to, the economic and financial data of such financial organizations
as:
1) Stock market capitalization: Morgan Stanley Capital International World
Indices, International Finance Corporation and Datastream.
2) Stock market trading volume: Morgan Stanley Capital International Industry
Indices, International Finance Corporation.
Statement of Additional Information Page 43
<PAGE>
GT GLOBAL THEME FUNDS
3) The number of listed companies: International Finance Corporation, 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, International Finance Corporation and Datastream.
7) The Consumer Price Index and inflation rate: The World Bank, Datastream and
International Finance Corporation.
8) Gross Domestic Product ("GDP"): Datastream and The World Bank.
9) GDP growth rate: International Finance Corporation, 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: International Finance Corporation, The
World Bank and Datastream.
14) Top three companies by country, industry or market: International Finance
Corporation, 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
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.
THE GT ADVANTAGE
The Manager has developed a unique team approach to its global money management
which we call the GT Advantage. The Manager's money management style combines
the best of the "top-down" and "bottom-up" investment manager strategies. The
top-down approach is implemented by the Manager's Investment Policy Committee,
which sets broad guidelines for asset allocation and currency management, based
on the Manager's own macroeconomic forecasts and research from our worldwide
offices. The bottom-up approach utilizes regional teams of individual portfolio
managers to implement the committee's guidelines by selecting local securities
that offer strong growth and income potential.
Statement of Additional Information Page 44
<PAGE>
GT GLOBAL THEME FUNDS
GENERAL INFORMATION ABOUT THE THEME FUNDS AND THEME PORTFOLIOS
Each Theme Portfolio may invest worldwide across industries within the
Portfolio's area of concentration without national or regional restrictions. The
ability of each Theme Portfolio to invest worldwide may allow the portfolio
managers to select industries in different economic cycles and varying stages of
development, though there is no assurance that the managers will be successful
in this selection.
Each Theme Portfolio's area of concentration reflects the underlying theme of
the Portfolio. GT Global believes that there are certain social, political and
economic trends that may benefit one or more industries within a Theme
Portfolio's area of concentration. Of course, there is no assurance that any of
the Funds will benefit as a result.
HEALTH CARE FUND
From time to time the Fund and GT Global will quote information including, but
not limited to, data regarding:
/ / Trading volume, number of listed companies and the largest companies of
the global health care industry
/ / Expenditures by various countries, regions and age groups on health care
/ / Population of countries, regions and age groups
/ / Natality and mortality rates in various regions, countries and age
groups
/ / Life expectancy rates in various regions, countries and age groups
/ / New health care products and products seeking approval
/ / Health maintenance organizations (HMOs) and its enrollment growth
/ / Studies from, but not limited to, the American Medical Association
showing the effectiveness of using drugs to cure illness
/ / Medical technology and devices in use or in development
/ / Regulatory environment of health care industries
/ / Consolidation in the health care industries
The information quoted has not been independently verified by a Fund or GT
Global and will be based on data provided that is believed to be reliable and
accurate from, but not limited to, the following sources:
/ / Research firms such as Mehta and Isaly which publishes PHARMACEUTICAL
PORTFOLIO RECOMMENDATIONS
/ / OECD and its publications such as the OECD HEALTH DATA, as supplemented
annually
/ / Morgan Stanley Capital International stock market industry indices such
as Health & Personal Care
/ / The World Bank and its publications such as THE WORLD DEVELOPMENT
REPORT, as supplemented annually
/ / International Finance Corporation (IFC) and publications such as the
EMERGING STOCK MARKETS FACTBOOK
INFORMATION ABOUT THE GLOBAL HEALTH CARE INDUSTRIES
The Health Care Fund and the Manager believe that certain market and demographic
factors merit an investor's consideration of making a health care investment.
Worldwide standards of living and life expectancy have increased at a
substantial rate during the past twenty years (based on the most recent data
available at December 31, 1992, as compiled by the OECD). The Manager expects
this growth, which works to the general benefit of the global health care
industry, to continue at a roughly comparable rate in the future, although no
assurances can be given in this regard. Moreover, according to the Manager, the
health care industry historically has proven to be a relatively non-cyclical
industry that continues to provide goods and services to the public in periods
of economic weakness as well as economic strength.
The Manager believes that the anticipated increase in the world's elderly
population could increase demand for health care products and services. For
example, according to data compiled by the Manager, in Japan the number of
people age 65 and older is expected to grow over 100% by the year 2025; in
Germany, France and the U.S., the same age group should grow 40%. Similarly, the
U.S. Census Bureau predicts the number of Americans 85 and older to double in
the next 30 years. From time to time, the Fund and GT Global will quote
information including, but not limited to, international data regarding
populations, birth rates, mortality rates, life expectancy, health care
expenditures, and gross domestic product vs. life expectancy. The information
quoted has not been independently verified by the Fund or GT Global and will be
based on data that is believed to be reliable and accurate.
Statement of Additional Information Page 45
<PAGE>
GT GLOBAL THEME FUNDS
TELECOMMUNICATIONS FUND
From time to time the Fund and GT Global will quote information including, but
not limited to, data regarding:
/ / Increased usage of new technologies such as, but not limited to,
cellular and wireless communications in emerging and established
countries around the world
/ / Supply and demand of telephone equipment and services
/ / Regulatory environment of telecommunications industries
/ / Revenue, price and usage of telecommunications products and services
/ / Privatization of telecommunications companies
The information quoted has not been independently verified by the Fund or GT
Global and will be based on data provided that is believed to be reliable and
accurate from, but not limited to, the following sources:
/ / Salomon Brothers World Equity Telecommunications Index, which includes
stock market data about the telecommunications industry in established
and developing markets
/ / OECD and other publications from its subsidiaries such as the
International Telecommunications Union
/ / Morgan Stanley Capital International stock market industry indices such
as Telecommunications, Broadcasting & Publishing and Data Processing &
Reproduction
/ / International Technology Consultants (ITC), a Washington D.C. based firm
which publishes reports such as EASTERN EUROPEAN & SOVIET TELECOM REPORT
and LATIN AMERICAN TELECOM REPORT
DEREGULATION IN THE UNITED STATES
The United States has been the bellwether for deregulation of the telephone
industry. The divestiture of the Bell System from American Telephone and
Telegraph has produced new competing companies in the United States. Such U.S.
market-driven competition has, for example, led to lower costs for consumers
which in turn led to greater consumer usage and to higher industrywide revenues.
The Manager expects this scenario to continue to benefit such companies in the
U.S. and to similarly to be realized by the established telecommunications
companies in established economies, although no assurances can be made in this
regard.
GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
From time to time the Fund and GT Global will quote information including, but
not limited to, data regarding:
/ / Trading volume, number of listed companies and the largest companies
located around the world in the consumer products and services
industries
/ / Expenditures, demand and consumption by various countries, regions,
income classes and age groups of consumer products and services
/ / Population of countries, regions and age groups
/ / Life expectancy rates in various regions, countries and age groups
/ / New consumer products and services in the development or manufacturing
stages
/ / Income of various regions, countries and age groups
/ / Sales and sales growth of consumer products and services companies in
their own country and abroad
/ / Sales, supply and demand of consumer products and services
/ / Parent Companies and the products and services they distribute
/ / Regulatory environment of consumer products industries
The information quoted will not be independently verified by the Fund or GT
Global and will be based on data provided that is believed to be reliable and
accurate from, but not limited to, the following sources:
/ / Consumer and trade groups
/ / Fortune magazine and other periodicals
/ / The World Bank and its publications
/ / The International Monetary Fund (IMF) and its publications
/ / The International Finance Corporation (IFC) and its publications
/ / The Organization for Economic Cooperation and Development (OECD) and its
publications
Statement of Additional Information Page 46
<PAGE>
GT GLOBAL THEME FUNDS
INFRASTRUCTURE FUND
From time to time the Fund and GT Global may quote information including, but
not limited to:
/ / Supply and demand of telephone equipment and services, electricity,
water, transportation, construction materials and other infrastructure
related products and services
/ / Regulatory environment of infrastructure industries
/ / Quantity and costs of current and projected infrastructure projects
/ / Privatization of industries and companies
/ / New technologies, products and services used in infrastructure
industries
FINANCIAL SERVICES FUND
From time to time the Fund and GT Global may quote information including, but
not limited to:
/ / Supply and demand of financial services
/ / Regulatory environment of financial service industries
/ / Credit ratings of U.S. and non-U.S. banks
/ / New technologies, products and services used in the financial services
industries
/ / Consolidation in the financial services industries
NATURAL RESOURCES
From time to time the Fund and GT Global may quote information including, but
not limited to:
/ / Supply, demand and prices of natural resources
/ / Regulatory environment of natural resources
/ / Supply, demand and prices of products manufactured from natural
resources
/ / New technologies, products and services used in the natural resources
industries
Statement of Additional Information Page 47
<PAGE>
GT GLOBAL THEME FUNDS
DESCRIPTION OF DEBT RATINGS
- --------------------------------------------------------------------------------
DESCRIPTION OF COMMERCIAL PAPER RATINGS
MOODY'S INVESTORS SERVICE, INC. ("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.
STANDARD & POOR'S RATINGS GROUP ("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 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.
Statement of Additional Information Page 48
<PAGE>
GT GLOBAL THEME FUNDS
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
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.
Statement of Additional Information Page 49
<PAGE>
GT GLOBAL THEME FUNDS
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.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The audited financial statements of each Theme Fund at October 31, 1996 and for
the fiscal year then ended appear on the following pages.
Statement of Additional Information Page 50
<PAGE>
GT GLOBAL THEME FUNDS
NOTES
- --------------------------------------------------------------------------------
Statement of Additional Information Page 51
<PAGE>
GT GLOBAL THEME FUNDS
NOTES
- --------------------------------------------------------------------------------
Statement of Additional Information Page 52
<PAGE>
GT GLOBAL THEME FUNDS
NOTES
- --------------------------------------------------------------------------------
Statement of Additional Information Page 53
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL MUTUAL FUNDS
GT GLOBAL OFFERS A BROAD RANGE OF MUTUAL FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY OF THE GT GLOBAL
MUTUAL FUNDS, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR CALL GT GLOBAL
DIRECTLY AT 1-800-824-1580.
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL WORLDWIDE GROWTH FUND
Invests around the world, including the U.S.
GT GLOBAL INTERNATIONAL GROWTH FUND
Provides portfolio diversity by investing outside the U.S.
GT GLOBAL EMERGING MARKETS FUND
Gives access to the growth potential of developing economies
/ / GLOBAL THEME FUNDS
GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
Invests in companies that manufacture, market, retail, or distribute consumer
products or services
GT GLOBAL FINANCIAL SERVICES FUND
Focuses on the worldwide opportunities from the demand for financial services
and products
GT GLOBAL HEALTH CARE FUND
Invests in the growing health care industries worldwide
GT GLOBAL INFRASTRUCTURE FUND
Seeks companies that build, improve or maintain a country's infrastructure
GT GLOBAL NATURAL RESOURCES FUND
Concentrates on companies that own, explore or develop natural resources
GT GLOBAL TELECOMMUNICATIONS FUND
Invests in companies worldwide that develop, manufacture or sell
telecommunications services or equipment
/ / REGIONALLY DIVERSIFIED FUNDS
GT GLOBAL NEW PACIFIC GROWTH FUND
Offers access to the emerging and established markets of the Pacific Rim,
excluding Japan
GT GLOBAL EUROPE GROWTH FUND
Focuses on investment opportunities in the new, unified Europe
GT GLOBAL LATIN AMERICA GROWTH FUND
Invests in the emerging markets of Latin America
/ / SINGLE COUNTRY FUNDS
GT GLOBAL AMERICA SMALL CAP GROWTH FUND
Invests in equity securities of small U.S. companies
GT GLOBAL AMERICA MID CAP GROWTH FUND
Concentrates on medium-sized companies in the U.S.
GT GLOBAL AMERICA VALUE FUND
Concentrates on equity securities of large cap U.S. companies believed to be
undervalued
GT GLOBAL JAPAN GROWTH FUND
Provides U.S. investors with direct access to the Japanese market
GROWTH AND INCOME FUNDS
GT GLOBAL GROWTH & INCOME FUND
Invests in blue-chip stocks and government bonds from around the world
FIXED INCOME FUNDS
GT GLOBAL GOVERNMENT INCOME FUND
Earns monthly income from global government securities
GT GLOBAL STRATEGIC INCOME FUND
Allocates its assets among debt securities from the U.S., developed foreign
countries and emerging markets
GT GLOBAL HIGH INCOME FUND
Invests in debt securities in emerging markets
MONEY MARKET FUND
GT GLOBAL DOLLAR FUND
Invests in high quality, U.S. dollar-denominated money market securities
worldwide for stability and preservation of capital
[LOGO]
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY G.T. INVESTMENT FUNDS, INC.,
GT GLOBAL FINANCIAL SERVICES FUND, GLOBAL FINANCIAL SERVICES PORTFOLIO, GT
GLOBAL INFRASTRUCTURE FUND, GLOBAL INFRASTRUCTURE PORTFOLIO, GT GLOBAL
NATURAL RESOURCES FUND, GLOBAL NATURAL RESOURCES PORTFOLIO, GT GLOBAL
CONSUMER PRODUCTS AND SERVICES FUND, GLOBAL CONSUMER PRODUCTS AND SERVICES
PORTFOLIO, GT GLOBAL HEALTH CARE FUND, GT GLOBAL TELECOMMUNICATIONS FUND,
CHANCELLOR LGT ASSET MANAGEMENT, INC. OR GT GLOBAL, INC. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF ANY OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON IN SUCH
JURISDICTION TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER.
THESA610MC
<PAGE>
GT GLOBAL INCOME FUNDS
50 California Street, 27th Floor
San Francisco, California 94111-4624
(415) 392-6181
Toll Free: (800) 824-1580
Statement of Additional Information
March 1, 1997
- --------------------------------------------------------------------------------
This Statement of Additional Information relates to the Class A and Class B
shares of GT Global Government Income Fund ("Government Income Fund"), GT Global
Strategic Income Fund ("Strategic Income Fund") and GT Global High Income Fund
("High Income Fund") (individually, a "Fund," collectively, the "Funds"). Each
Fund is a mutual fund organized as a separate non-diversified series of G.T.
Investment Funds, Inc. ("Company"), a registered open-end management investment
company. This Statement of Additional Information, which is not a Prospectus,
supplements and should be read in conjunction with the Funds' current Class A
and B Prospectus dated March 1, 1997, a copy of which is available without
charge by writing to the above address or by calling the Funds at the toll-free
telephone number listed above.
Chancellor LGT Asset Management, Inc. (the "Manager") serves as the investment
manager and administrator for the Government Income Fund, the Strategic Income
Fund and the Global High Income Portfolio ("Portfolio") and also serves as the
administrator of the High Income Fund. The distributor of the shares of each
Fund is GT Global, Inc. ("GT Global"). The Funds' transfer agent is GT Global
Investor Services, Inc. ("GT Services" or "Transfer Agent").
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Investment Objectives and Policies............................................................... 2
Options, Futures and Currency Strategies......................................................... 6
Risk Factors..................................................................................... 15
Investment Limitations........................................................................... 19
Execution of Portfolio Transactions.............................................................. 23
Directors, Trustees and Executive Officers....................................................... 25
Management....................................................................................... 27
Valuation of Fund Shares......................................................................... 30
Information Relating to Sales and Redemptions.................................................... 31
Taxes............................................................................................ 33
Additional Information........................................................................... 36
Investment Results............................................................................... 38
Description of Debt Ratings...................................................................... 45
Financial Statements............................................................................. 47
</TABLE>
[LOGO]
Statement of Additional Information Page 1
<PAGE>
GT GLOBAL INCOME FUNDS
INVESTMENT OBJECTIVES AND POLICIES
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES
The Government Income Fund primarily seeks high current income and secondarily
seeks capital appreciation and protection of principal through active management
of the maturity structure and currency exposure of its portfolio. The Strategic
Income Fund and the High Income Fund primarily seek high current income and
secondarily seek capital appreciation. The High Income Fund seeks to achieve its
investment objectives by investing all of its investable assets in the
Portfolio, which, like the High Income Fund, is a non-diversified open-end
management investment company with investment objectives identical to those of
the High Income Fund. Whenever the phrase "all of the High Income Fund's
investable assets" is used herein and in the Prospectus, it means that the only
investment securities that will be held by the High Income Fund will be its
interest in the Portfolio. The High Income Fund may withdraw its investment in
the Portfolio at any time, if the Board of Directors of the Company determines
that it is in the best interests of the Fund and its shareholders to do so. Upon
any such withdrawal, the High Income Fund's assets would be invested in
accordance with the investment policies described below with respect to the
Portfolio.
INVESTMENT IN EMERGING MARKETS
The Portfolio seeks its objectives by investing, under normal circumstances, at
least 65% of its total assets in debt securities of issuers in emerging markets.
The Strategic Income Fund may invest up to 50% of its assets in debt securities
of issuers in emerging markets. The Strategic Income Fund and the Portfolio do
not consider the following countries to be emerging markets: Australia, Austria,
Belgium, Canada, Denmark, France, Germany, Ireland, Italy, Japan, the
Netherlands, New Zealand, Norway, Spain, Sweden, Switzerland, United Kingdom,
and United States.
In addition to the factors set forth in the Prospectus, the Manager will also
consider, when determining what countries constitute emerging markets, data,
analysis, and classification of countries published or disseminated by the
International Bank for Reconstruction and Development (commonly known as the
World Bank) and the International Finance Corporation.
SELECTION OF DEBT INVESTMENTS
Chancellor LGT Asset Management, Inc. (the "Manager") is the investment manager
of the Government Income Fund, the Strategic Income Fund and the Portfolio. In
determining the appropriate distribution of investments among various countries
and geographic regions for the Government Income Fund, the Strategic Income Fund
and the Portfolio, the Manager ordinarily considers the following factors:
prospects for relative economic growth among the different countries in which
the Government Income Fund, the Strategic Income Fund and the Portfolio may
invest; expected levels of inflation; government policies influencing business
conditions; the outlook for currency relationships; and the range of the
individual investment opportunities available to international investors.
The Government Income Fund, the Strategic Income Fund and the Portfolio may
invest in the following types of money market instruments (i.e., debt
instruments with less than 12 months remaining until maturity) denominated in
U.S. dollars or other currencies: (a) obligations issued or guaranteed by the
U.S. or foreign governments, their agencies, instrumentalities or
municipalities; (b) obligations of international organizations designed or
supported by multiple foreign governmental entities to promote economic
reconstruction or development; (c) finance company obligations, corporate
commercial paper and other short-term commercial obligations: (d) bank
obligations (including certificates of deposit, time deposits, demand deposits
and bankers' acceptances), subject to the restriction that the Government Income
Fund, the Strategic Income Fund and the Portfolio may not invest more than 25%
of their respective total assets in bank securities; (e) repurchase agreements
with respect to the foregoing; and (f) other substantially similar short-term
debt securities with comparable characteristics.
INVESTMENTS IN OTHER INVESTMENT COMPANIES
With respect to certain countries, investments by the Government Income Fund,
the Strategic Income Fund and the Portfolio presently may be made only by
acquiring shares of other investment companies with local governmental approval
to invest in those countries. At such time as direct investment in these
countries is allowed, the Government Income Fund, the Strategic Income Fund and
the Portfolio anticipate investing directly in these markets. The Government
Statement of Additional Information Page 2
<PAGE>
GT GLOBAL INCOME FUNDS
Income Fund, the Strategic Income Fund and the Portfolio may also invest in the
securities of closed-end investment companies within the limits of the
Investment Company Act of 1940, as amended ("1940 Act"). These limitations
currently provide that, in part, a Fund or the Portfolio may purchase shares of
another investment company unless (a) such a purchase would cause the Government
Income Fund, the Strategic Income Fund or the Portfolio to own in the aggregate
more than 3% of the total outstanding voting securities of the investment
company or (b) such a purchase would cause the Government Income Fund, the
Strategic Income Fund or the Portfolio to have more than 5% of its total assets
invested in the investment company or more than 10% of its aggregate assets
invested in an aggregate of all such investment companies. The foregoing
limitations do not apply to the investment by the High Income Fund in the
Portfolio. Investment in investment companies may involve the payment of
substantial premiums above the value of such companies' portfolio securities.
The Government Income Fund, the Strategic Income Fund and the Portfolio do 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.
SAMURAI AND YANKEE BONDS
The Government Income Fund, the Strategic Income Fund and the Portfolio may
invest in yen-denominated bonds sold in Japan by non-Japanese issuers ("Samurai
bonds"), and may invest in dollar-denominated bonds sold in the United States by
non-U.S. issuers ("Yankee bonds"). It is the policy of the Government Income
Fund, the Strategic Income Fund and the Portfolio to invest in Samurai or Yankee
bond issues only after taking into account considerations of quality and
liquidity, as well as yield.
WARRANTS OR RIGHTS
Warrants or rights may be acquired by the Government Income Fund, the Strategic
Income Fund or the Portfolio in connection with other securities or separately
and provide a Fund or the Portfolio with the right to purchase at a later date
other securities of the issuer.
LENDING OF PORTFOLIO SECURITIES
For the purpose of realizing additional income, the Strategic Income Fund or the
Portfolio may make secured loans of portfolio securities 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
continuously be 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. While the securities loan is outstanding, the Strategic Income Fund and
the 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. The Strategic Income
Fund and the Portfolio each will have a right to call each loan and obtain the
securities on five business days' notice. The Government Income Fund, the
Strategic Income Fund and the Portfolio will not have the right to vote equity
securities while they are lent, but each may call in a loan in anticipation of
any important vote. The risks in lending portfolio securities, as with other
extensions of secured credit, consist of possible delay in receiving additional
collateral or in recovery of the securities or possible loss of rights in the
collateral should the borrower fail financially. Loans will be made only 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.
COMMERCIAL BANK OBLIGATIONS
For the purposes of the Strategic Income Fund's and the 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, however, may be
limited by the terms of a specific obligation and by government regulation. As
with investment in non-U.S. securities in general, investments in the
obligations of foreign branches of U.S. banks and of foreign banks may subject
the the Strategic Income Fund and the Portfolio to investment risks that are
different in some respects from those of investments in obligations of domestic
issuers. Although the Strategic Income Fund and the Portfolio typically will
acquire obligations issued and supported by the credit of U.S. or foreign banks
having total assets at the time of purchase in excess of $1 billion, this $1
billion figure is not an investment policy or restriction of either Fund or the
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
The Government Income Fund, the Strategic Income Fund and the Portfolio may
enter into repurchase agreements. Repurchase agreements are transactions in
which the Fund or Portfolio buys 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
Statement of Additional Information Page 3
<PAGE>
GT GLOBAL INCOME FUNDS
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 Funds
or Portfolio if the other party to the repurchase agreement becomes bankrupt,
the Government Income Fund, the Strategic Income Fund and the Portfolio intend
to enter into repurchase agreements only with banks and broker/dealers believed
by the Manager to present minimal credit risks in accordance with guidelines
approved by the Company's Board of Directors. (The term "Company's Board of
Directors" as used herein shall refer to the Board of Directors of the Company
and the Board of Trustees of the Portfolio, as applicable). The Manager reviews
and monitors the creditworthiness of such institutions under the Board's general
supervision.
The Government Income Fund, the Strategic Income Fund and the 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, the Government Income Fund,
the Strategic Income Fund or the 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 the Government Income Fund, the Strategic Income
Fund's or the Portfolio's ability to sell the collateral and the Government
Income Fund, the Strategic Income Fund or the Portfolio could suffer a loss.
However, with respect to financial institutions whose bankruptcy or liquidation
proceedings are subject to the U.S. Bankruptcy Code, the Government Income Fund,
the Strategic Income Fund and the Portfolio intend to comply with provisions
under such Code that would allow the immediate resale of such collateral. The
Government Income Fund will not enter into a repurchase agreement with a
maturity of more than seven days if, as a result, more than 10% of the value of
its total assets would be invested in such repurchase agreements and other
illiquid investments and securities for which no readily available market
exists.
BORROWING, REVERSE REPURCHASE AGREEMENTS AND "ROLL" TRANSACTIONS
The Government Income Fund's borrowings will not exceed 30% of the Fund's total
assets, i.e., the Fund's total assets at all times will equal at least 300% of
the amount of outstanding borrowings. If market fluctuations in the value of the
Fund's portfolio holdings or other factors cause the ratio of the Fund's total
assets to outstanding borrowings to fall below 300%, within three days
(excluding Sundays and holidays) of such event the Fund may be required to sell
portfolio securities to restore the 300% asset coverage, even though from an
investment standpoint such sales might be disadvantageous. The Strategic Income
Fund's and the Portfolio's borrowings will not exceed 33 1/3% of the Strategic
Income Fund's or the Portfolio's, respective total assets. The Government Income
Fund, the Strategic Income Fund and the Portfolio each may borrow up to 5% of
its respective total assets for temporary or emergency purposes other than to
meet redemptions. Any borrowing by a Fund or the Portfolio may cause greater
fluctuation in the value of its shares than would be the case if the Fund or the
Portfolio did not borrow.
The Government Income Fund's, the Strategic Income Fund's and the Portfolio's
fundamental investment limitations permit it to borrow money for leveraging
purposes. The Government Income Fund, however, currently is 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 a
vote of a majority of the Company's Board of Directors. The Strategic Income
Fund and Portfolio may borrow for leveraging purposes. In the event that the
Strategic Income Fund or the Portfolio employs leverage, 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 Fund's
or the Portfolio's net asset value. When the income and gains on securities
purchased with the proceeds of borrowings exceed the costs of such borrowings,
the Government Income Fund's, the Strategic Income Fund's or the Portfolio's
earnings or net asset value will increase faster than otherwise would be the
case; conversely, if such income and gains fail to exceed such costs, the Fund's
or the Portfolio's earnings or net asset value would decline faster than would
otherwise be the case.
The Government Income Fund, the Strategic Income Fund and the Portfolio may
enter into reverse repurchase agreements. A reverse repurchase agreement is a
borrowing transaction in which a Fund or the 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. The Government Income Fund, the Strategic
Income Fund and the Portfolio also may engage in "roll" borrowing transactions
which involve a Fund's or the Portfolio's sale of Government National Mortgage
Association certificates or other securities together with a commitment (for
which a Fund or the Portfolio may receive a fee) to purchase similar, but not
identical, securities at a future date. The Government Income Fund, the
Strategic Income Fund and the 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.
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SHORT SALES
The Government Income Fund, the Strategic Income Fund and the Portfolio are
authorized to make short sales of securities, although they have no current
intention of doing so. A short sale is a transaction in which a Fund or the
Portfolio sells a security in anticipation that the market price of that
security will decline. The Government Income Fund, the Strategic Income Fund and
the Portfolio may make short sales as a form of hedging to offset potential
declines in long positions in securities it owns, or anticipates acquiring, and
in order to maintain portfolio flexibility. The Government Income Fund, the
Strategic Income Fund and the Portfolio only may make short sales "against the
box." In this type of short sale, at the time of the sale, the Fund or the
Portfolio owns the security it has sold short or has the immediate and
unconditional right to acquire the identical security at no additional cost.
In a short sale, the seller does not immediately deliver the securities sold and
does not receive the proceeds from the sale. To make delivery to the purchaser,
the executing broker borrows the securities being sold short on behalf of the
seller. The seller is said to have a short position in the securities sold until
it delivers the securities sold, at which time it receives the proceeds of the
sale. To secure its obligation to deliver securities sold short, the Government
Income Fund, the Strategic Income Fund or the Portfolio will deposit in a
separate account with its custodian an equal amount of the securities sold short
or securities convertible into or exchangeable for such securities at no cost.
The Government Income Fund, the Strategic Income Fund or the Portfolio could
close out a short position by purchasing and delivering an equal amount of the
securities sold short, rather than by delivering securities already held by the
Fund or the Portfolio, because the Fund or the Portfolio might want to continue
to receive interest and dividend payments on securities in its portfolio that
are convertible into the securities sold short.
The Government Income Fund, the Strategic Income Fund and the Portfolio might
make a short sale "against the box" in order to hedge against market risks when
the Manager believes that the price of a security may decline, causing a decline
in the value of a security owned by the Government Income Fund, the Strategic
Income Fund or the Portfolio or a security convertible into or exchangeable for
such security, or when the Manager wants to sell the security the Fund or the
Portfolio owns at a current attractive price, but also wishes to defer
recognition of gain or loss for federal income tax purposes and for purposes of
satisfying certain tests applicable to regulated investment companies under the
Internal Revenue Code of 1986, as amended (the "Code"). In such case, any future
losses in the Government Income Fund's, the Strategic Income Fund's Fund or the
Portfolio's long position should be reduced by a gain in the short position.
Conversely, any gain in the long position should be reduced by a loss in the
short position. The extent to which such gains or losses in the long position
are reduced will depend upon the amount of the securities sold short relative to
the amount of the securities the Fund or the Portfolio owns, either directly or
indirectly, and, in the case where a Fund or the Portfolio owns convertible
securities, changes in the investment values or conversion premiums of such
securities. There will be certain additional transaction costs associated with
short sales "against the box," but a Fund or the Portfolio will endeavor to
offset these costs with income from the investment of the cash proceeds of short
sales.
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GT GLOBAL INCOME FUNDS
OPTIONS, FUTURES AND CURRENCY
STRATEGIES
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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 a Fund or the Portfolio
entered into a short hedge because the Manager projected a decline in the
price of a security in the Fund's or the Portfolio's portfolio, and the
price of that security increased instead, the gain from that increase might
by 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 Fund or the
Portfolio could suffer a loss. In either such case, the Fund or the
Portfolio would have been in a better position had it not hedged at all.
(4) As described below, a Fund or the 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 a Fund or
the 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 Fund's ability or the 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 Fund or the Portfolio sell a
portfolio security at a disadvantageous time. The Fund's or the 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 Fund or the Portfolio.
WRITING CALL OPTIONS
The Government Income Fund, the Strategic Income Fund and the 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
Government Income Fund, the Strategic Income Fund and the Portfolio.
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 may be assigned an
exercise notice, requiring him 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.
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GT GLOBAL INCOME FUNDS
Portfolio securities or currencies on which call options may be written will be
purchased solely on the basis of investment considerations consistent with a
Fund's or the Portfolio's investment objectives. When writing a call option, the
Government Income Fund, the Strategic Income Fund or the 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, a Fund or the
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 a Fund or the Portfolio has
written expires, the Fund or the 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 Fund or the 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. The Government Income Fund, the Strategic Income
Fund and the Portfolio do not consider a security or currency covered by a call
option to be "pledged" as that term is used in the Government Income Fund's, the
Strategic Income Fund's and the Portfolio's fundamental investment 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 a Fund or the Portfolio will
be obligated to sell the security or currency at less than its market value.
The premium that the Government Income Fund, the Strategic Income Fund or the
Portfolio receives for writing a call option is deemed to constitute the market
value of an option. The premium a Fund or the 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 the Government Income
Fund, the Strategic Income Fund or the Portfolio to write another call option on
the underlying security or currency with either a different exercise price,
expiration date or both.
The Government Income Fund, the Strategic Income Fund and the 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
normally are 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 or currencies at the time the options
are written. From time to time, a Fund or the 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.
A Fund or the 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 a Fund or the Portfolio.
WRITING PUT OPTIONS
The Government Income Fund, the Strategic Income Fund and the 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
anytime 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.
A Fund or the Portfolio generally would write put options in circumstances where
the Manager wishes to purchase the underlying security or currency for the
Fund's or the Portfolio's portfolio at a price lower than the current market
price of the security or currency. In such event, the Fund or the 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
Fund or the Portfolio also would receive interest on debt securities or
currencies maintained to cover the exercise price of the option, this technique
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GT GLOBAL INCOME FUNDS
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 a Fund or the Portfolio
will be obligated to purchase the security or currency at greater than its
market value.
PURCHASING PUT OPTIONS
The Government Income Fund, the Strategic Income Fund and the Portfolio may
purchase put options on securities, indices and currencies. As the holder of a
put option, the Government Income Fund, the Strategic Income Fund or the
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. The Government Income Fund, the Strategic Income Fund or the
Portfolio may enter into closing sale transactions with respect to such options,
exercise them or permit them to expire.
A Fund or the Portfolio may purchase a put option on an underlying security or
currency ("protective put") owned by the Fund or the Portfolio as a hedging
technique 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 Fund or the 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 eventually is sold.
The Government Income Fund, the Strategic Income Fund and the Portfolio also may
purchase put options at a time when that Fund or the Portfolio does not own the
underlying security or currency. By purchasing put options on a security or
currency it does not own, a Fund or the 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 Fund or the 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
The Government Income Fund, the Strategic Income Fund or the Portfolio may
purchase call options on securities, indices and currencies. As the holder of a
call option, a Fund or the 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. A Fund or the
Portfolio may enter into closing sale transactions with respect to such options,
exercise them or permit them to expire.
Call options may be purchased by a Fund or the 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 the Fund or the
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 also may be useful to a Fund or the
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, a Fund or the 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.
The Government Income Fund, the Strategic Income Fund and the Portfolio also may
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 also
may be purchased at times to avoid realizing losses that would result in a
reduction of a Fund's or the Portfolio's current return. For example, where a
Fund or the 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 the Fund or the Portfolio, an increase in the market
price could result in the exercise of the call option written by the Fund or the
Portfolio and the realization of a loss on the underlying security or currency.
Accordingly, the
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GT GLOBAL INCOME FUNDS
Fund or the Portfolio could purchase a call option on the same underlying
security or currency, which could be exercised to fulfill the Fund's or the
Portfolio's delivery obligations under its written call (if it is exercised).
This strategy could allow the Fund or the Portfolio to avoid selling the
portfolio security or currency at a time when it has an unrealized loss;
however, the Fund or the 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 a Fund's
or the Portfolio's total assets at the time of purchase.
The Government Income Fund, the Strategic Income Fund or the 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 a
Fund or the 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 of the option. A call option gives
a Fund or the 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 of the option. A Fund or
the 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 the Fund or the 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 the Fund or the Portfolio
anticipates purchasing securities.
Options may be either listed on an exchange or traded over-the-counter ("OTC
options"). 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. The Funds and the Portfolio will not purchase an OTC option unless the
Fund or the Portfolio 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 the 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. A Fund or the Portfolio may also sell OTC
options and, in connection therewith, segregate assets or cover its obligations
with respect to OTC options written by the Fund or the Porfolio. The assets used
as cover for OTC options written by a Fund or the Portfolio will be considered
illiquid unless the OTC options are sold to qualified dealers who agree that the
Fund or the 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.
A Fund's or the Portfolio's ability to establish and close out positions in
exchange-listed options depends on the existence of a liquid market. Each Fund
and the 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 each Fund and the Portfolio will enter into OTC options
only with contra parties that are expected to be capable of entering into
closing transactions with the Fund or the Portfolio, there is no assurance that
the Fund or the Portfolio will in fact be able to close out an OTC option
position at a favorable price prior to expiration. In the extent of insolvency
of the contra party, the Fund or the 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 a Fund or the 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 Fund or the 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 a Fund or the Portfolio buys
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GT GLOBAL INCOME FUNDS
a call on an index, it pays a premium and has the same rights as to such call as
are indicated above. When a Fund or the 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 Fund's or the Portfolio's exercise of the put, to
deliver to the Fund or the 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 a Fund or the 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 Fund or the 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 a Fund or the
Portfolio writes a call on an index it cannot provide in advance for its
potential settlement obligations by acquiring and holding the underlying
securities. A Fund or the 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, a Fund or the
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 a Fund or the 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 Fund or the 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 a Fund or the 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 Fund or the 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 AND CURRENCY FUTURES CONTRACTS
The Government Income Fund, the Strategic Income Fund or the Portfolio may enter
into interest rate or currency futures contracts, including futures contracts on
indices of debt securities, ("Futures" or "Futures Contracts"), as a hedge
against changes in prevailing levels of interest rates or currency exchange
rates in order to establish more definitely the effective return on securities
or currencies held or intended to be acquired by the Fund or the Portfolio. The
Government Income Fund, the Strategic Income Fund's or the Portfolio's hedging
may include sales of Futures as an offset against the effect of expected
increases in interest rates or decreases in currency exchange rates, and
purchases of Futures as an offset against the effect of expected declines in
interest rates or increases in currency exchange rates.
The Government Income Fund's, the Strategic Income Fund and the 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 a Fund's or the Portfolio's exposure to interest rate and
currency exchange rate fluctuations, a Fund or the Portfolio may be able to
hedge 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 (debt
security or currency) for a specified price at a designated date, time and
place. An index
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GT GLOBAL INCOME FUNDS
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 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 the securities 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 Government Income Fund, the
Strategic Income Fund or the Portfolio realizes a gain; if it is more, the
Government Income Fund, the Strategic Income Fund or the Portfolio realizes a
loss. Conversely, if the offsetting sale price is more than the original
purchase price, the Government Income Fund, the Strategic Income Fund or the
Portfolio realizes a gain; if it is less, the Government Income Fund, the
Strategic Income Fund or the Portfolio realizes a loss. The transaction costs
also must be included in these calculations. There can be no assurance, however,
that a Fund or the Portfolio will be able to enter into an offsetting
transaction with respect to a particular Futures Contract at a particular time.
If a Fund or the Portfolio is not able to enter into an offsetting transaction,
the Fund or the 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 Government
Income Fund, the Strategic Income Fund or the Portfolio.
The Government Income Fund, the Strategic Income Fund's and the 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 the Fund or the Portfolio owns, or Futures Contracts will be
purchased to protect the Fund or the 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 the Government Income Fund, the Strategic Income Fund or the
Portfolio in order to initiate Futures trading and to maintain the Fund's or the
Portfolio's open positions in Futures Contracts. A margin deposit made when the
Futures Contract is entered into ("initial margin") is intended to assure a
Fund's or the 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 modified significantly 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 Fund or the 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, among other things, by actual and anticipated
changes in interest and currency rates, 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 a Fund's or the
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
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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 option on Futures Contract 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 occasionally have 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 a Fund or the 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 Fund or the
Portfolio would continue to be subject to market risk with respect to the
position. In addition, except in the case of purchased options, the Fund or the
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 a Fund or the 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.
A Fund or the 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 a Fund or the 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 a Fund's or the
Portfolio's
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GT GLOBAL INCOME FUNDS
portfolio, after taking into account unrealized profits and unrealized losses on
any contracts the Fund or the 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 or the Portfolio's Board of
Trustees, as applicable, without a shareholder vote. This limitation does not
limit the percentage of a Fund's or the Portfolio's assets at risk to 5%.
FORWARD CURRENCY CONTRACTS
A Forward Contract is an obligation, generally 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. The
Government Income Fund, the Strategic Income Fund and the Portfolio either may
accept or make delivery of the currency at the maturity of the Forward Contract.
A Fund or the 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.
A Fund or the Portfolio engages in forward currency transactions in anticipation
of, or to protect itself against, fluctuations in exchange rates. A Fund or the
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,
a Fund or the 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, the Funds or
the 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. The Government Income Fund, the Strategic Income Fund or
the 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 Company's Board of Directors or the Portfolio's Board of Trustees, as
applicable.
The Government Income Fund, the Strategic Income Fund or the Portfolio may enter
into Forward Contracts either with respect to specific transactions or with
respect to the overall investment of the Fund or the 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 the Fund or the
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 Fund or the 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 Fund or the 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 the Fund or the Portfolio to
sustain losses on these contracts and transaction costs.
At or before the maturity of a Forward Contract requiring the Fund or the
Portfolio to sell a currency, the Fund or the Portfolio either may sell a
portfolio 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 Fund or the
Portfolio will obtain, on the same maturity date, the same amount of the
currency that it is obligated to deliver. Similarly, the Fund or the 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. The Fund or the 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 a Fund or the 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 usually are
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 the Fund or the Portfolio owns or intends to acquire, but
it does establish a rate of exchange in advance. In addition, while Forward
Contracts 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.
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GT GLOBAL INCOME FUNDS
FOREIGN CURRENCY STRATEGIES -- SPECIAL CONSIDERATIONS
A Fund or the 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 Fund's or the Portfolio's securities are denominated. Such currency
hedges can protect against price movements in a security that a Fund or the
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.
A Fund or the 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 Fund or the 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, a Fund or the 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, a Fund or the 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 a Fund or the Portfolio has purchased) expose the Fund or the
Portfolio to an obligation to another party. A Fund or the 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 Fund and the 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 a Fund's or the Portfolio's assets are used for cover or segregated accounts,
it could affect portfolio management or the Fund's or the Portfolio's ability to
meet redemption requests or other current obligations.
INTEREST RATE AND CURRENCY SWAPS
The Strategic Income Fund and the Portfolio usually will enter into interest
rate swaps on a net basis, that is, the two payment streams are netted out in a
cash settlement on the payment date or dates specified in the instrument, with
the Strategic Income Fund or the Portfolio receiving or paying, as the case may
be, only the net amount of the two payments. The net amount of the excess, if
any, of each of the Strategic Income Fund's and the Portfolio's obligations over
its entitlements with respect to each swap will be accrued on a daily basis and
an amount of cash, U.S. government securities or other liquid high grade debt
obligations having an aggregate net asset value at least equal to the accrued
excess will be maintained in an account by a custodian that satisfies the
requirements of the 1940 Act. The Strategic Income Fund and the Portfolio will
also establish and maintain such segregated accounts with respect to its total
obligations under any swaps that are not entered into on a net basis and with
respect to any caps or floors that are written by that Fund or the Portfolio.
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GT GLOBAL INCOME FUNDS
The Manager, the Strategic Income Fund and the Portfolio believe that swaps,
caps and floors do not constitute senior securities under the 1940 Act and,
accordingly, will not treat them as being subject to the Fund's and the
Portfolio's borrowing restrictions. The Strategic Income Fund and the Portfolio
will not enter into any swap, cap, floor, collar or other derivative transaction
unless, at the time of entering into the transaction, the unsecured long-term
debt rating of the counterparty combined with any credit enhancements is rated
at least A by Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's
Ratings Group ("S&P") or has an equivalent rating from a nationally recognized
statistical rating organization or is determined to be of equivalent credit
quality by the Manager. If a counterparty defaults, the Strategic Income Fund or
the Portfolio may have contractual remedies pursuant to the agreements related
to the transactions. The swap market has grown substantially in recent years,
with a large number of banks and investment banking firms acting both as
principals and as agents utilizing standardized swap documentation. As a result,
the swap market has become relatively liquid. Caps, floors and collars are more
recent innovations for which standardized documentation has not yet been fully
developed and, for that reason, they are less liquid than swaps.
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RISK FACTORS
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SPECIAL CONSIDERATIONS AFFECTING EMERGING MARKETS. The Strategic Income Fund
and the Portfolio may invest in debt securities in emerging markets. Investing
in securities in emerging countries may entail greater risks than investing in
debt securities in developed countries. These risks include (i) less social,
political and economic stability; (ii) the small current size of the markets for
such securities and the currently low or nonexistent volume of trading, which
result in a lack of liquidity and in greater price volatility; (iii) certain
national policies which may restrict the Strategic Income Fund's and the
Portfolio's investment opportunities, including restrictions on investment in
issuers or industries deemed sensitive to national interests; (iv) foreign
taxation; and (v) the absence of developed structures governing private or
foreign investment or allowing for judicial redress for injury to private
property.
Settlement mechanisms in emerging securities markets may be less efficient and
reliable than in more developed markets. In such emerging securities markets
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.
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 and on repatriation of capital invested. In the event of such
expropriation, nationalization or other confiscation by any country, either a
Fund or the Portfolio could lose its entire investment in any such country.
An investment in the Strategic Income Fund and the Portfolio is subject to the
political and economic risks associated with investments in emerging markets.
Even though opportunities for investment may exist in emerging markets, any
change in the leadership or policies of the governments of those countries or in
the leadership or policies of any other government which exercises a significant
influence over those countries, may halt the expansion of or reverse the
liberalization of foreign investment policies now occurring and thereby
eliminate any investment opportunities which may currently exist.
Investors should note that upon the accession to power of authoritarian regimes,
the governments of a number of emerging market countries previously expropriated
large quantities of real and personal property similar to the property which
will be represented by the securities purchased by the Fund and the Portfolio.
The claims of property owners against those governments were never finally
settled. There can be no assurance that any property represented by securities
purchased by the Fund or the Portfolio will not also be expropriated,
nationalized, or otherwise confiscated. If such confiscation were to occur, the
Fund or the Portfolio could lose a substantial portion of its investments in
such countries. The Fund's and the Portfolio's investments would similarly be
adversely affected by exchange control regulation in any of those countries.
Statement of Additional Information Page 15
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GT GLOBAL INCOME FUNDS
RELIGIOUS, POLITICAL AND ETHNIC INSTABILITY. Certain countries in which a
Fund or the 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 the Fund's or the
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 a Fund or the
Portfolio invests and adversely affect the value of the Fund's or the
Portfolio's assets.
ILLIQUID SECURITIES. The Government Income Fund may invest up to 10% of its
total assets in securities the disposition of which may be subject to legal or
contractual restrictions or the markets for which may be illiquid. The Strategic
Income Fund and the Portfolio each may invest up to 15% of total assets in
illiquid securities. Securities may be considered illiquid if a Fund or the
Portfolio cannot reasonably expect within seven days to receive approximately
the amount at which the Fund or the Portfolio values such securities. 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 the over-the-counter
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, each Fund and the 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 each Fund and the
Portfolio may be permitted to sell a security under an effective registration
statement. If, during such a period, adverse market conditions were to develop,
each Fund and the 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
each Fund and the Portfolio, however, could affect adversely the marketability
of such portfolio securities and each Fund and the Portfolio might be unable to
dispose of such securities promptly or at favorable prices.
With respect to liquidity determinations generally, the Company's Board of
Directors has the ultimate responsibility for determining whether specific
securities, including restricted securities eligible for resale to qualified
institutional buyers pursuant to Rule 144A under the 1933 Act, are liquid or
illiquid. The Board has delegated the function of making day-to-day
determinations of liquidity to the Manager in accordance with procedures
approved by the Company's Board of Directors. 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 will monitor the liquidity of securities
held by each Fund and the Portfolio and
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GT GLOBAL INCOME FUNDS
report periodically on such decisions to the Company's Board of Directors.
Moreover, as noted in the Prospectus, certain securities, such as those subject
to repatriation restrictions of more than seven days, will generally be treated
as illiquid.
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 the Government Income Fund,
the Strategic Income Fund or the Portfolio. These restrictions or controls may
at times limit or preclude investment in certain securities and may increase the
cost and expenses of a Fund or 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. The
Government Income Fund, the Strategic Income Fund or the 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 the Government
Income Fund, the Strategic Income Fund or the 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 the
Government Income Fund, the Strategic Income Fund and the 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 the Funds and the Portfolio, under normal
circumstances, will invest substantial portions of their 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 each Fund's and the 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 each Fund's and the Portfolio's
holdings of securities and cash denominated in such currency and, therefore,
will cause an overall decline in the Fund's and the Portfolio'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 Fund and the Portfolio.
Moreover, if the value of the foreign currencies in which a Fund receives its
income declines relative to the U.S. dollar between the receipt of the income
and the making of Fund distributions, the Fund may be required to liquidate
securities in order to make distributions if the Fund 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 the Funds and the Portfolio value their assets daily in terms of U.S.
dollars, the Funds and the Portfolio do not intend to convert holdings of
foreign currencies into U.S. dollars on a daily basis. The Funds 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 are buying and selling various currencies. Thus, a dealer may offer to sell
a foreign currency to a Fund at one rate, while offering a lesser rate of
exchange should the Fund desire to sell that currency to the dealer.
Statement of Additional Information Page 17
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GT GLOBAL INCOME FUNDS
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 U.S., 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 a Fund or the Portfolio are
uninvested and no return is earned thereon. The inability of a Fund or the
Portfolio to make intended security purchases due to settlement problems could
cause it to miss attractive opportunities. Inability to dispose of a portfolio
security due to settlement problems either could result in losses to a Fund or
the Portfolio due to subsequent declines in value of the portfolio security or,
if the Fund or the 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 each Fund's or the
Portfolio's assets, although the Manager does not believe that such difficulties
will have a material adverse effect on the Funds' or the Portfolio's portfolio
trading activities.
The Funds and the Portfolio may use foreign custodians, which may involve risks
in addition to those related to the use of U.S. custodians. Such risks include
uncertainties relating to: (i) determining and monitoring the financial
strength, reputation and standing of the foreign custodian; (ii) maintaining
appropriate safeguards to protect the Funds' and the Portfolio's investments and
(iii) possible difficulties in obtaining and enforcing judgments against such
custodians.
WITHHOLDING TAXES. Each Fund's and the Portfolio's net investment income
from foreign issuers may be subject to withholding taxes by the foreign issuer's
country, thereby reducing the Fund's and the Portfolio's net investment income
or delaying the receipt of income where those taxes may be recaptured. See
"Taxes."
SPECIAL CONSIDERATIONS AFFECTING EUROPE. 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 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 at this time
what the exact form or effect of these Common Market reforms will be on business
in Western Europe or the emerging European markets, it is impossible to predict
the long-term impact of the implementation of these programs on the securities
owned by the Funds or the Portfolio.
SPECIAL CONSIDERATIONS AFFECTING JAPAN AND HONG KONG. The concentration of
investments by a Fund or the Portfolio in Japan means that that Fund or the
Portfolio may be more volatile than a fund that is broadly diversified
geographically. Overseas trade is important to Japan's economy. Japan has few
natural resources and must export to pay for its imports of these basic
requirements. Because of the concentration of Japanese exports in highly visible
products, 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 or other protectionist measures could impact Japan
adversely in both the short and the long term. 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.
Hong Kong is a British colony which will transfer sovereignty to the Peoples
Republic of China in 1997. China has espoused policies antagonistic to free
enterprise capitalism and democracy. There can be no guarantee that property
rights will continue to be safeguarded in Hong Kong after 1997, although,
recently China has moved toward free enterprise, and has established stock
exchanges of its own.
Statement of Additional Information Page 18
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GT GLOBAL INCOME FUNDS
INVESTMENT LIMITATIONS
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Each Fund and the Portfolio has adopted the following investment limitations as
fundamental policies which may not be changed without approval by the holders of
the lesser of (i) 67% of that Fund's shares or the total beneficial interests of
the Portfolio represented at a meeting at which more than 50% of the outstanding
shares of the Fund or the total beneficial interests of the Portfolio are
represented, or (ii) more than 50% of the outstanding shares of the Fund or the
total beneficial interests of the Portfolio. Whenever the High Income Fund is
requested to vote on a change in the investment limitations of the Portfolio,
the Fund will hold a meeting of its shareholders and will cast its votes as
instructed by its shareholders.
GOVERNMENT INCOME FUND
The Government Income Fund may not:
(1) Invest 25% or more of the value of its total assets in the
securities of issuers conducting their principal business activities in the
same industry, except that this limitation shall not apply to securities
issued or guaranteed as to principal and interest by the U.S. Government or
any of its agencies or instrumentalities;
(2) Invest in companies for the purpose of exercising control or
management;
(3) Buy or sell real estate (including real estate limited partnerships)
or commodities or commodity contracts; however, the 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, and may purchase or sell currencies (including
forward currency exchange contracts), futures contracts and related options
generally as described in the Prospectus and Statement of Additional
Information and subject to (14) below;
(4) Acquire securities subject to restrictions on disposition or
securities for which there is no readily available market, or enter into
repurchase agreements or purchase time deposits maturing in more than seven
days, or purchase over-the-counter options or hold assets set aside to cover
over-the-counter options written by a Fund, if, immediately after and as a
result, the value of such securities would exceed, in the aggregate, 10% of
the Fund's total assets;
(5) Engage in the business of underwriting securities of other issuers,
except to the extent that the disposal of an investment position may
technically cause it to be considered an underwriter as that term is defined
under the Securities Act of 1933;
(6) Make loans, except that the Fund may purchase debt securities and
enter into repurchase agreements and make loans of portfolio securities;
(7) Sell securities short, except to the extent that the Fund
contemporaneously owns or has the right to acquire at no additional cost
securities identical to those sold short;
(8) Purchase securities on margin, provided that the 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 subject to (14) below;
(9) Borrow money, except from banks for temporary or emergency purposes
not in excess of 30% of the value of the Fund's total assets. The Fund will
not purchase securities while such borrowings are outstanding. This
restriction shall not prevent the Fund from entering into reverse repurchase
agreements and engaging in "roll" transactions, provided that reverse
repurchase agreements, "roll" transactions and any other transactions
constituting borrowing by the Fund may not exceed one-third of the Fund's
total assets. In the event that the asset coverage for the Fund's borrowings
falls below 300%, the Fund will reduce, within three days (excluding Sundays
and holidays), the amount of its borrowings in order to provide for the 300%
asset coverage;
(10) 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;
Statement of Additional Information Page 19
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GT GLOBAL INCOME FUNDS
(11) Invest in interests in oil, gas, or other mineral exploration or
development programs;
(12) 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;
(13) Purchase or retain the securities of any issuer, if those individual
officers and Directors of the Company, the 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;
or
(14) Enter into a futures contract, if, as a result thereof, more than 5%
of the Fund's total assets (taken at market value at the time of entering
into the contract) would be committed to margin on such futures contracts.
For purposes of the Fund's concentration policy contained in limitation (1)
above, the Fund intends to comply with the SEC staff positions that securities
issued or guaranteed as to principal and interest by any single foreign
government or any supranational organizations in the aggregate are considered to
be securities of issuers in the same industry.
The following investment policies of the Government Income Fund, are not
fundamental policies and may be changed by vote of a majority of the Company's
Board of Directors without shareholder approval. The Fund may not: (1) borrow
money to purchase securities; and (2) invest in securities of an issuer if the
investment would cause the Fund to own more than 10% of any class of securities
of any one issuer.
STRATEGIC INCOME FUND
The Strategic Income Fund may not:
(1) Invest 25% or more of the value of its total assets in the
securities of issuers conducting their principal business activities in the
same industry, (provided, however, that the Fund may invest all of its
investable assets in an open-end management investment company with
substantially the same investment objectives, policies and limitations as
the Fund) except that this limitation shall not apply to securities issued
or guaranteed as to principal and interest by the U.S. Government or any of
its agencies or instrumentalities;
(2) Invest in companies for the purpose of exercising control or
management (provided, however, that the Fund may invest all of its
investable assets in an open-end management investment company with
substantially the same investment objectives, policies and limitations as
the Fund);
(3) Buy or sell real estate (including real estate limited partnerships)
or commodities or commodity contracts; however, the 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, and may purchase or sell currencies (including
forward currency exchange contracts), futures contracts and related options
generally as described in the Prospectus and Statement of Additional
Information and subject to (13) below;
(4) Engage in the business of underwriting securities of other issuers,
except to the extent that the disposal of an investment position may
technically cause it to be considered an underwriter as that term is defined
under the Securities Act of 1933;
(5) Make loans, except that the Fund may invest in loans and
participations, purchase debt securities and enter into repurchase
agreements and make loans of portfolio securities;
(6) Sell securities short, except to the extent that the Fund
contemporaneously owns or has the right to acquire at no additional cost
securities identical to those sold short;
(7) Purchase securities on margin, provided that the 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 subject to (13) below;
(8) Borrow money in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed), less all liabilities and indebtedness
(other than borrowing). This restriction shall not prevent the Fund from
entering into reverse repurchase agreements and engaging in "roll"
transactions, provided that reverse repurchase agreements, "roll"
transactions and any other transactions constituting borrowing by the Fund
may not exceed one-third of the Fund's total assets. In the event that the
asset coverage for the Fund's borrowings falls below 300%, the Fund will
reduce, within three days (excluding Sundays and holidays), the amount of
its borrowings in order to provide for 300% asset coverage. Transactions
involving options, futures contracts, options on futures contracts and
forward currency contracts, and collateral arrangements relating thereto
will not be deemed to be borrowings;
Statement of Additional Information Page 20
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GT GLOBAL INCOME FUNDS
(9) 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;
(10) Invest in interests in oil, gas, or other mineral exploration or
development programs;
(11) 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 (provided, however, that the Fund may invest all of
its investable assets in an open-end management investment company with
substantially the same investment objectives, policies, and limitations as
the Fund);
(12) Purchase or retain the securities of any issuer, if those individual
officers and Directors of the Company, the 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;
or
(13) Enter into a futures contract, if, as a result thereof, more than 5%
of the Fund's total assets (taken at market value at the time of entering
into the contract) would be committed to margin on such futures contracts.
For purposes of the Fund's concentration policy contained in limitation (1)
above, the Fund intends to comply with the SEC staff positions that securities
issued or guaranteed as to principal and interest by any single foreign
government or any supranational organizations in the aggregate are considered to
be securities of issuers in the same industry.
The following investment policies are not fundamental policies and may be
changed by vote of a majority of the Company's Board of Directors without
shareholder approval. The Fund may not:
(1) Invest more than 15% of its total assets in illiquid securities;
(2) Borrow money to purchase securities and will not invest in
securities of an issuer if the investment would cause the Fund to own more
than 10% of any class of securities of any one issuer (provided, however,
that the Fund may invest all of its investable assets in an open-end
management investment company with substantially the same investment
objectives, policies, and limitations as the Fund.); and
(3) Invest more than 10% of its total assets in shares of other
investment companies and 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 (provided, however, that the Fund
may invest all of its investable assets in an open-end management investment
company with substantially the same investment objectives, policies, and
limitations as the Fund).
HIGH INCOME FUND AND GLOBAL HIGH INCOME PORTFOLIO
The High Income Fund and the Portfolio each may not:
(1) Invest 25% or more of the value of its total assets in the
securities of issuers conducting their principal business activities in the
same industry, (provided, however, that the Fund may invest all of its
investable assets in an open-end management investment company with
substantially the same investment objectives as the Fund) except that this
limitation shall not apply to securities issued or guaranteed as to
principal and interest by the U.S. Government or any of its agencies or
instrumentalities;
(2) Purchase or sell real estate, including real estate limited
partnerships, provided that the Fund and the Portfolio may invest in
securities secured by real estate or interests therein or issued by
companies that invest in real estate or interests therein;
(3) Purchase or sell commodities or commodity contracts, except that the
Fund and the 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
transactions in foreign currencies;
(4) Underwrite securities of other issuers, except to the extent that,
in connection with the disposition of portfolio securities, the Fund and the
Portfolio may be deemed an underwriter under federal or state securities
laws;
(5) Make loans, except that the Fund and the Portfolio may invest in
loans and participations, purchase debt securities and enter into repurchase
agreements and make loans of portfolio securities;
(6) Purchase securities on margin, provided that the Fund and the
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
Statement of Additional Information Page 21
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GT GLOBAL INCOME FUNDS
connection with the use of options, futures contracts, options thereon or
forward currency contracts. The Fund and the Portfolio may make deposits of
margin in connection with futures and forward contracts and options thereon;
(7) Borrow money in excess of 33 1/3% of the Fund's or the Portfolio's
total assets (including the amount borrowed), less all liabilities and
indebtedness (other than borrowing). This restriction shall not prevent the
Fund or the Portfolio from entering into reverse repurchase agreements and
engaging in "roll" transactions, provided that reverse repurchase
agreements, "roll" transactions and any other transactions constituting
borrowing by the Fund or the Portfolio may not exceed one-third of the
Fund's or the Portfolio's respective total assets. In the event that the
asset coverage for the Fund's or the Portfolio's borrowings falls below
300%, the Fund or the Portfolio will reduce, within three days (excluding
Sundays and holidays), the amount of its borrowings in order to provide for
300% asset coverage. Transactions involving options, futures contracts,
options on futures contracts and forward currency contracts, and collateral
arrangements relating thereto will not be deemed to be borrowings;
(8) Mortgage, pledge, or in any other manner transfer as security for
any indebtedness any of its assets, except to secure permitted borrowings.
Collateral arrangements with respect to initial or variation margin for
futures contracts will not be deemed to be a pledge of the Fund's or the
Portfolio's assets;
(9) Invest in direct interests or leases in oil, gas, or other mineral
exploration or development programs, however, the Fund or the Portfolio may
invest in securities of companies that engage in these activities; or
(10) With respect to 50% of its total assets, invest more than 5% of its
assets in the securities of any one issuer or purchase more than 10% of the
outstanding voting securities of any one issuer (provided, however, that the
Fund may invest all of its investable assets in an open-end management
investment company with substantially the same investment objectives as the
Fund).
For purposes of the Fund's and the Portfolio's concentration policy contained in
limitation (1) above, the Fund and the Portfolio intend to comply with the SEC
staff positions that securities issued or guaranteed as to principal and
interest by any single foreign government or any supranational organizations in
the aggregate are considered to be securities of issuers in the same industry.
The following investment policies are not fundamental policies and may be
changed by vote of a majority of the Company's Board of Directors without
shareholder approval. The Fund and the Portfolio each may not:
(1) Invest in securities of an issuer if the investment would cause the
Fund or the Portfolio to own more than 10% of any class of securities of any
one issuer (provided, however, that the Fund may invest all of its
investable assets in an open-end management investment company with
substantially the same investment objectives as the Fund);
(2) Invest in companies for the purpose of exercising control or
management (provided, however, that the Fund may invest all of its
investable assets in an open-end management investment company with
substantially the same investment objectives as the Fund);
(3) Purchase or retain the securities of any issuer, if, to the Fund's
or the Portfolio's knowledge, one or more of the officers or Directors of
the Company, the Fund's or the Portfolio's investment adviser, or
distributor, each own beneficially more than 1/2 of 1% of the securities of
such issuer and together own beneficially more than 5% of the securities of
such issuer;
(4) 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 Fund's or the Portfolio's portfolio,
after taking into account unrealized profits and unrealized losses on any
contracts the Fund or the Portfolio has entered into;
(5) 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 (provided, however, that the Fund may invest all of
its investable assets in an open-end management investment company with
substantially the same investment objectives as the Fund); or
(6) Invest more than 10% of its total assets in shares of other
investment companies and 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 (provided, however, that the Fund
may invest all of its investable assets in an open-end management investment
company with substantially the same investment objectives as the Fund).
Statement of Additional Information Page 22
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GT GLOBAL INCOME FUNDS
Investors should refer to the Prospectus for further information with respect to
each Fund's investment objectives, which may not be changed without the approval
of the shareholders and the Portfolio's investment objectives, which may be
changed without the approval of investors in the Portfolio, and other investment
policies and techniques, which may be changed without shareholder approval.
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EXECUTION OF PORTFOLIO
TRANSACTIONS
- --------------------------------------------------------------------------------
Subject to policies established by the Company's Board of Directors, the Manager
is responsible for the execution of the Government Income and Strategic Income
Funds' and the Portfolio's portfolio transactions and the selection of broker/
dealers that execute such transactions on behalf of these Funds and the
Portfolio. In executing portfolio transactions, the Manager seeks the best net
results for the Government Income and Strategic Income Funds and the 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 the Funds and the Portfolio may engage in soft dollar
arrangements for research services, as described below, neither the Funds nor
the Portfolio has any obligation to deal with any broker/dealer or group of
broker/ dealers in the execution of portfolio transactions.
Debt securities generally are traded on a "net" basis with a dealer acting as
principal for its own account without a stated commission, although the price of
the security usually includes a profit to the dealer. U.S. and foreign
government securities and money market instruments generally are traded in the
OTC markets. In underwritten offerings, securities usually are purchased at a
fixed price which includes an amount of compensation to the underwriter. On
occasion, securities may be purchased directly from an issuer, in which case no
commissions or discounts are paid. Broker/dealers may receive commissions on
futures, currency and options transactions.
Consistent with the interests of the Funds and the Portfolio, the Manager may
select brokers to execute the Funds' and the Portfolio's portfolio transactions
on the basis of the research and brokerage services they provide to the Manager
for its use in managing the Funds and the 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
brokers are in addition to, and not in lieu of, the services required to be
performed by the Manager under the Management Contract (defined below). A
commission paid to such brokers 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 the Funds and the Portfolio and its other clients and that the total
commissions paid by the Funds and the Portfolio will be reasonable in relation
to the benefits received by the Funds and the Portfolio over the long term.
Research services may also be received from dealers who execute Fund
transactions in over-the-counter 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 the Funds or the Portfolio toward payment of the Funds'
or the Portfolio's expenses, such as transfer agent and custodian fees.
Investment decisions for each Fund and the 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 one or both Funds and the
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 the Funds
and the Portfolio are concerned, in other cases the Manager believes that
coordination and the ability to participate in volume transactions will be
beneficial to the Funds and the Portfolio.
Under a policy adopted by the Company's Board of Directors and the Portfolio's
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 Funds and
the
Statement of Additional Information Page 23
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GT GLOBAL INCOME FUNDS
other funds for which the Manager serves as investment manager in selecting
brokers and 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 Funds and such other funds.
Each Fund and the Portfolio contemplates purchasing most foreign equity
securities in over-the-counter 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 United States 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 a Fund and the Portfolio in the form of
American Depository Receipts ("ADRs"), American Depository Shares ("ADSs"),
Continental Depository Receipts ("CDRs") or European Depository Receipts
("EDRs") or securities convertible into foreign equity securities. ADRs, ADSs,
CDRs and EDRs may be listed on stock exchanges, or traded in the
over-the-counter 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 the Funds and the Portfolio may invest generally are
traded in the over-the-counter markets.
The Funds and the Portfolio contemplate that, consistent with the policy of
obtaining the best net results, brokerage transactions may be conducted through
certain companies that are members of the Liechtenstein Global Trust. The
Company's Board of Directors 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. For the fiscal years
ended October 31, 1996, 1995 and 1994, the Portfolio paid aggregate brokerage
commissions of $ , $0 and $24,000, respectively. For the fiscal years ended
October 31, 1996, 1995 and 1994, the Government Income Fund paid aggregate
brokerage commissions of $ , $0 and $92,397, respectively. For the fiscal
years ended October 31, 1996, 1995 and 1994, the Strategic Income Fund paid
aggregate brokerage commissions of $ , $0 and $134,876, respectively.
PORTFOLIO TRADING AND TURNOVER
Each Fund and the Portfolio engages in portfolio trading when the Manager
concludes that the sale of a security owned by a Fund and the Portfolio and/or
the purchase of another security of better value can enhance principal and/or
increase income. A security may be sold to avoid any prospective decline in
market value, or a security may be purchased in anticipation of a market rise.
Consistent with each Fund's and the Portfolio's investment objectives, a
security also may be sold and a comparable security purchased coincidentally in
order to take advantage of what is believed to be a disparity in the normal
yield and price relationship between the two securities. Although the Funds and
the Portfolio generally do not intend to trade for short-term profits, the
securities in each Fund's and the Portfolio's portfolio will be sold whenever
the Manager believes it is appropriate to do so, without regard to the length of
time a particular security may have been held. Higher portfolio turnover
involves correspondingly greater brokerage commissions and other transaction
costs that a Fund or the Portfolio will bear directly, and could result in the
realization of net capital gains that would be taxable when distributed to
shareholders. The portfolio turnover rates for the Government Income Fund,
Strategic Income Fund and the Portfolio the last two fiscal years were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1996 OCTOBER 31, 1995
----------------- -----------------
<S> <C> <C>
Government Income Fund............................................................... % 385%
Strategic Income Fund................................................................ % 238%
High Income Portfolio................................................................ % 213%
</TABLE>
Statement of Additional Information Page 24
<PAGE>
GT GLOBAL INCOME FUNDS
DIRECTORS, TRUSTEES AND
EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
The term "Directors" as used below refers to the Company's Directors and the
Portfolio's Trustees collectively. The Company's Directors and executive
officers and the Portfolio's Trustees and executive officers are listed below.
<TABLE>
<CAPTION>
NAMES, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY/PORTFOLIO AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- --------------------------------------- ------------------------------------------------------------------------------------------
<S> <C>
David A. Minella,* 43 Chairman, the Manager since October 1996; Director, Liechtenstein Global Trust (holding
Trustee, Chairman of the Board and company of the various international LGT companies) since 1990; President, Asset
President Management Division, Liechtenstein Global Trust since 1995; Director and President, LGT
50 California Street Asset Management Inc. ("LGT Asset Management"), formerly LGT Asset Management Holdings,
San Francisco, CA 94111 Inc., since 1988; Director and President, the Manager from 1989 to October 1996; Director,
GT Global since 1987 and President, GT Global from 1987 to 1995; Director, GT Services
since 1990; President, GT Services from 1990 to 1995; Director, G.T. Global Insurance
Agency, Inc. ("G.T. Insurance") since 1992; and President, G.T. Insurance from 1992 to
1995. Mr. Minella also is a director or trustee of each of the other investment companies
registered under the 1940 Act that is managed or administered by the Manager.
C. Derek Anderson, 54 Chief Executive Officer, Anderson Capital Management, Inc.; Chairman and Chief Executive
Trustee Officer, Plantagenet Holdings, Ltd. from 1991 to present; Director, Munsingwear, Inc.; and
220 Sansome Street Director, American Heritage Group Inc. and various other companies. Mr. Anderson also is a
Suite 400 director or trustee of each of the other investment companies registered under the 1940
San Francisco, CA 94104 Act that is managed or administered by the Manager.
Frank S. Bayley, 55 Partner with Baker & McKenzie (a law firm); Director and Chairman, C.D. Stimson Company (a
Trustee private investment company); and Trustee, Seattle Art Museum. Mr. Bayley also is a
Two Embarcadero Center director or trustee of each of the other investment companies registered under the 1940
Suite 2400 Act that is managed or administered by the Manager.
San Francisco, CA 94111
Arthur C. Patterson, 52 Managing Partner, Accel Partners (a venture capital firm). He also serves as a director of
Trustee various computing and software companies. Mr. Patterson also is a director or trustee of
One Embarcadero Center each of the other investment companies registered under the 1940 Act that is managed or
Suite 3820 administered by the Manager.
San Francisco, CA 94111
Ruth H. Quigley, 59 Private investor; and President, Quigley Friedlander & Co., Inc. (a financial advisory
Trustee services firm) from 1984 to 1986. Ms. Quigley also is a director or trustee of each of the
1055 California Street other investment companies registered under the 1940 Act that is managed or administered
San Francisco, CA 94108 by the Manager.
</TABLE>
- --------------
* Mr. Minella is an "interested person" of the Company as defined by the 1940
Act due to his affiliation with the LGT companies.
Statement of Additional Information Page 25
<PAGE>
GT GLOBAL INCOME FUNDS
<TABLE>
<CAPTION>
NAMES, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY/PORTFOLIO AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- --------------------------------------- ------------------------------------------------------------------------------------------
<S> <C>
James R. Tufts, 37 Chief Information Officer for the Manager since October 1996; President,
Vice President and Chief GT Services since 1995; Senior Vice President of Finance and
Financial Officer Administration, GT Global, GT Services and G.T. Insurance, from 1994 to
50 California Street 1995; Senior Vice President of Finance and Administration, LGT Asset
San Francisco, CA 94111 Management and the Manager from 1994 to October 1996; Vice President of
Finance, LGT Asset Management, the Manager, GT Global and GT Services
from 1990 to 1994; Vice President of Finance, G.T. Insurance from 1992
to 1994; and a Director of the Manager, GT Global and GT Services since
1991.
Kenneth W. Chancey, 50 Vice President of Mutual Fund Accounting, the Manager since 1992; and
Vice President and Principal Vice President, Putnam Fiduciary Trust Company from 1989 to 1992.
Accounting Officer
50 California Street
San Francisco, CA 94111
Helge K. Lee, 49 Executive Vice President, Asset Management Division, Liechtenstein
Vice President and Secretary Global Trust since October 1996; Senior Vice President, LGT Asset
50 California Street Management, the Manager, GT Global, GT Services and G.T. Insurance from
San Francisco, CA 94111 February 1996 to October 1996; Vice President, LGT Asset Management, the
Manager, GT Global, GT Services and G.T. Insurance from May 1994 to
February 1996; General Counsel, LGT Asset Management, the Manager, GT
Global, GT Services and G.T. Insurance from May 1994 to October 1996;
Secretary, the Manager, since May 1994; Secretary, LGT Asset Management,
GT Global, GT Services and G.T. Insurance from May 1994 to October 1996;
Senior Vice President, General Counsel and Secretary, Strong/Corneliuson
Management, Inc.; and Secretary, each of the Strong Funds from October
1991 to May 1994.
</TABLE>
------------------------
The Board has a Nominating and Audit Committee, composed of Miss Quigley and
Messrs. Anderson, Bayley and Patterson, which is responsible for nominating
persons to serve as Directors, reviewing audits of the Company and its funds and
recommending firms to serve as independent auditors of the Company. Each of the
Directors and officers of the Company is also a Director and officer of G.T.
Investment Portfolios, Inc., G.T. Global Developing Markets Fund, Inc. and GT
Global Floating Rate Fund, Inc., and a Trustee and officer of G.T. Global Growth
Series, G.T. Greater Europe Fund, G.T. Global Variable Investment Trust, G.T.
Global Variable Investment Series, Global Investment Portfolio and Growth
Portfolio, which also are registered investment companies managed by the
Manager, and Floating Rate Portfolio, administered by the Manager.. Each of the
individuals listed above serves as a Director or officer of the Company as well
as a Trustee or officer of the Portfolio. Each Director and Officer serves in
total as a Director and or Trustee and Officer, respectively, of registered
investment companies with series managed or administered by the Manager. Each
Director or Trustee who is not a director, officer or employee of the Manager or
any affiliated company is paid aggregate fees of $5,000 per annum, plus $300 per
Fund for each meeting of the Board attended, and reimburses travel and other
expenses incurred in connection with attendance at such meetings. Other
Directors and Officers receive no compensation or expense reimbursement from the
Company. For the fiscal year ended October 31, 1996, Mr. Anderson, Mr. Bayley,
Mr. Patterson and Ms. Quigley, who are not directors, officers, or employees of
the Manager or any affiliated company, received total compensation of $
- --------, $
- --------, $
- -------- and $
- --------, respectively, from the Company for their services as Directors. For
the fiscal year ended October 31, 1996, Mr. Anderson, Mr. Bayley, Mr. Patterson
and Ms. Quigley received total compensation of $
- --------, $
- --------, $
- -------- and $
- --------, respectively, from the 40 GT Global Mutual Funds for which he or she
serves as a Director or Trustee. Fees and expenses disbursed to the Directors
contained no accrued or payable pension or retirement benefits. As of
- ------------, 199
- -, the officers and Directors and their families as a group owned in the
aggregate beneficially or of record less than 1% of the outstanding shares of
the Funds or of all the Company's Funds in the aggregate.
Statement of Additional Information Page 26
<PAGE>
GT GLOBAL INCOME FUNDS
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
Chancellor LGT Asset Management, Inc. (the "Manager") serves as the Government
Income Fund's and the Strategic Income Fund's investment manager and
administrator under an Investment Management and Administration Contract between
the Company and the Manager ("Company Management Contract") and as the
Portfolio's investment manager and administrator under an Investment Management
and Administration Contract between the Portfolio and the Manager ("Portfolio
Management Contract") (collectively, "Management Contracts"). The Manager serves
as the High Income Fund's administrator under an Administration Contract
("Administration Contract") between the Company and the Manager. The
Administration Contract will not be deemed an advisory contract, as defined
under the 1940 Act. As investment manager and administrator, the Manager makes
all investment decisions for the Government Income Fund, the Strategic Income
Fund and the Portfolio and as administrator, the Manager administers each Fund's
and the Portfolio's affairs. Among other things, the Manager furnishes the
services and pays the compensation and travel expenses of persons who perform
the executive, administrative, clerical and bookkeeping functions of the
Company, the Funds, and the Portfolio and provides suitable office space,
necessary small office equipment and utilities. For these services, the
Government Income Fund and the Strategic Income Fund each pay the Manager
investment management and administration fees, based on the Funds' average daily
net assets computed daily and paid monthly, at the annualized rate of .725% on
the first $500 million, .70% on the next 1 billion, .675% on the next $1
billion, and .65% on amounts thereafter. The High Income Fund pays
administration fees, computed daily and paid monthly, to the Manager at the
annualized rate of 0.25% of the Fund's average daily net assets. In addition,
the High Income Fund bears a pro rata portion of the investment management and
administration fee paid by the Portfolio to the Manager. The Portfolio pays such
fees, also computed daily and paid monthly at the annualized rate of .475% on
the first $500 million, .45% on the next $1 billion, .425% on the next $1
billion, and .40% on amounts thereafter of its average daily net assets, plus 2%
of the Portfolio's total investment income as stated in the Portfolio's
Statement of Operations, calculated in accordance with generally accepted
accounting principles, adjusted daily for currency revaluations, on a marked to
market basis, of the Portfolio's assets; provided, however, that during any
fiscal year this amount shall not exceed 2% of the Portfolio's total investment
income calculated in accordance with generally accepted accounting principles.
The Management Contracts may be renewed for one-year terms, provided that any
such renewal has been specifically approved at least annually by: (i) the
Company's Board of Directors or by the vote of a majority of the Fund's or the
Portfolio's outstanding voting securities (as defined in the 1940 Act), and (ii)
a majority of Directors or Trustees who are not parties to the Management
Contract or the Administration Contract, as applicable, or "interested persons"
of any such party (as defined in the 1940 Act), cast in person at a meeting
called for the specific purpose of voting on such approval. The Management
Contracts provide that with respect to the Government Income Fund, the Strategic
Income Fund and the Portfolio, and the Administration Contract provides that
with respect to the High Income Fund, either the Company, the Portfolio or the
Manager may terminate the Contract without penalty upon sixty days' written
notice to the other party. The Management Contracts and the Administration
Contract terminate automatically in the event of their assignment (as defined in
the 1940 Act).
The Manager and GT Global voluntarily have undertaken to limit the expenses of
the Class A shares and the Class B shares of the Government Income Fund and the
Strategic Income Fund (exclusive of brokerage commissions, taxes, interest and
extraordinary expenses) to the maximum annual level of 1.85% and 2.50% of the
average daily net assets of those respective classes of those Funds during each
fiscal year. The expenses of the Class A shares and Class B shares of the High
Income Fund (and such Fund's pro rata portion of the Portfolio's expenses) would
be limited to the annual level of 2.20% and 2.85% of the average daily net
assets of that Fund's Class A and Class B share. The Manager has agreed to
reimburse a Fund if the Fund's annual ordinary expenses exceed those respective
levels.
Statement of Additional Information Page 27
<PAGE>
GT GLOBAL INCOME FUNDS
In each of the last three fiscal years the Government Income Fund paid
investment management and administration fees to the Manager in the following
amounts:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, AMOUNT PAID
- ----------------------------------------------------------------------------------------------------------- -------------
<S> <C>
1996....................................................................................................... $
1995....................................................................................................... 4,946,971
1994....................................................................................................... 6,390,750
</TABLE>
In each of the last three fiscal years the Strategic Income Fund paid investment
management and administration fees to the Manager in the following amounts:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, AMOUNT PAID
- ----------------------------------------------------------------------------------------------------------- -------------
<S> <C>
1996....................................................................................................... $
1995....................................................................................................... 4,293,053
1994....................................................................................................... 5,392,542
</TABLE>
In each of the last three fiscal years the Portfolio paid investment management
and administration fees to the Manager in the following amounts:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, AMOUNT PAID
- ----------------------------------------------------------------------------------------------------------- -------------
<S> <C>
1996....................................................................................................... $
1995....................................................................................................... 2,411,786
1994....................................................................................................... 2,266,420
</TABLE>
In each of the last three fiscal years the High Income Fund paid administration
fees to the Manager in the following amounts:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, AMOUNT PAID
- ----------------------------------------------------------------------------------------------------------- -------------
<S> <C>
1996....................................................................................................... $
1995....................................................................................................... 860,884
1994....................................................................................................... 886,795
</TABLE>
DISTRIBUTION SERVICES
Each Fund's Class A and Class B shares are offered continuously through each
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 separate Distribution
Plans for each class of each Fund in accordance with the provisions of Rule
12b-1 under the 1940 Act ("Class A Plan" and "Class B Plan," collectively,
"Plans"). The rate of payments by each 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 that Fund. Each Fund makes no payments to any
party other than GT Global, who is the distributor (principal underwriter) of
each Fund's shares. All expenses for which GT Global is reimbursed under the
Class A Plan will have been incurred within one year of such reimbursement. The
following table discloses payments made by the Government Income Fund and the
Strategic Income Fund to GT Global under the Class A Plan and the Class B Plan
for the fiscal year ended October 31, 1996.
<TABLE>
<CAPTION>
CLASS A CLASS B
---------------- ----------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 1996 OCTOBER 31, 1996
---------------- ----------------
<S> <C> <C>
Government Income Fund............................................................... $ $
Strategic Income Fund................................................................ $ $
High Income Fund..................................................................... $ $
</TABLE>
In approving the Plans, the Directors determined that the adoption of the Class
B Plan or continuation of the Class A Plan, as applicable, was in the best
interests of the shareholders of the Funds. Agreements related to the Plans also
must be approved by such vote of the Directors, including a majority of
Directors who are not "interested persons" of the Company (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.
Each Plan requires that, at least quarterly, the Directors will 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 Directors who are not "interested persons" of the Company will be
committed to the discretion of the Directors who are not "interested persons" of
the Company, as defined in the 1940 Act.
Statement of Additional Information Page 28
<PAGE>
GT GLOBAL INCOME FUNDS
As discussed in the Prospectuses, GT Global collects sales charges on sales of
Class A shares of the Funds, retains certain amounts of such charges and
reallows other amounts of such charges to broker/dealers who sell shares.
The following tables review the extent of such activity during the last three
fiscal years:
YEAR ENDED OCTOBER 31, 1996
<TABLE>
<CAPTION>
SALES CHARGES AMOUNTS AMOUNTS
COLLECTED RETAINED REALLOWED
------------- ----------- -------------
<S> <C> <C> <C>
Government Income Fund...................................................... $ $ $
Strategic Income Fund.......................................................
High Income Fund............................................................
</TABLE>
YEAR ENDED OCTOBER 31, 1995
<TABLE>
<CAPTION>
SALES CHARGES AMOUNTS AMOUNTS
COLLECTED RETAINED REALLOWED
------------- ----------- -------------
<S> <C> <C> <C>
Government Income Fund...................................................... $ 305,067 $ 58,490 $ 246,577
Strategic Income Fund....................................................... 399,242 68,458 330,784
High Income Fund............................................................ 537,880 67,403 470,477
</TABLE>
YEAR ENDED OCTOBER 31, 1994
<TABLE>
<CAPTION>
SALES CHARGES AMOUNTS AMOUNTS
COLLECTED RETAINED REALLOWED
------------- ----------- -------------
<S> <C> <C> <C>
Government Income Fund...................................................... $ 2,518,304 $ 169,742 $ 2,348,562
Strategic Income Fund....................................................... 3,565,247 732,755 2,832,492
High Income Fund............................................................ 1,888,649 330,237 1,558,412
</TABLE>
GT Global receives no compensation or reimbursements relating to its
distribution efforts with respect to Class A shares other than as described
above. GT Global receives any contingent deferred sales charges payable with
respect to redemptions of Class B shares. The following table discloses the
amount of CDSCs collected by GT Global with regard to the GT Global Income Funds
for the periods shown.
GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
CDSCS
YEAR ENDED OCTOBER 31, COLLECTED
- ----------------------------------------------------------------------------------- -------------
<S> <C>
1996........................................................................... $
1995........................................................................... 1,540,013
1994........................................................................... 809,221
</TABLE>
STRATEGIC INCOME FUND
<TABLE>
<CAPTION>
CDSCS
YEAR ENDED OCTOBER 31, COLLECTED
- ----------------------------------------------------------------------------------- -------------
<S> <C>
1996........................................................................... $
1995........................................................................... 2,355,668
1994........................................................................... 1,084,779
</TABLE>
HIGH INCOME FUND
<TABLE>
<CAPTION>
CDSCS
YEAR ENDED OCTOBER 31, COLLECTED
- ----------------------------------------------------------------------------------- -------------
<S> <C>
1996........................................................................... $
1995........................................................................... 1,276,245
1994........................................................................... 990,675
</TABLE>
TRANSFER AGENCY AND ACCOUNTING AGENT SERVICES
GT Global Investor Services, Inc. ("Transfer Agent") has been retained by each
Fund, to perform shareholder servicing, reporting and general transfer agent
functions for each Fund. 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 also is reimbursed
by each Fund, for its out-of-pocket expenses for such items as postage, forms,
telephone charges, stationery and office supplies.
Statement of Additional Information Page 29
<PAGE>
GT GLOBAL INCOME FUNDS
The Manager also serves as each Fund's pricing and accounting agent. As of
October 31, 1996, the Government Income Fund, Strategic Income Fund and High
Income Fund paid the Manager fees of $
- ------, $
- ------ and $
- ------, respectively, for such accounting services.
EXPENSES OF THE FUNDS AND THE PORTFOLIO
The Fund pays all expenses not assumed by the Manager, GT Global and other
agents. These expenses include, in addition to the advisory, distribution,
transfer agency, pricing and accounting agent and brokerage fees discussed
above, legal and audit expenses, custodian fees, directors' fees, organizational
fees, fidelity bond and other insurance premiums, taxes, extraordinary expenses
and the expenses of reports and prospectuses sent to existing investors. The
allocation of general Company expenses and expenses shared by the Funds and
other funds organized as series of the Company are allocated on a basis deemed
fair and equitable, which may be based on the relative net assets of the Funds
or the nature of the services performed and relative applicability to each Fund.
Expenditures, including costs incurred in connection with the purchase or sale
of portfolio securities, which are capitalized in accordance with generally
accepted accounting principles applicable to investment companies, are accounted
for as capital items and not as expenses. The ratio of each Fund's expenses to
its relative net assets can be expected to be higher than the expense ratios of
funds investing solely in domestic securities, since the cost of maintaining the
custody of foreign securities and the rate of investment management fees paid by
each Fund and the Portfolio generally are higher than the comparable expenses of
such other funds.
- --------------------------------------------------------------------------------
VALUATION OF FUND SHARES
- --------------------------------------------------------------------------------
As described in the Prospectus, each Fund's net asset value per share for each
class of shares is determined at 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 business
time) on each business day the NYSE is open for business. 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.
Each Fund's and the Portfolio's portfolio securities and other assets are valued
as follows:
Equity securities, including ADRs, ADSs and EDRs, which are traded on stock
exchanges are valued at the last sale price on the exchange or in the principal
over-the-counter market in which such securities are traded, as of the close of
business on the day the securities are being valued or, lacking any sales, at
the last available bid price. In cases where securities are traded on more than
one exchange, the securities are valued on the exchange determined by the
Manager to be the primary market.
Long-term debt obligations are valued at the mean of representative quoted bid
or asked prices for such securities or, if such prices are not available, at
prices for securities of comparable maturity, quality and type; however, when
the Manager deems it appropriate, prices obtained for the day of valuation from
a bond pricing service will be used. Short-term debt investments are amortized
to maturity based on their cost, adjusted for foreign exchange translation,
provided such valuations represent fair value.
Options on indices, securities and currencies purchased by a Fund or the
Portfolio are valued at their last bid price in the case of listed options or,
in the case of OTC options, at the 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. When market quotations for futures and
options on futures held by a Fund or the Portfolio are readily available, those
positions will be valued based upon such quotations.
Securities and other assets for which market quotations are not readily
available (including restricted securities which are subject to limitations as
to their sale) are valued at fair value as determined in good faith by or under
the direction of the Company's Board of Directors. The valuation procedures
applied in any specific instance are likely to vary from case to case. However,
consideration is generally given to the financial position of the issuer and
other fundamental analytical data relating to the investment and to the nature
of the restrictions on disposition of the securities (including any registration
expenses that might be borne by the Fund in connection with such disposition).
In addition, specific factors also are generally considered, such as the cost of
the investment, the market value of any unrestricted securities of the same
Statement of Additional Information Page 30
<PAGE>
GT GLOBAL INCOME FUNDS
class (both at the time of purchase and at the time of valuation), the size of
the holding, the prices of any recent transactions or offers with respect to
such securities and any available analysts' reports regarding the issuer.
The fair value of any other assets is added to the value of all securities
positions to arrive at the value of a Fund's or the Portfolio's total assets.
The Fund's or the Portfolio's liabilities, including accruals for expenses, are
deducted from its total assets. Once the total value of a Fund's or the
Portfolio's net assets is so determined, that value is then divided by the total
number of shares outstanding (excluding treasury shares), and the result,
rounded to the nearer cent, is the net asset value per share.
Any assets or liabilities initially denominated in terms of foreign currencies
are translated into U.S. dollars at the official exchange rate or at the mean of
the current bid and asked prices of such currencies against the U.S. dollar last
quoted by a major bank that is a regular participant in the foreign exchange
market or on the basis of a pricing service that takes into account the quotes
provided by a number of such major banks. If none of these alternatives are
available or none are deemed to provide a suitable methodology for converting a
foreign currency into U.S. dollars, the Board of Directors, in good faith, will
establish a conversion rate for such currency.
European, Far Eastern or Latin American securities trading may not take place on
all days on which the NYSE is open. Further, trading takes place in Japanese
markets on certain Saturdays and in various foreign markets on days on which the
NYSE is not open. Consequently, the calculation of the Funds' respective net
asset values therefore may not take place contemporaneously with the
determination of the prices of securities held by the Funds. Events affecting
the values of portfolio securities that occur between the time their prices are
determined and the close of regular trading on the NYSE will not be reflected in
the Funds' net asset values unless the Manager, under the supervision of the
Company's Board of Directors, determines that the particular event would
materially affect net asset value. As a result, a Fund's net asset value may be
significantly affected by such trading on days when a shareholder cannot
purchase or redeem shares of the Fund.
- --------------------------------------------------------------------------------
INFORMATION RELATING TO SALES AND
REDEMPTIONS
- --------------------------------------------------------------------------------
PAYMENT AND TERMS OF OFFERING
Payment for Class A or Class B shares 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 cancelled 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 a Fund by reason of such cancellation, and if such
purchaser is a shareholder, that 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 that Fund for the loss incurred. Investors
whose purchase orders have been cancelled due to nonpayment may be prohibited
from placing future orders.
The Funds reserve 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 a 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 Funds reserve 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 Prospectuses.
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 assure 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,
Statement of Additional Information Page 31
<PAGE>
GT GLOBAL INCOME FUNDS
as specified by the shareholder. If the intended investment is not completed
within the specified 13-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 20 business days
after written request, the appropriate number of escrowed shares will be
redeemed and the proceeds paid to GT Global.
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 restrictively
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.
AUTOMATIC INVESTMENT PLAN -- CLASS A SHARES AND CLASS B SHARES
To establish participation in the Funds' Automatic Investment Plan ("AIP"),
investors or their brokers should specify whether the investment will be in
Class A shares or Class B shares and 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 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 a 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, a stop payment order or 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 a 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 Funds upon 30 days' written notice or by the participant, at any time,
without penalty, upon written notice to the pertinent Fund or the Transfer
Agent.
EXCHANGES BETWEEN FUNDS
Shares of each 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 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 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 60 days' prior 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, telex or telegram
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
affixed. All shareholders may request that redemption proceeds be transmitted by
bank wire 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 appropriate Fund. Proceeds of less than $1,000 will be mailed to
the shareholder's registered address of record. The Funds and the Transfer Agent
reserve the right to refuse any telephone instructions and may discontinue the
aforementioned redemption options upon 30 days written notice.
SYSTEMATIC WITHDRAWAL PLAN
Shareholders of a Fund owning Class A or Class B shares with a value of $10,000
or more, may establish a Systematic Withdrawal Plan ("SWP"). Under a 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 beginning
quarterly on the 25th day of the month the investor first selects). In the event
that the 25th 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
Statement of Additional Information Page 32
<PAGE>
GT GLOBAL INCOME FUNDS
shareholder must be guaranteed on the SWP application (see "How to Redeem
Shares" in the Prospectuses). A corporation (or partnership) also must 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 a Fund upon 30 days' written notice or by a shareholder upon
written notice to a Fund or its Transfer Agent. Applications and further details
regarding establishment of a SWP are provided at the back of the Funds'
Prospectus.
SUSPENSION OF REDEMPTION PRIVILEGES
The Funds 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 Funds from disposing of
their portfolio securities or in fairly determining the value of their 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 Company's Board of Directors, make it undesirable for a 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 a Fund, so called
"redemption in kind." Payments of redemption 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 Company has filed
with the SEC an election pursuant to Rule 18f-1 under the 1940 Act. This means
that each 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 value of the net
assets of the Fund at the beginning of such period. This election is 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 FUNDS
Each Fund is treated as a separate corporation for federal income tax purposes.
In order to continue to qualify for treatment as a regulated investment company
("RIC") under the Internal Revenue Code of 1986, as amended ("Code"), each 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, net short-term capital gain and net gains from certain foreign currency
transactions) ("Distribution Requirement") and must meet several additional
requirements. With respect to each 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 foreign
currencies, or other income (including gains from options, Futures or Forward
Contracts) derived with respect to its business of investing in securities or
those currencies ("Income Requirement"); (2) 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
- -- options or Futures (other than those on foreign currencies), or foreign
currencies (or options, Futures or Forward Contracts thereon) that are not
directly related to the Fund's principal business of investing in securities (or
options and Futures with respect to securities) ("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
Statement of Additional Information Page 33
<PAGE>
GT GLOBAL INCOME FUNDS
than 10% of the outstanding voting securities of the issuer; 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 High Income
Fund, as an investor in the Portfolio, is deemed to own a proportionate share of
the Portfolio's assets, and to earn a proportionate share of the Portfolio's
income, for purposes of determining whether that Fund satisfies all the
requirements described above to qualify as a RIC.
Each 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.
See the next section for a discussion of the tax consequences to the High Income
Fund of hedging transactions engaged in, and investments in passive foreign
investment companies ("PFIC") and other foreign securities by, the Portfolio.
TAXATION OF THE PORTFOLIO -- GENERAL
The Portfolio is treated as a partnership for federal income tax purposes and is
not a "publicly traded partnership." As a result, the Portfolio is not subject
to federal income tax; instead, the High Income Fund, as an investor in the
Portfolio, is required to take into account in determining its federal income
tax liability its share of the Portfolio's income, gains, losses, deductions and
credits, without regard to whether it has received any cash distributions from
the Portfolio. The Portfolio also is not subject to New York income or franchise
tax.
Because, as noted above, the High Income Fund is deemed to own a proportionate
share of the Portfolio's assets, and to earn a proportionate share of the
Portfolio's income, for purposes of determining whether that Fund satisfies the
requirements to qualify as a RIC, the Portfolio intends to conduct its
operations so that the High Income Fund will be able to satisfy all those
requirements.
Distributions to the High Income Fund from the Portfolio (whether pursuant to a
partial or complete withdrawal or otherwise) will not result in that Fund's
recognition of any gain or loss for federal income tax purposes, except that (1)
gain will be recognized to the extent any cash that is distributed exceeds that
Fund's basis for its interest in the Portfolio before the distribution, (2)
income or gain will be recognized if the distribution is in liquidation of that
Fund's entire interest in the Portfolio and includes a disproportionate share of
any unrealized receivables held by the Portfolio, and (3) loss will be
recognized if a liquidation distribution consists solely of cash and/or
unrealized receivables. The High Income Fund's basis for its interest in the
Portfolio generally will equal the amount of cash and the basis of any property
that Fund invests in the Portfolio, increased by that Fund's share of the
Portfolio's net income and gains and decreased by (a) the amount of cash and the
basis of any property the Portfolio distributes to that Fund and (b) that Fund's
share of the Portfolio's losses.
TAXATION OF CERTAIN INVESTMENT ACTIVITIES
For purposes of the following discussion, "Investor Fund" means the Government
Income Fund, the Strategic Income Fund or the Portfolio.
FOREIGN TAXES. Interest and dividends received by an Investor Fund may be
subject to income, withholding or other taxes imposed by foreign countries and
U.S. possessions that would reduce the yield on its securities. Tax conventions
between certain countries and the United States may reduce or eliminate these
foreign taxes, however, and many foreign countries do not impose taxes on
capital gains in respect of investments by foreign investors. If more than 50%
of the value of a Fund's total assets (taking into account, in the case of the
High Income Fund, its proportionate share of the Portfolio's assets) at the
close of its taxable year consists of securities of foreign corporations, the
Fund will be eligible to, and may, file an election with the Internal Revenue
Service that will enable its shareholders, in effect, to receive the benefit of
the foreign tax credit with respect to any foreign income taxes paid by it
(taking into account, in the case of the High Income Fund, its proportionate
share of these taxes paid by the Portfolio. Pursuant to the election, a Fund
will treat those taxes as dividends paid to its shareholders and each
shareholder will be required to (1) include in gross income, and treat as paid
by him, his proportionate share of those taxes, (2) treat his share of those
taxes and of any dividend paid by the Fund that represents income from foreign
sources as his own income from those sources, and (3) either deduct the taxes
deemed paid by him in computing his taxable income or, alternatively, use the
foregoing information in calculating the foreign tax credit against his federal
income tax. Each Fund will report to its shareholders shortly after each taxable
year their respective shares of the Fund's income (taking into account, in the
case of the High Income Fund, its proportionate share of the Portfolio's income)
from sources within, and taxes paid to, foreign countries if it makes this
election.
PASSIVE FOREIGN INVESTMENT COMPANIES. Each Investor Fund may invest in the
stock of PFICs. A PFIC is a foreign corporation that, in general, meets either
of the following tests: (1) at least 75% of its gross income is passive or (2)
an average of at least 50% of its assets produce, or are held for the production
of, passive income. Under certain circumstances, a Fund will be subject to
federal income tax on a part (or, in the case of the High Income Fund, its
proportionate
Statement of Additional Information Page 34
<PAGE>
GT GLOBAL INCOME FUNDS
share of a part) of any "excess distribution" received by it (or, in the case of
the High Income Fund, by the Portfolio) on the stock of a PFIC or of any gain on
the Fund's (or, in the case of the High Income Fund, the Portfolio's)
disposition of that stock (collectively "PFIC income"), plus interest thereon,
even if the Fund distributes the PFIC income as a taxable dividend to its
shareholders. The balance of the PFIC income will be included in the Fund's
investment company taxable income and, accordingly, will not be taxable to the
Fund to the extent that income is distributed to its shareholders.
If an Investor Fund invests in a PFIC and elects to treat the PFIC as a
"qualified electing fund" ("QEF"), then in lieu of the foregoing tax and
interest obligation, the Investor Fund (or, in the case of the Portfolio, the
High Income Fund) will be required to include in income each taxable year its
pro rata share of the QEF's ordinary earnings and net capital gain (the excess
of net long-term capital gain over net short-term capital loss) -- which most
likely would have to be distributed to satisfy the Distribution Requirement and
to avoid imposition of the Excise Tax -- even if those earnings and gain were
not received thereby. In most instances it will be very difficult, if not
impossible, to make this election because of certain requirements thereof.
Pursuant to proposed regulations, open-end RIC such as the Funds, would be
entitled to elect to "mark-to-market" their stock in certain PFICs.
"Marking-to-market," in this context, means recognizing as gain for each taxable
year the excess, as of the end of that year, of the fair market value of each
such PFIC's stock over the adjusted basis in that stock (including
mark-to-market gain for each prior year for which an election was in effect).
OPTIONS, FUTURES AND FOREIGN CURRENCY TRANSACTIONS. The Investors Funds' use
of hedging transactions, such as selling (writing) and purchasing options and
Futures Contracts and entering into Forward Contracts, involves complex rules
that will determine, for federal income tax purposes, the character and timing
of recognition of the gains and losses an Investor Fund realizes in connection
therewith. Income from foreign currencies (except certain gains therefrom that
may be excluded by future regulations), and income from transactions in options,
Futures and Forward Contracts derived by an Investor Fund with respect to its
business of investing in securities or foreign currencies, will qualify as
permissible income under the Income Requirement for that Investor Fund (or, in
the case of the Portfolio, the High Income Fund). However, income from the
disposition by an Investor Fund of options and Futures (other than those on
foreign currencies) will be subject to the Short-Short Limitation for that
Investor Fund (or, in the case of the Portfolio, the High Income Fund) if they
are held for less than three months. Income from the disposition by an Investor
Fund of foreign currencies, and options, Futures and Forward Contracts on
foreign currencies, that are not directly related to its principal business of
investing in securities, also will be subject to the Short-Short Limitation for
that Investor Fund (or, in the case of the Portfolio, the (or options and
Futures with respect thereto) Income Fund) if they are held for less than three
months.
If an Investor Fund satisfies certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any decrease in
value (whether realized or not) of the offsetting hedging position during the
period of the hedge for purposes of determining whether that Investor Fund (or,
in the case of the Portfolio, the High Income Fund) satisfies the Short-Short
Limitation. Thus, only the net gain (if any) from the designated hedge will be
included in gross income for purposes of that limitation. Each Investor Fund
intends that, when it engages in hedging transactions, it will qualify for this
treatment, but at the present time it is not clear whether this treatment will
be available for all those transactions. To the extent this treatment is not
available, an Investor Fund may be forced to defer the closing out of certain
options, Futures, Forward Contracts on foreign currency positions beyond the
time when it otherwise would be advantageous to do so, in order for that
Investor Fund (or, in the case of the Portfolio, the High Income Fund) to
continue to qualify as a RIC.
Futures and Forward Contracts that are subject to Section 1256 of the Code
(other than those that are part of a "mixed straddle") ("Section 1256
Contracts") and that are held by an Investor Fund at the end of its taxable year
generally will be deemed to have been sold at market value for federal income
tax purposes. Sixty percent of any net gain or loss recognized on these deemed
sales, and 60% of any net gain or loss realized from any actual sales of Section
1256 Contracts, will be treated as long-term capital gain or loss, and the
balance will be treated as short-term capital gain or loss. Section 988 of the
Code also may apply to foreign-currency-denominated debt securities and options,
Futures and Forward Contracts on foreign currencies ("Section 988" gains or
losses). Section 988 gain or loss generally is computed separately and treated
as ordinary income or loss. In the case of overlap between Sections 1256 and
988, special provisions determine the character and timing of any income, gain
or loss. Each Investor Fund attempts to monitor Section 988 transactions to
minimize any adverse tax impact.
TAXATION OF THE FUNDS' SHAREHOLDERS
Dividends and other distributions declared by a 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
Statement of Additional Information Page 35
<PAGE>
GT GLOBAL INCOME FUNDS
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 a 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
a Portfolio) from U.S. corporations. However, dividends received by a corporate
shareholder and deducted by it pursuant to the dividends-received deduction are
subject indirectly to the alternative minimum tax.
If 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 a Fund to a shareholder who, as to the United States, is a
nonresident alien individual, 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 a Fund to a foreign shareholder
is "effectively connected with the conduct of a 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 income tax
considerations affecting the Funds, their shareholders and the Portfolio.
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 a 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
and Verwaltung AG, located 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) in Tokyo; LGT Asset Management
Pte. Ltd., formerly G.T. Management (Singapore) PTE Ltd. located in Singapore;
LGT Asset Management Ltd., formerly G.T. Management (Australia) Ltd., located in
Sydney; and LGT Asset Management GmbH, formerly BIL Asset Management GmbH,
located in Frankfurt, Germany.
CUSTODIAN
State Street Bank and Trust Company ("State Street"), 225 Franklin Street,
Boston, Massachusetts 02110, acts as custodian of each Fund's and the
Portfolio's assets. State Street is authorized to establish and has established
separate accounts in foreign currencies and to cause securities of the Funds and
the Portfolio to be held in separate accounts outside the United States in the
custody of non-U.S. banks.
INDEPENDENT ACCOUNTANTS
The Funds' and the Portfolio's independent accountants are Coopers & Lybrand
L.L.P., One Post Office Square, Boston Massachusetts 02109. Coopers & Lybrand
L.L.P. conducts audits of each Fund's and the Portfolio's financial statements,
Statement of Additional Information Page 36
<PAGE>
GT GLOBAL INCOME FUNDS
assists in the preparation of the Funds' and the Portfolio's federal and state
income tax returns and consults with the Company, the Funds and the Portfolio as
to matters of accounting, regulatory filings, and federal and state income
taxation.
The audited financial statements of the Funds and the Portfolio 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 said firm as experts in accounting
and auditing.
USE OF NAME
The Manager has granted the Funds and the Portfolio the right to use the "GT"
name and "GT Global" and has reserved the right to withdraw its consent to the
use of such names by the Company, the Funds and/or the Portfolio at any time, or
to grant the use of such names to any other company.
Statement of Additional Information Page 37
<PAGE>
GT GLOBAL INCOME FUNDS
INVESTMENT RESULTS
- --------------------------------------------------------------------------------
A Fund's "Standardized Return", as referred to in the Prospectuses (see "Other
Information -- Performance Information" in the Prospectus), is calculated
separately for Class A, Class B and Advisor Class shares of each Fund, as
follows: Standardized Return ("T") is computed by using the value at the end of
the period ("EV") 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)(n) = EV. The following assumptions will be reflected in with respect to
Class A shares computations made in accordance with this formula: (1) for Class
A shares, deduction of the maximum sales charge with respect to Class B shares
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
Board; and (4) a complete redemption at the end of any period illustrated.
The Funds' Standardized Returns, for their Class A shares, stated as average
annualized total returns, for the periods shown, were as follows:
<TABLE>
<CAPTION>
GOVERNMENT STRATEGIC HIGH INCOME
PERIOD INCOME FUND INCOME FUND FUND
- ---------------------------------------------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Year ended October 31, 1996................................................. % % %
October 31, 1991 through October 31, 1996................................... % % N/A
March 29, 1988 through October 31, 1996..................................... % % N/A
October 22, 1992 through October 31, 1996................................... N/A N/A %
</TABLE>
The Funds' Standardized Returns for their Class B shares, which were first
offered on October 22, 1992, stated as average annualized total returns, for the
periods shown, were as follows:
<TABLE>
<CAPTION>
GOVERNMENT STRATEGIC HIGH INCOME
PERIOD INCOME FUND INCOME FUND FUND
- ---------------------------------------------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Year ended October 31, 1996................................................. % % %
October 22, 1992 through October 31, 1996................................... % % %
</TABLE>
"Non-Standardized Return," as referred to in the Prospectus, is calculated for a
specified period of time by assuming the investment of $1,000 in Fund shares and
further assuming the reinvestment of all dividends and other distributions made
to Fund shareholders in additional Fund shares at their net asset value.
Percentage rates of return are then calculated by comparing this assumed initial
investment to the value of the hypothetical account at the end of the period for
which the Non-Standardized Return is quoted. As discussed in the Prospectus, the
Funds may quote Non-Standardized Total Returns that do not reflect the effect of
sales charges. Non-Standardized Returns may be quoted for the same or different
time periods for which Standardized Returns are quoted. The Funds'
Non-Standardized Returns for their Class A shares, stated as aggregate total
returns, for the periods shown, were as follows:
<TABLE>
<CAPTION>
GOVERNMENT STRATEGIC HIGH INCOME
PERIOD INCOME FUND INCOME FUND FUND
- ---------------------------------------------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Year ended October 31, 1996................................................. % % %
October 31, 1991 through October 31, 1996................................... % % N/A
March 29, 1988 through October 31, 1996..................................... % % N/A
October 22, 1992 through October 31, 1996................................... N/A N/A %
</TABLE>
The Funds' Non-Standardized Returns for its Class B shares which were first
offered on October 22, 1992, stated as aggregate total returns, for the periods
shown, were as follows:
<TABLE>
<CAPTION>
GOVERNMENT STRATEGIC HIGH INCOME
PERIOD INCOME FUND INCOME FUND FUND
- ---------------------------------------------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Year ended October 31, 1996................................................. % % %
October 22, 1992 through October 31, 1996................................... % % %
</TABLE>
Statement of Additional Information Page 38
<PAGE>
GT GLOBAL INCOME FUNDS
The Funds' Non-Standardized Returns for the Funds' Class A shares stated as
average annualized total returns, for the periods shown, were as follows:
<TABLE>
<CAPTION>
GOVERNMENT STRATEGIC HIGH INCOME
PERIOD INCOME FUND INCOME FUND FUND
- ---------------------------------------------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Year ended October 31, 1996................................................. % % %
October 31, 1991 through October 31, 1996................................... % % N/A
March 29, 1988 through October 31, 1996..................................... % % N/A
October 22, 1992 through October 31, 1996................................... N/A N/A %
</TABLE>
The Funds' Non-Standardized Returns for its Class B shares which were first
offered on October 22, 1992, stated as average annualized total returns, for the
periods shown, were as follows:
<TABLE>
<CAPTION>
GOVERNMENT STRATEGIC HIGH INCOME
PERIOD INCOME FUND INCOME FUND FUND
- ---------------------------------------------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Year ended October 31, 1996................................................. % % %
October 22, 1992 through October 31, 1996................................... % % %
</TABLE>
Current yield ("YIELD"), which is calculated separately for Class A and Class B
shares of each fund, is computed by dividing the difference between dividends
and interest earned during a one-month period ("a") and expenses accrued for the
period (net of reimbursements) ("b") by the product of the average daily number
of shares outstanding during the period that were entitled to receive dividends
("c") and the maximum offering price per share on the last day of the period
("d") according to the following formula as required by the Securities and
Exchange Commission:
<TABLE>
<S> <C> <C> <C> <C> <C>
a-b
YIELD = 2 [( -- + 1 ) (6)-1]
cd
</TABLE>
The current yields of the Class A shares of the Government Income Fund,
Strategic Income Fund and the High Income Fund for the one month period ended
October 31, 1996, were
- ----%,
- ----% and
- ----%, respectively. The current yields of the Class B shares of Government
Income Fund, Strategic Income Fund and High Income Fund for the one month period
ended October 31, 1996 were
- ----%,
- ----% and
- ----%, respectively.
As of October 22, 1992, the investment objectives and policies of the Strategic
Income Fund were changed to high current income, primarily, and capital
appreciation, secondarily. Prior to October 22, 1992, the Strategic Income Fund
operated as the GT Global Bond Fund and had investment objectives which sought
primarily, capital appreciation and moderate current income, secondarily. The
total returns and yield for the Strategic Income Fund were primarily achieved
under the Strategic Income Fund's prior investment objectives.
IMPORTANT POINTS TO NOTE ABOUT DATA RELATING TO WORLD EQUITY AND BOND MARKETS
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 Company
or GT Global. The authors and publishers of such material are not to be
considered as "experts" under the Securities Act of 1933, as amended, on account
of the inclusion of such information herein.
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 any of these Funds, nor is it a
prediction of such performance. The performance of the Funds will differ from
the historical performance of relevant indices. The performance of indices does
not take expenses into account, while each Fund incurs expenses in its
operations, which will reduce performance. Each Fund is actively managed, I.E.,
the Manager, as each Fund's investment manager, actively purchases and sells
securities in seeking each Fund's investment objective. Moreover, each Fund may
invest a portion of its assets in corporate bonds, while certain indices relate
only to government bonds. Each of these factors will cause the performance of
each Fund to differ from relevant indices.
Each Fund and GT Global, from time to time, may compare the Funds with, but not
limited to, the following:
(1) Various Salomon Brothers World Bond Indices, which measure the total
return performance of high quality non-U.S. dollar denominated securities in
major sectors of the worldwide bond markets including the Salomon Brothers
World Government Bond Index, which is a widely used index of ten year
government bonds with remaining maturities greater than one year.
(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
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GT GLOBAL INCOME FUNDS
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 or BBB by S&P, or, in the case of
nonrated bonds, BBB by Fitch Investors Service (excluding Collateralized
Mortgage Obligations).
(3) 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.
(4) 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).
(5) Data and mutual fund rankings and comparisons published or prepared
by Lipper Analytical Data Services, Inc. ("Lipper"), CDA/Wiesenberger
Investment Company Services ("CDA/Wiesenberger"), Morningstar, Inc.
("Morningstar") and/or other companies that rank or compare mutual funds by
overall performance, investment objectives, assets, expense levels, periods
of existence and/or other factors. In this regard, each Fund may be compared
to the 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 without such peer group. 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.
(6) Bear Stearns Foreign Bond Index, which provides simple average
returns for individual countries and GNP-weighted index, beginning in 1975.
The returns are broken down by local market and currency.
(7) Ibbottson Associates International Bond Index, which provides a
detailed breakdown of local market and currency returns since 1960.
(8) 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 U.S.
(9) 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 and the Salomon Brothers Brady Bond Index which
measures the total return performance of Brady Bonds issued since March,
1990, and are issued in U.S. dollar denominated instruments.
(10) Dow Jones Industrial Average.
(11) CNBC/Financial News Composite Index.
(12) 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 of Europe, Australia and the Far East.
(13) International Finance Corporation ("IFC") Emerging Markets Data Base
which provides detailed statistics on bond and stock markets in developing
countries
(14) J.P. Morgan & Co. Bond Indices, including, among others, the J.P.
Morgan Traded Government Bond Index which is an index composed of liquid
non-U.S. fixed income securities based on market weightings and currency
since 1986.
(15) 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.
(16) The World Bank Publication of Trends in Developing Countries
("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.
(17) Salomon Brothers Global Telecommunications Index is composed of
telecommunications companies in the developing and emerging countries.
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GT GLOBAL INCOME FUNDS
(18) Datastream and Worldscope, each is an on-line database retrieval
service for information including but not limited to international financial
and economic data.
(19) International Financial Statistics, which is produced by the
International Monetary Fund.
(20) Various publications and reports produced by the World Bank and its
affiliates.
(21) Various publications from the International Bank for Reconstruction
and Development/The World Bank.
(22) Various publications including but not limited to ratings agencies
such as Moody's Investors Service, Fitch Investors Service, Standard &
Poor's.
(23) Wilshire Associates which is an on-line database for international
financial and economic data including performance measure for a wide range
of securities.
(24) Various publications from the Organization for Economic Cooperation
and Development ("OECD").
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, 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, included but not limited to, Money 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. Each 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.
From time to time, each 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 Fund assets under management or
rankings by DALBAR Surveys, Inc. in advertising materials.
GT Global believes the GT Global Income Funds can be an appropriate investment
for long-term investment goals including but not limited to funding retirement,
paying for education or purchasing a house. The GT Global Income Funds do not
represent a complete investment program and the investors should consider the
Funds as appropriate for a portion of their overall investment portfolio with
regard to their long-term investment goals.
GT Global believes that a growing number of consumer products, including but not
limited to home appliances, automobiles and clothing, purchased by Americans are
manufactured abroad. GT Global believes that investing globally in the companies
that produce products for U.S. consumers can help U.S. investors seek protection
of the value of their assets against the potentially increasing costs of foreign
manufactured goods. Of course, there can be no assurance that there will be any
correlation between global investing and the costs of such foreign goods unless
there is a corresponding change in value of the U.S. dollar to foreign
currencies. From time to time, GT Global may refer to or advertise the names of
such companies although there can be no assurance that any GT Global Mutual Fund
may own the securities of these companies.
Each Fund may compare its performance to that of other compilations or indices
of comparable quality to those listed above which may be developed and made
available in the future. Each Fund may be compared in advertising to
Certificates of Deposit (CDs), the Bank Rate Monitor National Index, an average
of the quoted rates for 100 leading banks and thrifts in ten U.S. cities chosen
to represent the ten largest Consumer Metropolitan statistical areas, or other
investments issued by banks. Each Fund differs from bank investments in several
respects. Each Fund may offer greater liquidity or higher potential returns than
CDs; but unlike CDs, the Fund will have a fluctuating share price and return and
is not FDIC insured.
Each Fund's performance may be compared to the performance of other mutual funds
in general, or to the performance of particular types of mutual funds. These
comparisons may be expressed as mutual fund rankings prepared by Lipper
Analytical Services, Inc. ("Lipper"), an independent service which monitors the
performance of mutual funds. 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, each Fund's performance
may be compared to mutual fund performance indices prepared by Lipper.
Statement of Additional Information Page 41
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GT GLOBAL INCOME FUNDS
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.
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 is based on the returns of different
indices.
GT Global 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. Each funds
may also compare performance to that of other compilations or indices that may
be developed and made available in the future.
In advertising materials, GT Global may reference or discuss its products and
services, which may include: retirement investing; the effects of dollar-cost
averaging and saving for college or a home. In addition, GT Global may quote
financial or business publications and periodicals, including model portfolios
or allocations, as they relate to fund management, investment philosophy, and
investment techniques.
Each Fund may discuss its Quotron number, CUSIP number, and its current
portfolio management team.
From time to time, each Fund's performance also may be compared to other mutual
funds tracked by financial or business publications and periodicals. For
example, each fund may quote Morningstar, Inc. in its advertising materials.
Morningstar, Inc. is a mutual fund rating service that rates mutual funds on the
basis of risk-adjusted performance. In addition, each Fund may quote financial
or business publications and periodicals as they relate to fund management,
investment philosophy, and investment techniques. Rankings that compare the
performance of GT Global Funds to one another in appropriate categories over
specific periods of time may also be quoted in advertising.
Each Fund may quote various measures of volatility and benchmark correlation,
such as beta, standard deviation and R(2), in advertising. In addition, each
Fund may compare these measures to those of other funds. Measures of volatility
seek to compare each 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.
Each Fund may advertise examples of the effects of periodic investment plans,
including the principle of dollar cost averaging. 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.
Each 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.
Each Fund may describe in its sales material and advertisements how an investor
may invest in the GT Global Mutual Funds through various retirement accounts and
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. The Funds may also discuss these accounts and plans,
which include:
INDIVIDUAL RETIREMENT ACCOUNTS (IRAS): Any individual who receives earned income
from employment (including self-employment) can contribute up to $2,000 each
year to an IRA (or, if less, 100% of compensation). If your spouse is not
employed, a total of $2,250 may be contributed each year to IRAs set up for you
and your spouse (subject to the maximum of $2,000 to either IRA). 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.
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GT GLOBAL INCOME FUNDS
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 rollover (or make a direct transfer of) their
distribution to a Rollover IRA. These accounts can also receive rollovers or
transfers from an existing IRA.
SEP-IRAS AND SALARY-REDUCTION SEP-IRAS: Simplified employee pension (SEP) plans
and salary-reduction SEPs provide self-employed individuals (and any eligible
employees) with benefits similar to Keogh-type plans or 401(k) plans, but with
fewer administrative requirements and therefore potentially lower annual
administration expenses.
403(B)(7) CUSTODIAL ACCOUNTS: Employees of public schools and most other
not-for-profit corporations can make pre-tax salary reduction contributions to
these accounts.
PROFIT-SHARING (INCLUDING 401(K)) AND MONEY PURCHASE PENSION PLANS: Corporations
can sponsor these qualified defined contribution plans for their employees. A
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).
GT Global may from time to time in its sales methods and advertising discuss the
risks inherent in investing. 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.
The major types of investment risk are market risk, industry risk, credit risk,
interest rate risk and inflation risk. Market risk entails a change in value of
a security due to market uncertainty. Industry risk can be described as the
market risk associated with companies engaged in a similar business.
The next two risks, credit and interest rate risk, more often are associated
with fixed income investing. Credit risk refers to the creditworthiness of an
issuer of debt securities and its ability to pay interest and repay the
principal value of the bond. Interest rate risk has two components. When
interest rates rise or fall the value of the security generally will move
correspondingly in the opposite direction. Further, the longer the maturity the
greater the impact on the bond's value.
Finally, 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.
From time to time, the Funds and GT Global will quote certain data regarding
industries, individual countries, regions, world stock exchanges, and economic
and demographic statistics from sources GT Global deems reliable, including but
not limited to, the economic and financial data of such financial organizations
as:
1) Stock market capitalization: Morgan Stanley Capital International World
Indices, International Finance Corporation and Datastream.
2) Stock market trading volume: Morgan Stanley Capital International Industry
Indices, International Finance Corporation.
3) The number of listed companies: International Finance Corporation, 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, International Finance Corporation and Datastream.
7) The Consumer Price Index and inflation rate: The World Bank, Datastream and
International Finance Corporation.
8) Gross Domestic Product ("GDP"): Datastream and The World Bank.
9) GDP growth rate: International Finance Corporation, 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: International Finance Corporation, The
World Bank and Datastream.
14) Top three companies by country, industry or market: International Finance
Corporation, 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.
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GT GLOBAL INCOME FUNDS
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.
THE GT ADVANTAGE
The Manager has developed a unique team approach to its global money management
which we call the GT Advantage. The Manager's money management style combines
the best of the "top-down" and "bottom-up" investment manager strategies. The
top-down approach is implemented by the Manager's Investment Policy Committee,
which sets broad guidelines for asset allocation and currency management, based
on the Manager's own macroeconomic forecasts and research from our worldwide
offices. The bottom-up approach utilizes regional teams of individual portfolio
managers to implement the committee's guidelines by selecting local securities
that offer strong growth and income potential.
In addition, the GT Global Strategic Income Fund and the GT Global High Income
Fund, from time to time, may quote yields and total returns of representative
debt instruments from emerging market countries in its advertising and sales
literature.
ECONOMIC DEVELOPMENT IN EMERGING MARKETS
The Manager has identified six phases to track the progress of developing
economies.
In addition, the Manager focuses on the transitions between each phase:
BETWEEN PHASES 1 & 2, STABILIZATION: Developing nations recognize the need
for economic reform and launch initiatives to stabilize their economies. Typical
measures might include initiating monetary reforms to contain inflation,
controlling government spending, and addressing external trade imbalances.
BETWEEN PHASES 2 & 3, RENOVATION: Economic development gathers momentum as
the governments of developing nations take further steps to increase
productivity and external competitiveness. Typical reforms include easing market
regulations, privatizing state-owned industries, lowering trade barriers and
reforming the national tax structure.
BETWEEN PHASES 3 & 4, NEW CONSTRUCTION: As economic reforms take hold,
infrastructure improvements are needed to facilitate and support long-term
growth. The construction and upgrading of highways and airports, communications
and utility systems generally require financing in the form of public debt.
Similarly, as the private sector develops, bolstered by new privatizations,
corporate debt securities typically are issued to finance business expansion.
EMERGING MARKET TRADING VOLUME
The annual trading volume of debt securities from developing economies according
to Salomon Brothers, Inc. has grown from $90 billion in 1990 to $150 billion in
1991, to $400 billion in 1992 and was estimated to be $1,200 billion at the end
of 1993 and $1.5 trillion at the end of 1994, respectively.
Statement of Additional Information Page 44
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GT GLOBAL INCOME FUNDS
DESCRIPTION OF DEBT RATINGS
- --------------------------------------------------------------------------------
DESCRIPTION OF BOND RATINGS
MOODY'S INVESTORS SERVICE, INC. ("Moody's") rates the 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 edge." 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. They are rated lower than the best
bond 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 risks appear somewhat
greater.
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. 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 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 ratings
classification from Aa through 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.
Statement of Additional Information Page 45
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GT GLOBAL INCOME FUNDS
STANDARD & POOR'S RATINGS GROUP ("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 -- High grade. Very strong capacity to pay interest and repay
principal and differ from AAA issues only in a small degree.
A -- Have a strong capacity to pay interest and repay principal although
they are somewhat more susceptible to the adverse effects of change in
circumstances and economic conditions than debt in higher rated categories.
BBB -- Regarded as having adequate capacity to pay interest and repay
principal. These bonds normally exhibit adequate protection parameters, but
adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity to pay interest and repay principal than for
debt in higher rated categories.
BB, B, CCC, CC, C -- Debt rated "BB," "B," "CCC," "CC," and "C" are
regarded, on balance, as predominantly speculative with respect to capacity
to pay interest and repay principal in accordance with the terms of this
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 indefinable 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 which 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.
C -- Reserved for income bonds on which no interest is being paid.
D -- In payment default. The "D" rating is used when interest 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. The "D" rating also will 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 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.
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 (or
supporting institutions) rated Prime-1 have a superior ability to repay senior
short-term debt obligations. Prime-1 repayment capacity generally will be
evidenced by many of the following characteristics: leading market positions in
well-established industries; high rates of return on funds employed;
conservative capitalization structures with moderate reliance on debt and ample
asset protections; 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. Issues rated
Prime-2 have a strong ability to repay senior short-term debt obligations. This
normally will be evidenced by many of the characteristics cited above, but to a
lesser degree. Earnings trends
Statement of Additional Information Page 46
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GT GLOBAL INCOME FUNDS
and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
S&P ratings of commercial paper are graded into several categories ranging
from A-1 for the highest quality obligations to "D" for the lowest. A-1 -- This
highest rating 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 payments 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.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The audited financial statements of GT Global Government Income Fund, GT Global
Strategic Income Fund, GT Global High Income Fund, and Global High Income
Portfolio as of October 31, 1996 and for the year then ended appear on the
following pages.
Statement of Additional Information Page 47
<PAGE>
GT GLOBAL INCOME FUNDS
NOTES
- --------------------------------------------------------------------------------
Statement of Additional Information Page 48
<PAGE>
GT GLOBAL INCOME FUNDS
NOTES
- --------------------------------------------------------------------------------
Statement of Additional Information Page 49
<PAGE>
GT GLOBAL INCOME FUNDS
NOTES
- --------------------------------------------------------------------------------
Statement of Additional Information Page 50
<PAGE>
GT GLOBAL INCOME FUNDS
GT GLOBAL MUTUAL FUNDS
GT GLOBAL OFFERS A BROAD RANGE OF MUTUAL FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY OF THE GT GLOBAL
MUTUAL FUNDS, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR CALL GT GLOBAL
DIRECTLY AT 1-800-824-1580.
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL WORLDWIDE GROWTH FUND
Invests around the world, including the U.S.
GT GLOBAL INTERNATIONAL GROWTH FUND
Provides portfolio diversity for U.S. investors by investing outside the U.S.
GT GLOBAL EMERGING MARKETS FUND
Gives access to the growth potential of developing economies
/ / GLOBAL THEME FUNDS
GT GLOBAL CONSUMER PRODUCTS AND
SERVICES FUND
Invests in companies that manufacture, market, retail, or distribute consumer
products or services
GT GLOBAL FINANCIAL SERVICES FUND
Focuses on the worldwide opportunities from the demand for financial services
and products
GT GLOBAL HEALTH CARE FUND
Invests in the growing health care industries worldwide
GT GLOBAL INFRASTRUCTURE FUND
Seeks companies that build, improve or maintain a country's infrastructure
GT GLOBAL NATURAL RESOURCES FUND
Concentrates on companies that own, explore or develop natural resources
GT GLOBAL TELECOMMUNICATIONS FUND
Invests in companies worldwide that develop, manufacture or sell
telecommunications services or equipment
/ / REGIONALLY DIVERSIFIED FUNDS
GT GLOBAL NEW PACIFIC GROWTH FUND
Offers access to the emerging and established markets of the Pacific Rim
GT GLOBAL EUROPE GROWTH FUND
Focuses on investment opportunities in the new, unified Europe
GT GLOBAL LATIN AMERICA GROWTH FUND
Invests in the emerging markets of Latin America
/ / SINGLE COUNTRY FUNDS
GT GLOBAL AMERICA SMALL CAP GROWTH FUND
Invests in equity securities of small U.S. companies
GT GLOBAL AMERICA MID CAP GROWTH FUND
Concentrates on medium-sized companies in the U.S.
GT GLOBAL AMERICA VALUE FUND
Concentrates on large cap equity securities of U.S. companies believed to be
undervalued
GT JAPAN GROWTH FUND
Provides U.S. investors with direct access to the Japanese market
GROWTH AND INCOME FUND
GT GLOBAL GROWTH & INCOME FUND
Invests in blue-chip stocks and government bonds from around the world
INCOME FUNDS
GT GLOBAL GOVERNMENT INCOME FUND
Invests in global government securities
GT GLOBAL STRATEGIC INCOME FUND
Allocates its assets among debt securities from the U.S., developed foreign
countries and emerging markets
GT GLOBAL HIGH INCOME FUND
Invests in a portfolio of emerging market debt securities
MONEY MARKET FUND
GT GLOBAL DOLLAR FUND
Invests in high quality, U.S. dollar-denominated money market securities
worldwide for stability and preservation of capital
[LOGO]
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
STATEMENT OF ADDITIONAL INFORMATION AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY GT
GLOBAL GOVERNMENT INCOME FUND, GT GLOBAL STRATEGIC INCOME FUND, GT GLOBAL
HIGH INCOME FUND, GLOBAL HIGH INCOME PORTFOLIO, CHANCELLOR LGT ASSET
MANAGEMENT, INC. OR GT GLOBAL, INC. THIS STATEMENT OF ADDITIONAL INFORMATION
DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF ANY OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
INCSA610MC
<PAGE>
GT GLOBAL GROWTH &
INCOME FUND
50 California Street, 27th Floor
San Francisco, California 94111
(415) 392-6181
Toll Free: (800) 824-1580
Statement of Additional Information
March 1, 1997
- --------------------------------------------------------------------------------
GT Global Growth & Income Fund ("Fund") is a non-diversified mutual fund
organized as a separate series of G.T. Investment Funds, Inc. ("Company"), a
registered open-end management investment company. This Statement of Additional
Information relating to the Class A and Class B shares of the Fund, which is not
a prospectus, supplements and should be read in conjunction with the Fund's
current Class A and Class B Prospectus dated March 1, 1997, a copy of which is
available without charge by writing to the above address or by calling the Fund
at the toll-free telephone number listed above.
Chancellor LGT Asset Management, Inc. (the "Manager") serves as the Fund's
investment manager and administrator. 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 "Transfer Agent").
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Investment Objective and Policies........................................................................................ 2
Options, Futures and Currency Strategies................................................................................. 5
Risk Factors............................................................................................................. 13
Investment Limitations................................................................................................... 16
Execution of Portfolio Transactions...................................................................................... 17
Directors and Executive Officers......................................................................................... 20
Management............................................................................................................... 22
Valuation of Fund Shares................................................................................................. 24
Information Relating to Sales and Redemptions............................................................................ 25
Taxes.................................................................................................................... 27
Additional Information................................................................................................... 30
Investment Results....................................................................................................... 31
Description of Debt Ratings.............................................................................................. 37
Financial Statements..................................................................................................... 40
</TABLE>
[LOGO]
Statement of Additional Information Page 1
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
INVESTMENT OBJECTIVE AND
POLICIES
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is long-term capital appreciation together
with current income. The Fund seeks its objective by investing in a global
portfolio of both equity securities and debt obligations allocated among diverse
international markets.
SELECTION OF EQUITY INVESTMENTS
For investment purposes, an issuer is typically considered as located in a
particular country if it (a) is incorporated under the laws of or has its
principal office in that country, or (b) it normally derives 50% or more of its
total revenue from business in that country. 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
off-shore operations or subsidiaries and/or export sales exceeding in size the
assets or sales in that country.
INVESTMENTS IN OTHER INVESTMENT COMPANIES
The Fund may invest in the securities of investment companies within the limits
of the Investment Company Act of 1940, as amended ("1940 Act"). These
limitations currently provide that, in general, the Fund may purchase shares of
a closed-end investment company unless (a) such a purchase would cause the Fund
to own in the aggregate more than 3 percent of the total outstanding voting
stock of the investment company or (b) such a purchase would cause the Fund to
have more than 5 percent of its total assets invested in the investment company
or more than 10 percent of its total assets invested in an aggregate of all such
investment companies. Investment in such investment companies may also involve
the payment of substantial premiums above the value of such companies' portfolio
securities. The Fund 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
The Fund may hold equity 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 issuers. These securities may not necessarily be denominated in the
same currency as the securities for which they may be exchanged. ADRs and ADSs
typically are 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 United States securities markets and EDRs in bearer
form are designed for use in European securities markets. For purposes of the
Fund's investment policies, the Fund'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.
WARRANTS OR RIGHTS
Warrants or rights may be acquired by the Fund in connection with other
securities or separately and provide the Fund with the right to purchase at a
later date other securities of the issuer.
LENDING OF PORTFOLIO SECURITIES
For the purpose of realizing additional income, the Fund may make secured loans
of portfolio securities 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 continuously be 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. While the securities loan is
outstanding, the Fund 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. The Fund will have a
right to call each loan and obtain the securities on five business days' notice.
The Fund will not have the right to vote equity securities while they are lent,
but it may call in a loan in anticipation of any important vote. The risks in
lending portfolio securities, as with other extensions of secured credit,
consist of possible delay in receiving additional collateral or in recovery of
the securities or
Statement of Additional Information Page 2
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
possible loss of rights in the collateral should the borrower fail financially.
Loans will be made only 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.
COMMERCIAL BANK OBLIGATIONS
For the purposes of the Fund'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, however, may be limited by the terms of a specific
obligation and by government regulation. As with investment in non-U.S.
securities in general, investments in the obligations of foreign branches of
U.S. banks and of foreign banks may subject the Fund to investment risks that
are different in some respects from those of investments in obligations of
domestic issuers. Although the Fund typically will acquire obligations issued
and supported by the credit of U.S. or foreign banks having total assets at the
time of purchase in excess of $1 billion, this $1 billion figure is not an
investment policy or restriction of the Fund. 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
Repurchase agreements are transactions in which the Fund 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, the Fund intends to enter into repurchase
agreements only with banks and dealers believed by the Manager to present
minimum credit risks in accordance with guidelines established by the Company's
Board of Directors. The Manager will review and monitor the creditworthiness of
such institutions under the Board's general supervision.
The Fund 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, the Fund 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 the Fund's ability
to sell the collateral and the Fund could suffer a loss. However, with respect
to financial institutions whose bankruptcy or liquidation proceedings are
subject to the U.S. Bankruptcy Code, the Fund intends to comply with provisions
under the U.S. Bankruptcy Code that would allow it immediately to resell the
collateral. There is no limitation on the amount of the Fund's assets that may
be subject to repurchase agreements at any given time. The Fund will not enter
into a repurchase agreement with a maturity of more than seven days if, as a
result, more than 10% of the value of its net assets would be invested in such
repurchase agreements and other illiquid investments.
BORROWING, REVERSE REPURCHASE AGREEMENTS AND "ROLL" TRANSACTIONS
The Fund's borrowings will not exceed 33 1/3% of the Fund's total assets, i.e.,
the Fund's total assets at all times will equal at least 300% of the amount of
outstanding borrowings. If market fluctuations in the value of the Fund's
portfolio holdings or other factors cause the ratio of the Fund's total assets
to outstanding borrowings to fall below 300%, within three days (excluding
Sundays and holidays) of such event the Fund may be required to sell portfolio
securities to restore the 300% asset coverage, even though from an investment
standpoint such sales might be disadvantageous. The Fund also may borrow up to
5% of its total assets for temporary or emergency purposes other than to meet
redemptions. Any borrowing by the Fund may cause greater fluctuation in the
value of its shares than would be the case if the Fund did not borrow.
The Fund's fundamental investment limitations permit the Fund to borrow money
for leveraging purposes. The Fund, however, currently is 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 a vote of
a majority of the Company's Board of Directors. In the event that the Fund
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 Fund's net asset value. When the
income and gains on securities purchased with the proceeds of borrowings exceed
the costs of such borrowings, the Fund's earnings or net asset value will
increase faster than otherwise would be the case; conversely, if such income and
gains fail to exceed such costs, the Fund's earnings or net asset value would
decline faster than would otherwise be the case.
The Fund may enter into reverse repurchase agreements. A reverse repurchase
agreement is a borrowing transaction in which the Fund 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. The Fund also may engage in "roll"
borrowing transactions which involve the Fund's sale of Government National
Mortgage
Statement of Additional Information Page 3
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
Association certificates or other securities together with a commitment (for
which the Fund may receive a fee) to purchase similar, but not identical,
securities at a future date. The Fund will maintain, in a segregated account
with a custodian, cash or other 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
The Fund is authorized to make short sales of securities, although it has no
current intention of doing so. A short sale is a transaction in which the Fund
sells a security in anticipation that the market price of that security will
decline. The Fund may make short sales (i) as a form of hedging to offset
potential declines in long positions in securities it owns, or anticipates
acquiring, and (ii) in order to maintain portfolio flexibility. The Fund may
only make short sales "against the box." In this type of short sale, at the time
of the sale the Fund owns the security it has sold short or has the immediate
and unconditional right to acquire the identical security at no additional cost.
In a short sale, the seller does not immediately deliver the securities sold and
does not receive the proceeds from the sale. To make delivery to the purchaser,
the executing broker borrows the securities being sold short on behalf of the
seller. The seller is said to have a short position in the securities sold until
it delivers the securities sold, at which time it receives the proceeds of the
sale. To secure its obligation to deliver securities sold short, the Fund will
deposit in a separate account with its custodian an equal amount of the
securities sold short or securities convertible into or exchangeable for such
securities at no cost. The Fund could close out a short position by purchasing
and delivering an equal amount of the securities sold short, rather than by
delivering securities already held by the Fund, because the Fund might want to
continue to receive interest and dividend payments on securities in its
portfolio that are convertible into the securities sold short.
The Fund might make a short sale "against the box" in order to hedge against
market risks when the Manager believes that the price of a security may decline,
causing a decline in the value of a security owned by the Fund or a security
convertible into or exchangeable for such security, or when the Manager wants to
sell the security the Fund owns at a current attractive price, but also wishes
to defer recognition of gain or loss for federal income tax purposes and for
purposes of satisfying certain tests applicable to regulated investment
companies under the Internal Revenue Code of 1986, as amended ("Code"). In such
case, any future losses in the Fund's long position should be reduced by a gain
in the short position. Conversely, any gain in the long position should be
reduced by a loss in the short position. The extent to which such gains or
losses in the long position are reduced will depend upon the amount of the
securities sold short relative to the amount of the securities the Fund owns,
either directly or indirectly, and, in the case where the Fund owns convertible
securities, changes in the investment values or conversion permiums of such
securities. There will be certain additional transaction costs associated with
short sales "against the box," but the Fund will endeavor to offset these costs
with income from the investment of the cash proceeds of short sales.
Statement of Additional Information Page 4
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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 a Fund entered into a
short hedge because the Manager projected a decline in the price of a
security in the Fund's portfolio, and the price of that security increased
instead, the gain from that increase might by 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 Fund could suffer a loss. In either such case, the Fund
would have been in a better position had it not hedged at all.
(4) As described below, a Fund 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 Fund 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 Fund'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 Fund sell a portfolio security at
a disadvantageous time. The Fund'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 Fund.
WRITING CALL OPTIONS
The Fund 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 Fund.
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 may be assigned an
exercise notice, requiring him 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.
Portfolio securities or currencies on which call options may be written will be
purchased solely on the basis of investment considerations consistent with the
Fund's investment objective. When writing a call option, the Fund, in return for
the
Statement of Additional Information Page 5
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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, the Fund 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 the Fund has written expires, the Fund 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 Fund 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. The Fund does not consider a
security or currency covered by a call option to be "pledged" as that term is
used in the Fund'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 the Fund will be obligated to
sell the security or currency at less than its market value.
The premium that the Fund receives for writing a call option is deemed to
constitute the market value of an option. The premium the Fund 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 the Fund to write
another call option on the underlying security or currency with either a
different exercise price, expiration date or both.
The Fund will pay transaction costs in connection with the writing of options
and in entering into closing purchase contracts. Transaction costs relating to
options activity normally are 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 or currencies at the time the options
are written. From time to time, the Fund 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.
The Fund 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 the Fund.
WRITING PUT OPTIONS
The Fund 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.
The Fund generally would write put options in circumstances where the Manager
wishes to purchase the underlying security or currency for the Fund's portfolio
at a price lower than the current market price of the security or currency. In
such event, the Fund 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 Fund also would 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 the Fund will be obligated
to purchase the security or currency at greater than its market value.
Statement of Additional Information Page 6
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
PURCHASING PUT OPTIONS
The Fund may purchase put options on securities, indices and currencies. As the
holder of a put option, the Fund has 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. The Fund may enter into closing sale
transactions with respect to such options, exercise them or permit them to
expire.
The Fund may purchase a put option on an underlying security or currency
("protective put") owned by the Fund 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 Fund, 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.
The Fund also may purchase put options at a time when the Fund does not own the
underlying security or currency. By purchasing put options on a security or
currency it does not own, the Fund 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 Fund 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
The Fund may purchase call options on securities, indices and currencies. As the
holder of a call option, the Fund 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. The Fund may enter
into closing sale transactions with respect to such options, exercise them or
permit them to expire.
Call options may be purchased by the Fund for the purpose of acquiring the
underlying security or currency for its portfolio. Utilized in this fashion, the
purchase of call options would enable the Fund 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 also may be useful to the Fund 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 Fund 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.
The Fund also may 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 also may be purchased at times to avoid
realizing losses that would result in a reduction of the Fund's current return.
For example, where the Fund 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 the Fund, an increase in the market price could
result in the exercise of the call option written by the Fund and the
realization of a loss on the underlying security or currency. Accordingly, the
Fund could purchase a call option on the same underlying security or currency,
which could be exercised to fulfill the Fund's delivery obligations under its
written call (if it is exercised). This strategy could allow the Fund to avoid
selling the portfolio security or currency at a time when it has an unrealized
loss; however, the Fund 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 the
Fund's total assets at the time of purchase.
The Fund 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 Fund 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. A call option gives the Fund
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 an
(European style) the expiration date. The Fund 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
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GT GLOBAL GROWTH & INCOME FUND
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 the
Fund 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 the Fund
anticipates purchasing securities.
Options may be either listed on an exchange or traded over-the-counter ("OTC
options"). 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. The Fund 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. The Fund may also sell OTC options and,
in connection therewith, segregate assets or cover its obligations with respect
to OTC options written by the Fund. The assets used as cover for OTC options
written by the Fund will be considered illiquid unless the OTC options are sold
to qualified dealers who agree that the Fund 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.
The Fund's ability to establish and close out positions in exchange-listed
options depends on the existence of a liquid market. The Fund 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 the Fund
will enter into OTC options only with contra parties that are expected to be
capable of entering into closing transactions with the Fund, there is no
assurance that the Fund 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 Fund 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 the Fund 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 Fund 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 the Fund buys a call on an
index, it pays a premium and has the same rights as to such call as are
indicated above. When the Fund 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 Fund's exercise of the put, to deliver to the Fund 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 Fund writes a put on an index, it receives a
premium and the purchaser has the right, prior to the expiration date, to
require the Fund 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 a Fund writes a call
on an index it cannot provide in advance for its potential settlement
obligations by acquiring and holding the underlying securities. The Fund 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, the Fund 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 the Fund 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
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GT GLOBAL GROWTH & INCOME FUND
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 Fund 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 the Fund 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 Fund 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
The Fund 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 Fund. The Fund'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 or 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.
The Fund 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 the Fund's exposure to interest rate, currency exchange rate and
stock market fluctuations, the Fund 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 Fund realizes a gain; if it is
more, the Fund realizes a loss. Conversely, if the offsetting sale price is more
than the original purchase price, the Fund realizes a gain; if it is less, the
Fund realizes a loss. The transaction costs also must be included in these
calculations. There can be no assurance, however, that the Fund will be able to
enter into an offsetting transaction with respect to a particular Futures
Contract at a particular time. If the Fund is not able to enter into an
offsetting transaction, the Fund 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
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GT GLOBAL GROWTH & INCOME FUND
Contract was sold and the price paid for the offsetting purchase, after
allowance for transaction costs, represents the profit or loss to the Fund.
The Fund'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 the Fund owns, or Futures Contracts will be
purchased to protect the Fund 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 the Fund in order to initiate Futures trading and to maintain the
Fund's open positions in Futures Contracts. A margin deposit made when the
Futures Contract is entered into ("initial margin") is intended to assure the
Fund'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 modified significantly 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 Fund 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, among other things, by 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 the Fund'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 Contract 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 occasionally have 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 the Fund 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 Fund would continue to be subject to
market risk with respect to the position. In addition, except in the case of
purchased options, the Fund 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
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GT GLOBAL GROWTH & INCOME FUND
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 the Fund 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.
The Fund 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 the Fund 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 Fund's portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the Fund 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 without a shareholder vote. This limitation does not limit
the percentage of the Fund'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. The Fund either may
accept or make delivery of the currency at the maturity of the Forward Contract.
The Fund may also, if its contra party agrees, prior to maturity, enter into a
closing transaction involving the purchase or sale of an offsetting contract.
The Fund engages in forward currency transactions in anticipation of, or to
protect itself against, fluctuations in exchange rates. The Fund 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, the Fund
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, the Fund 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. The Fund will enter into such Forward Contracts with major
U.S. or foreign banks and securities or currency dealers in accordance with the
guidelines approved by the Company's Board of Directors.
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The Fund may enter into Forward Contracts either with respect to specific
transactions or with respect to the Fund's portfolio positions. 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 the Fund 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 Fund 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
Fund 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 the
Fund to sustain losses on these contracts and transaction costs.
At or before the maturity of a Forward Contract requiring the Fund to sell a
currency, the Fund either may sell a portfolio 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 Fund will obtain, on the same maturity date, the same
amount of the currency that it is obligated to deliver. Similarly, the Fund 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.
The Fund 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 the Fund 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 usually are 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 the Fund 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
The Fund 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 Fund's securities
are denominated. Such currency hedges can protect against price movements in a
security that the Fund 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.
The Fund 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 Fund 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 Fund 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.
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GT GLOBAL GROWTH & INCOME FUND
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 Fund 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 the Fund has purchased) expose the Fund to an obligation to another
party. The Fund 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. The Fund will comply
with SEC guidelines regarding cover for these instruments and, if the guidelines
so require, set aside cash or other 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 the Fund's assets are used for cover or otherwise set aside, it could affect
portfolio management or the Fund's ability to meet redemption requests or other
current obligations.
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RISK FACTORS
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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, the Fund could lose its entire investment in
any such country.
Certain countries in which the Fund 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 the Fund'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 the Fund
invests and adversely affect the value of the Fund's assets.
ILLIQUID SECURITIES. The Fund may invest up to 10% of its net assets in
illiquid securities. Securities may be considered illiquid if the Fund cannot
reasonably expect within seven days to sell the security approximately the
amount at which the Fund values such securities. 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 the sale of liquid securities, such as securities eligible for
trading on U.S. securities exchanges or in the over-the-counter 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, the Fund 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 Fund may be permitted to sell a security
under an effective registration statement. If, during such a period, adverse
market conditions were to develop, the Fund might obtain a less favorable price
than prevailed when it decided to sell.
Statement of Additional Information Page 13
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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
a Fund, however, could affect adversely the marketability of such portfolio
securities and the Fund might be unable to dispose of such securities promptly
or at favorable prices.
With respect to liquidity determinations generally, the Company's Board of
Directors has the ultimate responsibility for determining whether specific
securities, including restricted securities pursuant to Rule 144A under the 1933
Act, are liquid or illiquid. The Board has delegated the function of making
day-to-day determinations of liquidity to the Manager in accordance with
procedures approved by the Company's Board of Directors. 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 who make quotes for the security; (iii) the number of dealers who 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 in the
Fund's portfolio and periodically reports on such decisions to the Board of
Directors.
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 the Fund. These restrictions
or controls may at times limit or preclude investment in certain securities and
may increase the cost and expenses of the Fund. 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. The Fund
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 the Fund 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 the Fund 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 on 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.
Statement of Additional Information Page 14
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
CURRENCY FLUCTUATIONS. Because the Fund, 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 the
Fund'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 the
Fund's holdings of securities and cash denominated in such currency and,
therefore, will cause an overall decline in the 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 Fund. Moreover, if the value
of the foreign currencies in which the Fund receives its income falls relative
to the U.S. dollar between receipt of the income and the making of Fund
distributions, the Fund may be required to liquidate securities in order to make
distributions if the Fund 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 movement of interest
rates, the pace of business activity in certain other countries and the U.S.,
and other economic and financial conditions affecting the world economy.
Although the Fund values its assets daily in terms of U.S. dollars, the Fund
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. The Fund 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 are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign currency to the
Fund at one rate, while offering a lesser rate of exchange should the Fund
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 U.S., 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 the Fund are uninvested and no return
is earned thereon. The inability of the Fund to make intended security purchases
due to settlement problems could cause the Fund to miss attractive
opportunities. Inability to dispose of a portfolio security due to settlement
problems either could result in losses to the Fund due to subsequent declines in
value of the portfolio security or, if the Fund 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 the
Fund's assets, although the Manager does not believe that such difficulties will
have a material adverse effect on the Fund's portfolio trading activities.
The Fund may use foreign custodians, which may involve risks in addition to
those related to the use of U.S. custodians. Such risks include uncertainties
relating to: (i) determining and monitoring the financial strength, reputation
and standing of the foreign custodian; (ii) maintaining appropriate safeguards
to protect the Fund's investments and (iii) possible difficulties in obtaining
and enforcing judgments against such custodians.
WITHHOLDING TAXES. The Fund's net investment income from foreign issuers may
be subject to withholding taxes by the foreign issuer's country, thereby
reducing the Fund's net investment income or delaying the receipt of income
where those taxes may be recaptured. See "Taxes."
SPECIAL CONSIDERATIONS AFFECTING EUROPE. 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 and Germany) 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 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 at
this time what the exact form or effect of these Common Market reforms will be
on business in Western Europe or the emerging European markets, it is impossible
to predict the long-term impact of the implementation of these programs on the
securities owned by the Fund.
SPECIAL CONSIDERATIONS AFFECTING JAPAN AND HONG KONG. The concentration of
investments by the Fund in Japan means that the Fund may be more volatile than a
fund that is broadly diversified geographically. Overseas trade is important to
Japan's economy. Japan has few natural resources and must export to pay for its
imports of these basic requirements.
Statement of Additional Information Page 15
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
Because of the concentration of Japanese exports in highly visible products,
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 or other protectionist measures could impact Japan adversely in
both the short and the long term. 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.
Hong Kong is a British colony which will transfer sovereignty to the Peoples
Republic of China in 1997. China has espoused policies antagonistic to free
enterprise capitalism and democracy. There can be no guarantee that property
rights will continue to be safeguarded in Hong Kong after 1997, although
recently China has moved toward free enterprise, and has established stock
exchanges of its own.
- --------------------------------------------------------------------------------
INVESTMENT LIMITATIONS
- --------------------------------------------------------------------------------
The Fund has adopted the following investment limitations as fundamental
policies which (unless otherwise noted) may not be changed without approval by
the holders 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, and
(ii) more than 50% of the outstanding shares.
The Fund may not:
(1) Invest 25% or more of the value of its total assets in the
securities of issuers conducting their principal business activities in the
same industry, except that this limitation shall not apply to securities
issued or guaranteed as to principal and interest by the U.S. Government or
any of its agencies or instrumentalities;
(2) Invest in companies for the purpose of exercising control or
management;
(3) Buy or sell real estate (including real estate limited partnerships)
or commodities or commodity contracts; however, the 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, and may purchase or sell currencies (including
forward currency exchange contracts), futures contracts and related options
generally as described in the Prospectus and Statement of Additional
Information and subject to operating policy (4) below;
(4) Acquire securities subject to restrictions on disposition or
securities for which there is no readily available market, or enter into
repurchase agreements or purchase time deposits maturing in more than seven
days, or purchase over-the-counter options or hold assets set aside to cover
over-the-counter options written by the Fund, if, immediately after and as a
result, the value of such securities would exceed, in the aggregate, 10% of
the Fund's net assets;
(5) Engage in the business of underwriting securities of other issuers,
except to the extent that the disposal of an investment position may
technically cause it to be considered an underwriter as that term is defined
under the Securities Act of 1933;
(6) Make loans, except that the Fund may purchase debt securities and
enter into repurchase agreements and make loans of portfolio securities;
(7) Purchase securities on margin, provided that the 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 subject to operating policy (4) below;
(8) Borrow money except from banks for temporary or emergency purposes
not in excess of 33 1/3% of the value of the Fund's total assets at the
lower of cost or fair market value. The Fund will not purchase securities
while borrowings in excess of 5% of its total assets are outstanding. This
restriction shall not prevent the Fund from entering into reverse repurchase
agreements and engaging in "roll" transactions, provided that reverse
repurchase agreements, "roll" transactions and any other transactions
constituting borrowing by the Fund may not exceed one-third of the Fund's
total assets. In the event that the asset coverage for the Fund's borrowings
falls below 300%, the Fund will
Statement of Additional Information Page 16
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
reduce, within three days (excluding Sundays and holidays), the amount of
its borrowings in order to provide for 300% asset coverage;
(9) 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;
(10) Invest in interests in oil, gas, or other mineral exploration or
development programs; or
(11) Purchase or retain the securities of any issuer, if those individual
officers and Directors of the Fund, its 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.
For purposes of the concentration policy of the Fund contained in limitation (1)
above, the Fund intends to comply with the SEC staff position that securities
issued or guaranteed as to principal and interest by any single foreign
government or any supranational organizations in the aggregate are considered to
be securities of issuers in the same industry.
The following operating policies of the Fund are not fundamental policies and
may be changed by vote of a majority of the Company's Board of Directors without
shareholder approval. The Fund may not: (1) invest in securities of an issuer if
the investment would cause the Fund to own more than 10% of any class of
securities of any one issuer; (2) sell securities short, except to the extent
that the Fund contemporaneously owns or has the right to acquire at no
additional cost securities identical to those sold short; (3) 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; or (4)
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 Fund's portfolio, after taking into account unrealized
profits and unrealized losses on any contracts the Fund has entered into.
Investors should refer to the Prospectus for further information with respect to
the Fund's investment objective, which may not be changed without the approval
of the shareholders, and other investment policies, techniques and limitations,
which may be changed without shareholder approval.
- --------------------------------------------------------------------------------
EXECUTION OF PORTFOLIO
TRANSACTIONS
- --------------------------------------------------------------------------------
Subject to policies established by the Company's Board of Directors, the Manager
is responsible for the execution of the Fund's portfolio transactions and the
selection of broker/dealers who execute such transactions on behalf of the Fund.
In executing portfolio transactions, the Manager seeks the best net results for
the Fund, 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 the Fund may engage in soft dollar arrangements for
research services, as described below, the Fund has no obligation to deal with
any broker/dealer or group of broker/dealers in the execution of portfolio
transactions.
Debt securities generally are traded on a "net" basis with a dealer acting as
principal for its own account without a stated commission, although the price of
the security usually includes a profit to the dealer. U.S. and foreign
government securities and money market instruments generally are traded in the
OTC markets. In underwritten offerings, securities usually are purchased at a
fixed price which includes an amount of compensation to the underwriter. On
occasion, securities may be purchased directly from an issuer, in which case no
commissions or discounts are paid. Broker/dealers may receive commissions on
futures, currency and options transactions.
Consistent with the interests of the Fund, the Manager may select brokers to
execute the Fund's portfolio transactions, on the basis of the research and
brokerage services they provide to the Manager for its use in managing the Fund
and its other advisory accounts. Such services may include furnishing analyses,
reports and information concerning issuers, industries,
Statement of Additional Information Page 17
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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 brokers are in addition to,
and not in lieu of, the services required to be performed by the Manager under
the Management Contract (defined below). A commission paid to such brokers 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 the Fund and its
other clients and that the total commissions paid by the Fund will be reasonable
in relation to the benefits received by the Fund over the long term. Research
services may also be received from dealers who execute Fund transactions in
over-the-counter 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 the Fund toward payment of the Fund's expenses, such as
transfer agent and custodian fees.
Investment decisions for the Fund 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 the Fund. 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 the Fund is concerned, in other cases, the Manager
believes that coordination and the ability to participate in volume transactions
will be beneficial to the Fund.
Under a policy adopted by the Company's Board of Directors, 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 Fund and the other funds for which the
Manager serves as investment manager in selecting brokers and 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 Fund and such other funds.
The Fund contemplates purchasing most foreign equity securities in
over-the-counter 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 United States 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 the Fund 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 over-the-
counter 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 the Fund may invest generally are traded in the
over-the-counter markets.
The Fund contemplates that, consistent with the policy of obtaining the best net
results, brokerage transactions may be conducted through certain companies that
are members of the Liechtenstein Global Trust. The Company's Board of Directors
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.
For the Fund's fiscal years ended October 31, 1996, 1995 and 1994, the Fund paid
aggregate brokerage commissions of $
- -------, $318,958 and $280,861, respectively.
PORTFOLIO TRADING AND TURNOVER
The Fund engages in portfolio trading when the Manager has concluded that the
sale of a security owned by the Fund and/ or the purchase of another security of
better value can enhance principal and/or increase income. A security may be
sold to avoid any prospective decline in market value, or a security may be
purchased in anticipation of a market rise. Consistent with the Fund's
investment objective, a security also may be sold and a comparable security
purchased coincidentally in order to take advantage of what is believed to be a
disparity in the normal yield and price relationship between the two securities.
Although the Fund does not intend generally to trade for short-term profits, the
securities in the Fund's portfolio will be sold whenever management believes it
is appropriate to do so, without regard to the length of time a particular
security may have been held. However, the portfolio turnover rate will not be a
limiting factor when the Manager deems portfolio changes appropriate. Higher
portfolio turnover involves correspondingly greater brokerage
Statement of Additional Information Page 18
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
commissions and other transaction costs that the Fund will bear directly, and
may result in the realization of net capital gains that are taxable when
distributed to the Fund's shareholders. For the fiscal years ended October 31,
1996 and 1995, the Fund's portfolio turnover rates were
- ---% and 83%, respectively.
Statement of Additional Information Page 19
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
DIRECTORS AND EXECUTIVE
OFFICERS
- --------------------------------------------------------------------------------
The Company's Directors and Executive Officers are listed below.
<TABLE>
<CAPTION>
NAME, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- --------------------------------------- ------------------------------------------------------------------------------------------
<S> <C>
David A. Minella*, 43 Chairman, the Manager since October 1996; Director, Liechtenstein Global Trust (holding
Director, Chairman of the Board and company of the various international LGT companies) since 1990; President, Asset
President Management Division, Liechtenstein Global Trust since 1995; Director and President, LGT
50 California, Street Asset Management Inc. ("LGT Asset Management"), formerly LGT Asset Management Holdings,
San Francisco CA 94111 Inc., since 1988; Director and President, the Manager from 1989 to October 1996; Director,
GT Global since 1987 and President, GT Global from 1987 to 1995; Director, GT Services
since 1990; President, GT Services from 1990 to 1995; Director, G.T. Global Insurance
Agency, Inc. ("G.T. Insurance") since 1992; and President, G.T. Insurance from 1992 to
1995. Mr. Minella also is a director or trustee of each of the other investment companies
registered under the 1940 Act that is managed or administered by the Manager.
C. Derek Anderson, 54 Chief Executive Officer, Anderson Capital Management, Inc.; Chairman and Chief Executive
Director Officer, Plantagenet Holdings, Ltd. from 1991 to present; Director, Munsingwear, Inc.; and
220 Sansome Street Director, American Heritage Group Inc. and various other companies. Mr. Anderson also is a
Suite 400 director or trustee of each of the other investment companies registered under the 1940
San Francisco, CA 94104 Act that is managed or administered by the Manager.
Frank S. Bayley, 55 Partner with Baker & McKenzie (a law firm); Director and Chairman, C.D. Stimson Company (a
Director private investment company); and Trustee, Seattle Art Museum. Mr. Bayley also is a
Two Embarcadero Center director or trustee or each of the other investment companies registered under the 1940
Suite 2400 Act that is managed or administered by the Manager.
San Francisco, CA 94111
Arthur C. Patterson, 52 Managing Partner, Accel Partners (a venture capital firm). He also serves as a director of
Director various computing and software companies. Mr. Patterson also is a director or trustee of
One Embarcadero Center each of the other investment companies registered under the 1940 Act that is managed or
Suite 3820 administered by the Manager.
San Francisco, CA 94111
Ruth H. Quigley, 59 Private investor; and President, Quigley Friedlander & Co., Inc. (a financial advisory
Director services firm) from 1984 to 1986. Ms. Quigley also is a director or trustee or each of the
1055 California Street other investment companies registered under the 1940 Act that is managed or administered
San Francisco, CA 94108 by the Manager.
</TABLE>
- --------------
* Mr. Minella is an "interested person" of the Company as defined by the 1940
Act due to his affiliation with the LGT companies.
Statement of Additional Information Page 20
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
<TABLE>
<CAPTION>
NAME, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- --------------------------------------- ------------------------------------------------------------------------------------------
<S> <C>
James R. Tufts, 37 Chief Information Officer for the Manager since October 1996; President,
Vice President and Chief GT Services since 1995; Senior Vice President of Finance and
Financial Officer Administration, GT Global, GT Services and G.T. Insurance, from 1994 to
50 California Street 1995; Senior Vice President of Finance and Administration, LGT Asset
San Francisco, CA 94111 Management and the Manager from 1994 to October 1996; Vice President of
Finance, LGT Asset Management, the Manager, GT Global and GT Services
from 1990 to 1994; Vice President of Finance, G.T. Insurance from 1992
to 1994; and a Director of the Manager, GT Global and GT Services since
1991.
Kenneth W. Chancey, 50 Vice President of Mutual Fund Accounting, the Manager since 1992; and
Vice President and Vice President, Putnam Fiduciary Trust Company from 1989 to 1992.
Principal Accounting Officer
50 California Street
San Francisco, CA 94111
Helge K. Lee, 49 Executive Vice President, Asset Management Division, Liechtenstein
Vice President and Secretary Global Trust since October 1996; Senior Vice President, LGT Asset
50 California Street Management, the Manager, GT Global, GT Services and G.T. Insurance from
San Francisco, CA 94111 February 1996 to October 1996; Vice President, LGT Asset Management, the
Manager, GT Global, GT Services and G.T. Insurance from May 1994 to
February 1996; General Counsel, LGT Asset Management, the Manager, GT
Global, GT Services and G.T. Insurance from May 1994 to October 1996;
Secretary, the Manager, since May 1994; Secretary, LGT Asset Management,
GT Global, GT Services and G.T. Insurance from May 1994 to October 1996;
Senior Vice President, General Counsel and Secretary, Strong/Corneliuson
Management, Inc.; and Secretary, each of the Strong Funds from October
1991 to May 1994.
</TABLE>
The Board of Directors has a Nominating and Audit Committee, comprised of Miss
Quigley and Messrs. Anderson, Bayley and Patterson, which is responsible for
nominating persons to serve as Directors, reviewing audits of the Company and
its funds and recommending firms to serve as independent auditors for the
Company. Each of the Directors and officers of the Company is also a Director
and officer of G.T. Investment Portfolios, Inc., G.T. Global Developing Markets
Fund, Inc. and GT Floating Rate Portfolio, a Trustee and officer of G.T. Global
Growth Series and a Trustee of G.T. Greater Europe Fund, G.T. Global Variable
Investment Trust, G.T. Global Variable Investment Series, Global High Income
Portfolio and Global Investment Portfolio, which are also registered investment
companies managed by the Manager. Each Director and officer serves in total as a
Director or Trustee and Officer, respectively, of
- --- registered investment companies with
- ---series managed or administered by the Manager. The Company pays each
Director, who is not a director, officer or employee of the Manager or any
affiliated company, $5,000 per annum, plus $300 per Fund for each meeting of the
Board attended, and reimburses travel and other expenses incurred in connection
with attendance at such meetings. Other Directors and Officers receive no
compensation or expense reimbursement from the Company. For the fiscal year
ended October 31, 1996, Mr. Anderson, Mr. Bayley, Mr. Patterson and Ms. Quigley
received total compensation of $
- -------, $
- -------, $
- ------- and $
- -------, respectively, from the Company for which he or she serves as a
Director. For the fiscal year ended October 31, 1996, Mr. Anderson, Mr. Bayley,
Mr. Patterson and Ms. Quigley, who are not directors, officers or employees of
the Manager or any affiliated company, received total compensation of $
- -------, $
- ------, $
- ------ and $
- -------, respectively, from the
- ---GT Global Mutual Funds for which he or she serves as a Director or Trustee.
Fees and expenses disbursed to the Directors contained no accrued or payable
pension or retirement benefits. As of
- ------------, 1997, the officers and Directors and their families as a group
owned in the aggregate beneficially or of record less than 1% of the outstanding
shares of the Fund or of all the Company's funds in the aggregate.
Statement of Additional Information Page 21
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
Chancellor LGT Asset Management, Inc. (the "Manager") serves as the Fund's
investment manager and administrator under an Investment Management and
Administration Contract ("Management Contract") between the Company and the
Manager. As investment manager and administrator, the Manager makes all
investment decisions for the Fund and administers the Fund's affairs. Among
other things, the Manager furnishes the services and pays the compensation and
travel expenses of persons who perform the executive, administrative, clerical
and bookkeeping functions of the Company and the Fund, and provides suitable
office space, necessary small office equipment and utilities. For these
services, the Fund pays the Manager investment management and administration
fees, based on the Fund's average daily net assets, computed daily and paid
monthly, at the annualized rate of .975% on the first $500 million, .95% on the
next $500 million, .925% on the next $500 million, and .90% on amounts
thereafter.
The Management Contract may be renewed for one-year terms, provided that any
such renewal has been specifically approved at least annually by: (i) the
Company's Board of Directors, or by the vote of a majority of the Fund's
outstanding voting securities (as defined in the 1940 Act), and (ii) a majority
of Directors who are not parties to the Management Contract or "interested
persons" of any such party (as defined in the 1940 Act), cast in person at a
meeting called for the specific purpose of voting on such approval. The
Management Contract provides that with respect to the Fund, the Company or the
Manager may terminate the Contract without penalty upon sixty days' written
notice. The Management Contract terminates automatically in the event of its
assignment (as defined in the 1940 Act).
The Manager and GT Global have voluntarily undertaken to limit the Fund's Class
A share and Class B share expenses (exclusive of brokerage commissions, taxes,
interest and extraordinary expenses) to the maximum annual level of 1.85% and
2.50% of the Fund's average daily net assets of those respective classes of the
Fund, during each fiscal year and the Manager and GT Global have agreed to
reimburse the Fund if the Fund's expenses exceed that amount.
The following table discloses the amount of investment management and
administration fees paid by the Fund to the Manager during the Fund's last three
fiscal years:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, AMOUNT PAID
- ----------------------------------------------------------------------------------------------------------- -------------
<S> <C>
1996.......................................................................................................
$--------
1995....................................................................................................... 6,301,399
1994....................................................................................................... 5,676,421
</TABLE>
DISTRIBUTION SERVICES
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 a Distribution Contract between the Company and GT Global
dated February 24, 1989.
As described in the Prospectus, the Company has adopted separate Distribution
Plans with respect to each class of the Fund in accordance with the provisions
of Rule 12b-1 under the 1940 Act ("Class A Plan" and "Class B Plan")
(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 Fund. All expenses for
which GT Global is reimbursed under the Class A Plan will have been incurred
within one year of such reimbursement. The Fund makes no payments to any party
other than GT Global, which is the distributor (principal underwriter) of the
Fund's shares. The Class B Plan took effect on October 22, 1992. The following
table discloses payments made by the Fund to GT Global under the Plans during
the Fund's last fiscal year:
<TABLE>
<CAPTION>
CLASS A CLASS B
AMOUNT PAID AMOUNT PAID
------------- -------------
<S> <C> <C>
Year ended October 31, 1996.................................................................
$-------- $--------
</TABLE>
In approving the Plans, the Directors including a majority of Directors who are
not "interested persons" of the Company (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, determined that each Plan was in the best
interests of the Fund and its shareholders.
Statement of Additional Information Page 22
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
Agreements related to the Plan must also be approved by such vote of the
Directors and Qualified Directors as described above. A plan of distribution
which was substantially similar to the Class A Plan was approved by the
shareholders of the Fund on January 20, 1992, which was subsequently amended to
reflect certain changes, including (i) reference to the addition of the Class B
Plan and (ii) changes in the rules of the National Association of Securities
Dealers, Inc. ("NASD"). The Class B Plan was approved by the initial sole
shareholder of the Class B shares on October 21, 1992.
Each Plan requires that, at least quarterly, the Directors 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
Directors who are not "interested persons" of the Company will be committed to
the discretion of the Directors who are not "interested persons" of the Company,
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 who sell shares.The following
table reviews the extent of such activity during the Fund's last three fiscal
years under a sales structure substantially similar to the current Class A
structure:
<TABLE>
<CAPTION>
SALES CHARGES AMOUNTS AMOUNTS
YEAR ENDED OCTOBER 31, COLLECTED RETAINED REALLOWED
- ----------------------------------------------------------------------------------- ------------- --------- ----------
<S> <C> <C> <C>
1996...............................................................................
$ ------- $------- $-------
1995............................................................................... 556,296 80,112 476,184
1994............................................................................... 2,299,883 442,313 1,857,570
</TABLE>
GT Global receives no compensation or reimbursements relating to its
distribution efforts with respect to Class A shares other than as described
above. GT Global receives any contingent deferred sales charges payable with
respect to redemptions of Class B shares. For the fiscal years ended October 31,
1996, 1995 and 1994, GT Global collected contingent deferred sales charges in
the amounts of $
- --------, $1,533,810 and $321,440, respectively. Purchases of Class A shares
exceeding $500,000 may be subject to a contingent deferred sales charge upon
redemption. GT Global collected contingent deferred sales charges in the amount
of $19,017 for the fiscal year ended October 31, 1995.
TRANSFER AGENCY AND ACCOUNTING AGENT SERVICES
GT Global Investor Services, Inc. ("Transfer Agent") has been retained by the
Fund to perform shareholder servicing, reporting and general transfer agent
functions for the Fund. 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 also is reimbursed
by the Fund for its out-of-pocket expenses for such items as postage, forms,
telephone charges, stationery and office supplies. The Manager serves as the
Fund's pricing and accounting agent. The monthly fee for these services to the
Manager is a percentage, not to exceed 0.03% annually, of the Fund's average
daily net assets. The annual fee rate is derived by applying 0.03% to the first
$5 billion of assets of all registered mutual funds advised by the Manager ("GT
Global Mutual Funds") and 0.02% to the assets in excess of $5 billion and
allocating the result according to each Fund's average daily net assets.
As of October 31, 1996, the Fund paid the Manager fees of $
- ----- for such accounting services.
EXPENSES OF THE FUND
The Fund pays all expenses not assumed by the Manager, GT Global and other
agents. These expenses include, in addition to the advisory, distribution,
transfer agency, pricing and accounting agency and brokerage fees discussed
above, legal and audit expenses, custodian fees, directors' fees, organizational
fees, fidelity bond and other insurance premiums, taxes, extraordinary expenses
and the expenses of reports and prospectuses sent to existing investors. The
allocation of general Company expenses and expenses shared among the Fund and
other funds organized as series of the Company are allocated on a basis deemed
fair and equitable, which may be based on the relative net assets of the Fund or
the nature of the services performed and relative applicability to the Fund.
Expenditures, including costs incurred in connection with the purchase or sale
of portfolio securities, which are capitalized in accordance with generally
accepted accounting principles applicable to investment companies, are accounted
for as capital items and not as expenses. The ratio of the Fund's expenses to
its relative net assets can be expected to be higher than the expense ratios of
funds investing solely in domestic securities, since the cost of maintaining the
custody of foreign securities and the rate of investment management fees paid by
the Fund generally are higher than the comparable expenses of such other funds.
Statement of Additional Information Page 23
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
- --------------------------------------------------------------------------------
VALUATION OF FUND SHARES
- --------------------------------------------------------------------------------
As described in the Prospectus, the Fund's net asset value per share for each
class of shares is determined at 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
each business day the NYSE is open for business. 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 Fund's portfolio securities and other assets are valued as follows:
Equity securities, including ADRs, ADSs, and EDRs, which are traded on stock
exchanges, are valued at the last sale price on the exchange or in the principal
over-the-counter market in which such securities are traded, as of the close of
business on the day the securities are being valued or, lacking any sales, at
the last available bid price. In cases where securities are traded on more than
one exchange, the securities are valued on the exchange determined by the
Manager to be the primary market.
Long-term debt obligations are valued at the mean of representative quoted bid
and asked prices for such securities or, if such prices are not available, at
prices for securities of comparable maturity, quality and type; however, when
the Manager deems it appropriate, prices obtained for the day of valuation from
a bond pricing service will be used. Short-term investments are amortized to
maturity based on their cost, adjusted for foreign exchange translation,
provided such valuations represent fair value.
Options on indices, securities and currencies purchased by the Fund are valued
at their last bid price in the case of listed options or, in the case of OTC
options, at the 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. The value of each security denominated in a currency other
than U.S. dollars will be translated into U.S. dollars at the prevailing market
rate as determined by the Manager on that day. When market quotations for
futures and options on futures held by the Fund are readily available, those
positions will be valued based upon such quotations.
Securities and other assets for which market quotations are not readily
available (including restricted securities which are subject to limitations as
to their sale) are valued at fair value as determined in good faith by or under
the direction of the Company's Board of Directors. The valuation procedures
applied in any specific instance are likely to vary from case to case. However,
consideration generally is given to the financial position of the issuer and
other fundamental analytical data relating to the investment and to the nature
of the restrictions on disposition of the securities (including any registration
expenses that might be borne by the Fund in connection with such disposition).
In addition, specific factors also generally are considered, such as the cost of
the investment, the market value of any unrestricted securities of the same
class (both at the time of purchase and at the time of valuation), the size of
the holding, the prices of any recent transactions or offers with respect to
such securities and any available analysts' reports regarding the issuer.
The fair value of any other assets is added to the value of all securities
positions to arrive at the value of the Fund's total assets. The Fund's
liabilities, including accruals for expenses, are deducted from its total
assets. Once the total value of the Fund's net assets is so determined, that
value is then divided by the total number of shares outstanding (excluding
treasury shares), and the result, rounded to the nearer cent, is the net asset
value per share.
Any assets or liabilities initially expressed in terms of foreign currencies are
translated into U.S. dollars at the official exchange rate or at the mean of the
current bid and asked prices of such currencies against the U.S. dollar last
quoted by a major bank that is a regular participant in the foreign exchange
market or on the basis of a pricing service that takes into account the quotes
provided by a number of such major banks. If none of these alternatives are
available, or none are deemed to provide a suitable methodology for converting a
foreign currency into U.S. dollars, the Board of Directors, in good faith, will
establish a conversion rate for such currency.
European, Far Eastern, or Latin American securities trading may not take place
on all days on which the NYSE is open. Further, trading takes place in Japanese
markets on certain Saturdays and in various foreign markets on days on which the
NYSE is not open. In addition, trading in securities on European and Far Eastern
securities exchanges and OTC markets generally is completed well before the
close of the business day in New York. Consequently, the calculation of the
Fund's
Statement of Additional Information Page 24
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
net asset value may not take place contemporaneously with the determination of
the prices of securities held by the Fund. Events affecting the values of
portfolio securities that occur between the time their prices are determined and
the close of regular trading on the NYSE will not be reflected in the Fund's net
asset value unless the Manager, under the supervision of the Company's Board of
Directors, determines that the particular event would materially affect net
asset value. As a result, the Fund's net asset value may be significantly
affected by such trading on days when a shareholder cannot purchase or redeem
shares of the Fund.
- --------------------------------------------------------------------------------
INFORMATION RELATING TO SALES
AND REDEMPTIONS
- --------------------------------------------------------------------------------
PAYMENT AND TERMS OF OFFERING
Payment for Class A or Class B shares purchased should accompany the purchase
order, or funds should be wired to the Transfer Agent as described in the
Prospectus. Payment for Fund shares, 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 cancelled 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 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 cancelled 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.
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 assure 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
13-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 20 business days after written
request, the appropriate number of escrowed shares will be redeemed and the
proceeds paid to GT Global.
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 restrictively
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.
AUTOMATIC INVESTMENT PLAN -- CLASS A SHARES AND CLASS B SHARES
To establish participation in the GT Global Automatic Investment Plan ("AIP"),
investors or their brokers should specify whether investment will be in Class A
shares or Class B shares and 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.
Statement of Additional Information Page 25
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
The necessary forms are included at the back of the Fund's prospectus. Providing
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, a stop payment order
or 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 30 days' written notice or by
the participant, at any time, without penalty, upon written notice to the Fund
or the Transfer Agent.
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 Internal
Revenue Code of 1986, as amended ("Code"). IRA applications are available from
brokers or GT Global.
EXCHANGES BETWEEN FUNDS
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 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 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 60 days prior notice to the shareholders of such fund and is available only
in states where the exchange may be legally made. 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 30 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 a 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 beginning
quarterly on the 25th day of the month the investor first selects). In the event
that the 25th 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) also must submit a "Corporation
Resolution" or "Certification 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 30 days' written notice or by a shareholder upon
written notice to the Fund or its Transfer Agent. Applications and further
details regarding establishment of a SWP are provided at the back of the Fund's
Prospectus.
Statement of Additional Information Page 26
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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 determined by the SEC, (2) when an
emergency exists, as defined by the SEC, which would prohibit the Fund from
disposing of its portfolio securities 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 Company's Board of Directors, 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
"redemption 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 Company 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 value of the net
assets of the Fund at the beginning of such period. This election is irrevocable
so long as Rule 18f-1 remains in effect, unless the SEC by order upon
application permits the withdrawal of such election.
- --------------------------------------------------------------------------------
TAXES
- --------------------------------------------------------------------------------
GENERAL
In order to qualify or to continue 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, net short-term
capital gain and net gains from certain foreign currency transactions)
("Distribution Requirement") and must meet several additional requirements.
These requirements include the following: (1) the Fund must derive at least 90%
of its gross income each taxable year from dividends, interest, payments with
respect to securities loans and gains from the sale or other disposition of
securities or foreign currencies, or other income (including gains from options,
Futures or Forward Contracts) derived with respect to its business of investing
in securities or those currencies ("Income Requirement"); (2) 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 -- options or Futures (other than those on foreign
currencies), or foreign currencies (or options, Futures or Forward Contracts
thereon) that are not directly related to the Fund's principal business of
investing in securities (or options and Futures with respect to securities)
("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.
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 from U.S.
corporations. However, dividends received by a corporate shareholder and
deducted by it pursuant to the dividends-received deduction are subject
indirectly to the alternative minimum tax.
Statement of Additional Information Page 27
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
If 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.
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.
FOREIGN TAXES
Dividends and interest received by the Fund may be subject to income,
withholding or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors. If more than 50% of the value of
the Fund's total assets at the close of its taxable year consists of securities
of foreign corporations, the Fund will be eligible to, and may, file an election
with the Internal Revenue Service that will enable its shareholders, in effect,
to receive the benefit of the foreign tax credit with respect to any foreign
income taxes paid by it. Pursuant to the election, the Fund will treat those
taxes as dividends paid to its shareholders and each shareholder will be
required to (1) include in gross income, and treat as paid by him, his
proportionate share of those taxes, (2) treat his share of those taxes and of
any dividend paid by the Fund that represents income from foreign sources as his
own income from those sources, and (3) either deduct the taxes deemed paid by
him in computing his taxable income or, alternatively, use the foregoing
information in calculating the foreign tax credit against his federal income
tax. The Fund will report to its shareholders shortly after each taxable year
their respective shares of the Fund's income from sources within, and taxes paid
to, foreign countries if it makes this election.
PASSIVE FOREIGN INVESTMENT COMPANIES
The Fund may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is a foreign corporation that, in general, meets either of the
following tests: (1) at least 75% of its gross income is passive or (2) an
average of at least 50% of its assets produce, or are held for the production
of, passive income. Under certain circumstances, the Fund would be subject to
federal income tax on a portion of any "excess distribution" received on, of any
gain from disposition of, stock of a PFIC (collectively "PFIC income"), plus
interest thereon, even if the Fund distributed the PFIC income as a taxable
dividend to its shareholders. The balance of the PFIC income would be included
in the Fund's investment company taxable income and, accordingly, would not be
taxable to the Fund to the extent that income is distributed to its
shareholders.
If the Fund does invest in a PFIC and elects to treat the PFIC as a "qualified
electing fund" ("QEF"), then in lieu of the foregoing tax and interest
obligation, the Fund would be required to include in income each taxable year
its pro rata share of the QEF's ordinary earnings and net capital gain (the
excess of net long-term capital gain over net short-term capital loss) -- which
most likely would have to be distributed to satisfy the Distribution Requirement
and to avoid imposition of the Excise Tax -- even if those earnings and gain
were not received by the Fund. In most instances it will be very difficult, if
not impossible, to make this election because of certain requirements thereof.
Pursuant to proposed regulations, open-end RICs, such as the Fund, would be
entitled to elect to "mark-to-market" their stock in certain PFICs.
"Marking-to-market," in this context, means recognizing as gain for each taxable
year the excess, as of the end of that year, of the fair market value of each
such PFIC's stock over the adjusted basis in that stock (including
mark-to-market gain for each prior year for which an election was in effect).
NON-U.S. SHAREHOLDERS
Dividends paid by the Fund to a shareholder who, as to the United States, is a
nonresident alien individual, 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
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.
OPTIONS, FUTURES AND FOREIGN CURRENCY TRANSACTIONS
The use of hedging transactions, such as selling (writing) and purchasing
options and Futures Contracts and entering into Forward Contracts, involves
complex rules that will determine, for federal income tax purposes, the
character and timing
Statement of Additional Information Page 28
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
of recognition of the gains and losses the Fund realizes in connection
therewith. Gains from foreign currencies (except certain gains that may be
excluded by future regulations), and gains from the disposition of options,
Futures and Forward Contracts derived by the Fund with respect to its business
of investing in securities or foreign currencies, will qualify as permissible
income under the Income Requirement. However, income from the disposition by the
Fund of options and Futures (other than those on foreign currencies) will be
subject to the Short-Short Limitation if they are held for less than three
months. Income from the disposition by the Fund of foreign currencies, and
options, Futures and Forward Contracts on foreign currencies, that are not
directly related to the Fund's principal business of investing in securities (or
options and Futures with respect thereto) also will be subject to the
Short-Short Limitation if they are held for less than three months.
If the Fund satisfies certain requirements, any increase in value of a position
that is part of a "designated hedge" will be offset by any decrease in value
(whether realized or not) of the offsetting hedging position during the period
of the hedge for purposes of determining whether the Fund satisfies the
Short-Short Limitation. Thus, only the net gain (if any) from the designated
hedge will be included in gross income for purposes of that limitation. The Fund
intends that, when it engages in hedging transactions, it will qualify for this
treatment, but at the present time it is not clear whether this treatment will
be available for all those transactions. To the extent this treatment is not
available, the Fund may be forced to defer the closing out of certain options,
Futures, Forward Contracts or foreign currency positions beyond the time when it
otherwise would be advantageous to do so, in order for the Fund to continue to
qualify as a RIC.
Futures and Forward Contracts that are subject to section 1256 of the Code
(other than those that are part of a "mixed straddle") ("Section 1256
Contracts") and that are held by the Fund at the end of its taxable year
generally will be deemed to have been sold at market value for federal income
tax purposes. Sixty percent of any net gain or loss recognized on these deemed
sales, and 60% of any net gain or loss realized from any actual sales of Section
1256 Contracts, will be treated as long-term capital gain or loss, and the
balance will be treated as short-term capital gain or loss. Section 988 of the
Code also may apply to gains and losses from transactions in foreign currencies,
foreign-currency-denominated debt securities and options, Futures and Forward
Contracts on foreign currencies ("Section 988" gains or losses). Each Section
988 gain or loss generally is computed separately and treated as ordinary income
or loss. In the case of overlap between Sections 1256 and 988, special
provisions determine the character and timing of any income, gain or loss. The
Fund attempts to monitor Section 988 transactions to minimize any adverse tax
impact.
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.
Statement of Additional Information Page 29
<PAGE>
GT GLOBAL GROWTH & INCOME 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 and Verwaltung AG, located 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) in Tokyo; LGT Asset Management
Pte. Ltd., formerly G.T. Management (Singapore) PTE Ltd. located in Singapore;
LGT Asset Management Ltd., formerly G.T. Management (Australia) Ltd., located in
Sydney; and LGT Asset Management GmbH, formerly BIL Asset Management GmbH,
located in Frankfurt, Germany.
CUSTODIAN
State Street Bank and Trust Company ("State Street"), 225 Franklin Street,
Boston, Massachusetts 02110, acts as custodian of the Fund's assets. State
Street is authorized to establish and has established separate accounts in
foreign currencies and to cause securities of the Fund to be held in separate
accounts outside the United States in the custody of non-U.S. banks.
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 Company and the Fund as to matters of
accounting, regulatory filings, and federal and state income taxation.
The audited financial statements of the Company 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 said firm as experts in accounting and auditing.
USE OF NAME
The Manager has granted the Company 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 Company and/or the Fund at any time, or to grant the use of such
names to any other company.
Statement of Additional Information Page 30
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
INVESTMENT RESULTS
- --------------------------------------------------------------------------------
The Fund's "Standardized Return," 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 ("T") is computed by using the value at the end of
the period ("EV") 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)(n) = EV. 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 Board and (4) a complete redemption at the end of any period
illustrated.
The Fund's Standardized Returns for its Class A shares, stated as average
annualized total returns, for the periods shown were as follows:
<TABLE>
<CAPTION>
PERIOD STANDARDIZED RETURN
- ---------------------------------------------------------------------------------------------------- ---------------------
<S> <C>
Year ended October 31, 1996.........................................................................
----%
October 31, 1991 to October 31, 1996................................................................
----%
September 25, 1990 (commencement of operations) through October 31, 1996............................
----%
</TABLE>
The Fund's Standardized Returns for its Class B shares, which were first offered
on October 22, 1992, stated as average annualized total returns for the periods
shown, were:
<TABLE>
<CAPTION>
PERIOD STANDARDIZED RETURN
- -------------------------------------------------------------------------------------------------- ---------------------
<S> <C>
Year ended October 31, 1996.......................................................................
----%
October 22, 1992 (commencement of operations) to October 31, 1996.................................
----%
</TABLE>
"Non-Standardized Return," as referred to in the Prospectus, is calculated for a
specified period of time by assuming the investment of $1,000 in Fund shares and
further assuming the reinvestment of all dividends and other distributions made
to Fund shareholders in additional Fund shares at their net asset value.
Percentage rates of return are then calculated by comparing this assumed initial
investment to the value of the hypothetical account at the end of the period for
which the Non-Standardized Return is quoted. As discussed in the Prospectus, the
Fund may quote non-standardized total returns that do not reflect the effect of
sales charges. Non-Standardized Returns may be quoted from the same or different
time periods for which Standardized Returns are quoted.
The Fund's Non-Standardized Returns for its Class A shares, stated as aggregate
total returns, for the periods shown, were as follows:
<TABLE>
<CAPTION>
NON-STANDARDIZED
PERIOD AGGREGATE TOTAL RETURN
- ------------------------------------------------------------------------------------------------ -----------------------
<S> <C>
Year ended October 31, 1996.....................................................................
----%
October 31, 1991 to October 31, 1996............................................................
----%
September 25, 1991 (commencement of operations) through October 31, 1996........................
----%
</TABLE>
The Fund's Non-Standardized Returns for its Class B shares which were first
offered on October 22, 1992, stated as aggregate total returns, for the periods
shown, were as follows:
<TABLE>
<CAPTION>
PERIOD AGGREGATE TOTAL RETURN
- ------------------------------------------------------------------------------------------------ -----------------------
<S> <C>
Year ended October 31, 1996.....................................................................
----%
October 22, 1992 (commencement of operations) through October 31, 1996..........................
----%
</TABLE>
Statement of Additional Information Page 31
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
The Fund's Non-Standardized Returns for its Class A shares, stated as average
annualized total returns for the periods shown, were as follows:
<TABLE>
<CAPTION>
NON-STANDARDIZED
AVERAGE ANNUALIZED
PERIOD TOTAL RETURN
- --------------------------------------------------------------------------------------------------- ---------------------
<S> <C>
Year ended October 31, 1996........................................................................
----%
October 31, 1991 to October 31, 1996...............................................................
----%
September 25, 1990 (commencement of operations) through October 31, 1996...........................
----%
</TABLE>
The Fund's Non-Standardized Returns for its Class B shares which were first
offered on October 22, 1992, stated as average annualized total returns for the
periods shown, were as follows:
<TABLE>
<CAPTION>
PERIOD NON-STANDARDIZED RETURN
- ---------------------------------------------------------------------------------------------- -------------------------
<S> <C>
Year ended October 31, 1996...................................................................
----%
October 22, 1992 (commencement of operations) through October 31, 1996........................
----%
</TABLE>
IMPORTANT POINTS TO NOTE ABOUT DATA RELATING TO WORLD EQUITY AND BOND MARKETS
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 Company
or GT Global. The authors and publishers of such material are not to be
considered as "experts" under the Securities Act of 1933, on account of the
inclusion of such information herein.
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 any of these Funds, nor is it a
prediction of such performance. The performance of the Funds will differ from
the historical performance of relevant indices. The performance of indices does
not take expenses into account, while each Fund incurs expenses in its
operations, which will reduce performance. Each Fund is actively managed, I.E.,
the Manager, as each Fund's investment manager, actively purchases and sells
securities in seeking each Fund's investment objective. Moreover, each Fund may
invest a portion of its assets in corporate bonds, while certain indices relate
only to government bonds. Each of these factors will cause the performance of
each Fund to differ from relevant indices.
In addition, GT Global may in its radio, television and other advertising,
employ the use of sound effects such as, for example, sounds of electronic data
being communicated.
The Fund and GT Global may from time to time compare the Fund with the
following:
(1) Various Salomon Brothers World Bond Indices, which measure 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.
or BBB by Standard and Poor's, or, in the case of nonrated bonds, BBB by
Fitch Investors Service (excluding Collateralized Mortgage Obligations).
(3) 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.
(4) 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).
(5) Data and mutual fund rankings and comparisons published or prepared
by Lipper Analytical Data Services, Inc. ("Lipper"), CDA/Wiesenberger
Investment Company Services ("CDA/Wiesenberger") and/or other companies that
rank or compare mutual funds by overall performance, investment objectives,
assets, expense levels, periods of existence and/or other factors. In this
regard, the Fund may be compared to the Fund's "peer group" as defined by
Lipper, CDA/Wiesenberger and/or other firms, as applicable, or to specific
funds or groups of funds within or without such peer group. 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.
Statement of Additional Information Page 32
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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.
(6) Bear Stearns Foreign Bond Index, which provides simple average
returns for individual countries and GNP-weighted index, beginning in 1975.
The returns are broken down by local market and currency.
(7) Ibbottson Associates International Bond Index, which provides a
detailed breakdown of local market and currency returns since 1960.
(8) 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 U.S.
(9) 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.
(10) Dow Jones Industrial Average.
(11) CNBC/Financial News Composite Index.
(12) 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 of Europe, Australia and the Far East.
(13) 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.
(14) The World Bank Publication of Trends in Developing Countries (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.
(15) Salomon Brothers Global Telecommunications Index is composed of
telecommunications companies in the developing and emerging countries.
(16) Datastream and Worldscope each is an on-line database retrieval
service for information including but not limited to international financial
and economic data.
(17) International Financial Statistics, which is produced by the
International Monetary Fund.
(18) Various publications and annual reports such as the World
Development Report, produced by the World Bank and its affiliates.
(19) Various publications from the International Bank for Reconstruction
and Development/The World Bank.
(20) Various publications including but not limited to ratings agencies
such as Moody's Investors Services, Fitch Investors Service and Standard &
Poor's.
(21) Wilshire Associates which is an on-line database for international
financial and economic data including performance measure for a wide range
of securities.
(22) Bank Rate National Monitor Index, which is an average of the quoted
rates for 100 leading banks and thrifts in ten U.S. cities.
(23) International Finance Corporation (IFC) Emerging Markets Data Base
which provides detailed statistics on stock and bond markets in developing
countries.
(24) Various publications from the Organization for Economic Cooperation
and Development (OECD).
Indices, economic and financial data prepared by the research departments of
such financial organizations as Salomon Brothers, Inc., Lehman Brothers, Merrill
Lynch, Pierce, Fenner & Smith, Inc. J. P. Morgan, Morgan Stanley, Smith Barney,
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, performance rankings, ratings and commentary
reported periodically in national financial publications, included but not
limited to Money 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. Each Fund may compare its performance
to that of other
Statement of Additional Information Page 33
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
compilations or indices of comparable quality to those listed above and other
indices which may be developed and made available.
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 Fund 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. 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.
GT Global believes that a growing number of consumer products, including, but
not limited to home appliances, automobiles and clothing, purchased by Americans
are manufactured abroad. GT Global believes that investing globally in the
companies that produce products for U.S. consumers can help U.S. investors seek
protection of the value of their assets against the potentially increasing costs
of foreign manufactured goods. Of course, there can be no assurance that there
will be any correlation between global investing and the costs of such foreign
goods unless there is a corresponding change in value of the U.S. dollar to
foreign currencies. From time to time, GT Global may refer to or advertise the
names of such companies although there can be no assurance that any GT Global
Mutual Fund may own the securities of these companies.
The Fund may compare its performance to that of other compilations or indices of
comparable quality to those listed above which may be developed and made
available in the future. The Fund may be compared in advertising to Certificates
of Deposit (CDs), the Bank Rate Monitor National Index, an average of the quoted
rates for 100 leading banks and thrifts in ten U.S. cities chosen to represent
the ten largest Consumer Metropolitan statistical areas, or other investments
issued by banks. The Fund differs from bank investments in several respects. The
Fund may offer greater liquidity or higher potential returns than CDs; but
unlike CDs, the Fund will have a fluctuating share price and return and is not
FDIC insured.
The Fund's performance may be compared to the performance of other mutual funds
in general, or to the performance of particular types of mutual funds. These
comparisons may be expressed as mutual fund rankings prepared by Lipper
Analytical Services, Inc. (Lipper), an independent service which monitors the
performance of mutual funds. 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 Fund's performance
may be compared to mutual fund performance indices prepared by Lipper.
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.
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 is 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.
In advertising materials, GT Global may reference or discuss its products and
services, which may include: retirement investing; the effects of dollar-cost
averaging and saving for college or a home. In addition, GT Global may quote
financial or business publications and periodicals, including model portfolios
or allocations, as they relate to fund management, investment philosophy, and
investment techniques.
The Fund may discuss its Quotron number, CUSIP number, and its current portfolio
management team.
From time to time, the Fund's performance also may be compared to other mutual
funds tracked by financial or business publications and periodicals. For
example, the fund may quote Morningstar, Inc. in its advertising materials.
Morningstar, Inc. is a mutual fund rating service that rates mutual funds on the
basis of risk-adjusted performance. In addition, the
Statement of Additional Information Page 34
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
Fund may quote financial or business publications and periodicals as they relate
to fund management, investment philosophy, and investment techniques. Rankings
that compare the performance of GT Global Mutual Funds to one another in
appropriate categories over specific periods of time may also be quoted in
advertising.
The Fund may quote various measures of volatility and benchmark correlation such
as beta, standard deviation and R(2) 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. 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 the GT Global Mutual Funds through various retirement accounts and
plans that offer deferral of income taxes on investment earnings and may also
enable you to make pre-tax contributions. Because of their advantages, these
retirement accounts and plans may produce returns superior to comparable
non-retirement investments. The Fund may also discuss these accounts and plans,
which include:
INDIVIDUAL RETIREMENT ACCOUNTS (IRAS): Any individual who receives earned income
from employment (including self-employment) can contribute up to $2,000 each
year to an IRA (or, if less, 100% of compensation). If your spouse is not
employed, a total of $2,250 may be contributed each year to IRAs set up for you
or your spouse (subject to the maximum of $2,000 to either IRA). 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 rollover (or make a direct transfer of) their
distribution to a Rollover IRA. These accounts can also receive roll overs or
transfers from an existing IRA.
SEP-IRAS AND SALARY-REDUCTION SEP-IRAS: Simplified employee pension (SEP) plans
and salary-reduction SEPs provide self-employed individuals (and any eligible
employees) with benefits similar to Keogh-type plans or 401(k) plans, but with
fewer administrative requirements and therefore lower annual administration
expenses.
403(B)(7) CUSTODIAL ACCOUNTS: Employees of public schools and most other
not-for-profit corporations can make pre-tax salary reduction contributions to
these accounts.
PROFIT-SHARING (INCLUDING 401(K)) AND MONEY PURCHASE PENSION PLANS: Corporations
can sponsor these qualified defined contribution plans for their employees.
401(k) plans, a type of profit-sharing plan, additionally permit the eligible,
participating employees to make pre-tax salary reduction contributions to the
plan (up to certain limitations).
GT Global may from time to time in its sales methods and advertising discuss the
risks inherent in investing. The major types of investment risk are market risk,
industry risk, credit risk, interest rate 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 information including but
not limited to data regarding: individual countries, regions, world stock
exchanges, and economic and demographic statistics from sources GT Global deems
reliable including, but not limited to, the economic and financial data of the
referenced financial organizations such as:
1) Stock market capitalization: Morgan Stanley Capital International World
Indices, International Finance Corporation and Datastream.
Statement of Additional Information Page 35
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
2) Stock market trading volume: Morgan Stanley Capital International Industry
Indices, International Finance Corporation.
3) The number of listed companies: International Finance Corporation, G.T.
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 Indices.
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, International Finance Corporation and Datastream.
7) The Consumer Price Index and inflation rate: The World Bank, Datastream and
International Finance Corporation.
8) Gross Domestic Product (GDP): Datastream and The World Bank.
9) GDP growth rate: International Finance Corporation, 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: Organization for Economic Cooperation
and Development and United Nations.
13) Total exports and imports by year: International Finance Corporation, The
World Bank and Datastream.
14) Top three companies by country, industry or market: International Finance
Corporation, G.T. Guide to World Equity Markets, Salomon Brothers Inc., and
S.G. Warburg.
15) Foreign direct investments to developing countries: The World Bank 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.
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.
THE GT ADVANTAGE
The Manager has developed a unique team approach to its global money management
which we call the GT Advantage. The Manager's money management style combines
the best of the "top-down" and "bottom-up" investment manager strategies. The
top-down approach is implemented by the Manager's Investment Policy Committee
which sets broad guidelines for asset allocation and currency management based
on the Manager's own macroeconomic forecasts and research from our worldwide
offices. The bottom-up approach utilizes regional teams of individual portfolio
managers to implement the committee's guidelines by selecting local securities
that offer strong growth and income potential.
Statement of Additional Information Page 36
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
DESCRIPTION OF DEBT RATINGS
- --------------------------------------------------------------------------------
DESCRIPTION OF BOND RATINGS
MOODY'S INVESTORS SERVICE, INC. ("Moody's") rates the 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 edge." Interest
payments are protected by a large or 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. They are rated lower than the best
bond because margins of protection may not be as large as in Aaa securities,
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risk appear somewhat
greater.
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. 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 to
be well assured. Often the protection of interest and principal payments may
be very moderate, and thereby not well safeguarded during other 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.
Statement of Additional Information Page 37
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
STANDARD & POOR'S RATINGS GROUP ("S&P") rates the securities debt of various
entities in categories ranging from "AAA" to "DD" 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 -- High grade. Very strong capacity to pay interest and repay
principal. Generally, these bonds differ from AAA issues only in a small
degree.
A -- Have a strong capacity to pay interest and repay principal although
they are somewhat more susceptible to the adverse effects of change in
circumstances and economic conditions than debt in higher rated categories.
BBB -- Regarded as having adequate capacity to pay interest and repay
principal. These bonds normally exhibit adequate protection parameters, but
adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity to pay interest and repay principal than for
debt in higher rated categories.
BB, B, CCC, CC, C -- Debt rated "BB," "B," "CCC," "CC," and "C" are
regarded, on balance, as predominantly speculative with respect to capacity
to pay interest and repay principal in accordance with the terms of this
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 indefinable 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 which 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.
C -- Reserved for income bonds on which no interest is being paid.
D -- In payment default. The "D" rating is used when interest 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. The "D" rating also will 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.
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 have a superior capacity for repayment of short-term promissory
obligations. Prime-1 repayment capacity normally will be evidenced by the
following characteristics: leading market positions in well-established
industries; high rates of return on funds employed; conservative capitalization
structures with moderate reliance on debt and ample asset protections; 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. Issues rated Prime-2 have a strong
capacity for repayment of short-term promissory obligations. This normally will
be evidenced by many of the characteristics cited above, but to a lesser degree.
Earnings trends and coverage ratios,
Statement of Additional Information Page 38
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
while sound, will be more subject to variation. Capitalization characteristics,
while still appropriate, may be more affected by external conditions. Ample
alternate liquidity is maintained.
S&P ratings of commercial paper are graded into four categories ranging from
"A" for the highest quality obligations to "D" for the lowest. A -- Issues
assigned its highest rating are regarded as having the greatest capacity for
timely payment. Issues in this category are delineated with numbers 1, 2, and 3
to indicate the relative degree of safety. A-1 -- This designation indicates
that the degree of safety regarding timely payment is either overwhelming or
very strong. Those issues determined to possess overwhelming safety
characteristics will be denoted with a plus (++) sign designation. A-2 --
Capacity for timely payments on issues with this designation is strong; however,
the relative degree of safety is not as high as for issues designated "A-1."
COMMERCIAL PAPER RATINGS
The Fund may invest only in high quality commercial paper, i.e. commercial paper
rated Prime-1 by Moody's, A-1 by S&P, or, if unrated, judged by the Manager to
be of comparable quality. Issuers rated Prime-1 by Moody's have, in Moody's
judgment, a superior capacity for repayment of short-term debt obligations.
Prime-1 repayment capacity will normally be evidenced by the following
characteristics: leading market positions in well-established industries; high
rates of return on funds employed; conservative capitalization structures with
moderate reliance on debt and ample asset protections; 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. Issues assigned the A-1 rating by S&P are regarded by S&P
as having the greatest capacity for timely payment. This designation indicates
that the degree of safety regarding timely payment is either overwhelming or
very strong.
Statement of Additional Information Page 39
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The audited financial statements of the Fund as of October 31, 1996, and for its
fiscal year then-ended appear on the following pages.
Statement of Additional Information Page 40
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
NOTES
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Statement of Additional Information Page 60
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
NOTES
- --------------------------------------------------------------------------------
Statement of Additional Information Page 61
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
NOTES
- --------------------------------------------------------------------------------
Statement of Additional Information Page 62
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
GT GLOBAL MUTUAL FUNDS
GT GLOBAL OFFERS A BROAD RANGE OF MUTUAL FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY GT GLOBAL MUTUAL
FUND, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR CALL GT GLOBAL DIRECTLY AT
1-800-824-1580.
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL WORLDWIDE GROWTH FUND
Invests around the world, including the U.S.
GT GLOBAL INTERNATIONAL GROWTH FUND
Provides portfolio diversity by investing outside the U.S.
GT GLOBAL EMERGING MARKETS FUND
Gives access to the growth potential of developing economies
/ / GLOBAL THEME FUNDS
GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
Invests in companies that manufacture, market, retail, or distribute consumer
products or services
GT GLOBAL FINANCIAL SERVICES FUND
Focuses on the worldwide opportunities from the demand for financial services
and products
GT GLOBAL HEALTH CARE FUND
Invests in the growing health care industries worldwide
GT GLOBAL INFRASTRUCTURE FUND
Seeks companies that build, improve or maintain a country's infrastructure
GT GLOBAL NATURAL RESOURCES FUND
Concentrates on companies that own, explore or develop natural resources
GT GLOBAL TELECOMMUNICATIONS FUND
Invests in companies worldwide that develop, manufacture or sell
telecommunications services or equipment
/ / REGIONALLY DIVERSIFIED FUNDS
GT GLOBAL NEW PACIFIC GROWTH FUND
Offers access to the emerging and established markets of the Pacific Rim,
excluding Japan
GT GLOBAL EUROPE GROWTH FUND
Focuses on investment opportunities in the new, unified Europe
GT GLOBAL LATIN AMERICA GROWTH FUND
Invests in the emerging markets of Latin America
/ / SINGLE COUNTRY FUNDS
GT GLOBAL AMERICA SMALL CAP GROWTH FUND
Invests in equity securities of small U.S. companies
GT GLOBAL AMERICA MID CAP GROWTH FUND
Concentrates on medium-sized companies in the U.S.
GT GLOBAL AMERICA VALUE FUND
Concentrates on equity securities of large cap U.S. companies believed to be
undervalued
GT GLOBAL JAPAN GROWTH FUND
Provides U.S. investors with direct access to the Japanese market
GROWTH AND INCOME FUNDS
GT GLOBAL GROWTH & INCOME FUND
Invests in blue-chip stocks and government bonds from around the world
FIXED INCOME FUNDS
GT GLOBAL GOVERNMENT INCOME FUND
Earns monthly income from global government securities
GT GLOBAL STRATEGIC INCOME FUND
Allocates its assets among debt securities from the U.S., developed foreign
countries and emerging markets
GT GLOBAL HIGH INCOME FUND
Invests in debt securities in emerging markets
MONEY MARKET FUND
GT GLOBAL DOLLAR FUND
Invests in high quality, U.S. dollar-denominated money market securities
worldwide for stability and preservation of capital
[LOGO]
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY G.T. INVESTMENT FUNDS, INC.,
GT GLOBAL GROWTH & INCOME FUND, CHANCELLOR LGT ASSET MANAGEMENT, INC. OR GT
GLOBAL, INC. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON IN SUCH JURISDICTION TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER.
GROSA610MC
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
50 California Street, 27th Floor
San Francisco, California 94111
(415) 392-6181
Toll Free: (800) 824-1580
Statement of Additional Information
March 1, 1997
- --------------------------------------------------------------------------------
GT Global Latin America Growth Fund ("Fund") is a non-diversified mutual fund
organized as a separate series of G.T. Investment Funds, Inc. ("Company"), a
registered open-end management investment company. This Statement of Additional
Information relating to the Class A and Class B shares of the Fund is not a
prospectus and supplements and should be read in conjunction with the Fund's
current Class A and Class B Prospectus dated March 1, 1997. A copy of the Fund's
Prospectus is available without charge by either writing the Fund at the above
address or by calling the Fund at the toll-free telephone number printed above.
Chancellor LGT Asset Management, Inc. (the "Manager") serves as the Fund's
investment manager and administrator. 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 "Transfer Agent").
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Investment Objective and Policies........................................................................................ 2
Options, Futures and Currency Strategies................................................................................. 5
Risk Factors............................................................................................................. 13
Investment Limitations................................................................................................... 18
Execution of Portfolio Transactions...................................................................................... 20
Directors and Executive Officers......................................................................................... 22
Management............................................................................................................... 24
Valuation of Fund Shares................................................................................................. 26
Information Relating to Sales and Redemptions............................................................................ 27
Taxes.................................................................................................................... 29
Additional Information................................................................................................... 32
Investment Results....................................................................................................... 33
Description of Debt Ratings.............................................................................................. 39
Financial Statements..................................................................................................... 41
</TABLE>
[LOGO]
Statement of Additional Information Page 1
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
INVESTMENT OBJECTIVE
AND POLICIES
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is capital appreciation. The Fund will
normally invest at least 65% of its total assets in securities of a broad range
of Latin American issuers. Under current market conditions, the Fund expects to
invest primarily in equity and debt securities issued by companies and
governments in Mexico, Chile, Brazil and Argentina. Though the Fund can normally
invest up to 35% of its total assets in U.S. securities, the Fund reserves the
right to be primarily invested in U.S. securities for temporary defensive
purposes or pending investment of the proceeds of the offering made hereby.
SELECTION OF EQUITY INVESTMENTS
Chancellor LGT Asset Management, Inc. (the "Manager") is the investment manager
of the Fund. In determining the appropriate distribution of investments among
various countries for the Fund, the Manager ordinarily considers the following
factors: prospects for relative economic growth between the different countries
in which the Fund may invest; expected levels of inflation; government policies
influencing business conditions; the outlook for interest rates; the outlook for
currency relationships; and the range of the individual investment opportunities
available to international investors.
In analyzing companies for investment by the Fund, the Manager ordinarily looks
for one or more of the following characteristics: an above-average earnings
growth per share; high return on invested capital; healthy balance sheet; sound
financial and accounting policies and overall financial strength; strong
competitive advantages; effective research and product development and
marketing; efficient service; pricing flexibility; strength of management; and
general operating characteristics which will enable the companies to compete
successfully in their respective marketplaces. In certain countries,
governmental restrictions and other limitations on investment may affect the
maximum percentage of equity ownership in any one company by the Fund. 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.
There may be times when, in the opinion of the Manager, prevailing market,
economic or political conditions warrant reducing the proportion of the Fund's
assets invested in equity securities and increasing the proportion held in cash
or short-term obligations denominated in U.S. dollars or other currencies. A
portion of the Fund's assets normally will be held in U.S. dollars or short-term
interest-bearing dollar-denominated securities to provide for ongoing expenses
and redemptions.
The Fund may be prohibited under the Investment Company Act of 1940, as amended
(the "1940 Act") from purchasing the securities of any foreign company that, in
its most recent fiscal year, derived more than 15% of its gross revenues from
securities-related activities ("securities-related companies"). In a number of
Latin American countries, commercial banks act as securities broker/dealers,
investment advisers and underwriters or otherwise engage in securities-related
activities, which may limit the Fund's ability to hold securities issued by
banks. The Fund has obtained an exemption from the Securities and Exchange
Commission ("SEC") to permit the Fund to invest in certain of these securities
subject to certain restrictions.
DEBT CONVERSIONS
Several Latin American countries have adopted debt conversion programs, pursuant
to which investors may use external debt of a country, directly or indirectly,
to make investments in local companies. The terms of the various programs vary
from country to country, although each program includes significant restrictions
on the application of the proceeds received in the conversion and on the
remittance of profits on the investment and of the invested capital. The Fund
intends to acquire Sovereign Debt, as defined in the Prospectus, to hold and
trade in appropriate circumstances as described in the Prospectus, as well as to
use to participate in Latin American debt conversion programs. The Manager will
evaluate opportunities to enter into debt conversion transactions as they arise
but does not currently intend to invest more than 5% of the Fund's assets in
such programs.
Statement of Additional Information Page 2
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
INVESTMENTS IN OTHER INVESTMENT COMPANIES
With respect to certain countries investments by the Fund presently may be made
only by acquiring shares of other investment companies with local governmental
approval to invest in those countries. The Fund may invest in the securities of
closed-end investment companies within the limits of the 1940 Act. These
limitations currently provide, in part, that the Fund may purchase shares of a
closed-end investment company unless (a) such a purchase would cause the Fund to
own in the aggregate more than 3 percent of the total outstanding voting stock
of the investment company or (b) such a purchase would cause the Fund to have
more than 5 percent of its total assets invested in the investment company or
more than 10 percent of its total assets invested in the aggregate in all such
investment companies. Investment in such investment companies may involve the
payment of substantial premiums above the value of such companies' portfolio
securities. The Fund does not intend to invest in such funds 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. At such time as direct
investment in these countries is allowed, the Fund anticipates investing
directly in these markets.
DEPOSITORY RECEIPTS
The Fund 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 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 which evidence
ownership of underlying securities issued by a foreign corporation. EDRs, which
are sometimes referred to as Continental Depository Receipts ("CDRs"), are
receipts issued in Europe typically by foreign banks and trust companies that
evidence ownership of either foreign or domestic securities. Generally, ADRs and
ADSs in registered form are designed for use in United States securities markets
and EDRs and CDRs in bearer form are designed for use in European securities
markets. For purposes of the Fund's investment policies, the Fund's investments
in ADRs, ADSs, EDRs, and CDRs will be deemed to be investments in the equity
securities representing securities of foreign issuers into which they may be
converted.
WARRANTS OR RIGHTS
Warrants or rights may be acquired by the Fund in connection with other
securities or separately and provide the Fund with the right to purchase at a
later date other securities of the issuer.
LENDING OF PORTFOLIO SECURITIES
For the purpose of realizing additional income, the Fund may make secured loans
of portfolio securities amounting to not more than 25% 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 collateral received will
consist of cash, U.S. short-term government securities, bank letters of credit
or such other collateral as may be permitted under the Fund's investment program
and by regulatory agencies and approved by the Company's Board of Directors.
While the securities loan is outstanding, the Fund 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.
The Fund will have a right to call each loan and obtain the securities on five
business days' notice. The Fund will not have the right to vote equity
securities while they are lent, but it may call in a loan in anticipation of any
important vote. The risks in lending portfolio securities, as with other
extensions of secured credit, consist of possible delay in receiving additional
collateral or in recovery of the securities or possible loss of rights in the
collateral should the borrower fail financially. 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.
COMMERCIAL BANK OBLIGATIONS
For the purposes of the Fund'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 investment in non-U.S.
securities in general, investments in the obligations of foreign branches of
U.S. banks and of foreign banks may subject the Fund to investment risks that
are different in some respects from those of investments in obligations of
domestic issuers. Although the Fund will typically acquire obligations issued
and supported by the credit of U.S. or foreign banks having total assets at the
time of purchase in excess of $1 billion, this $1 billion figure is not a
fundamental investment policy or restriction of the Fund. 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.
Statement of Additional Information Page 3
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
REPURCHASE AGREEMENTS
The Fund 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, the Fund 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 the Fund's ability
to sell the collateral and the Fund could suffer a loss. However, with respect
to financial institutions whose bankruptcy or liquidation proceedings are
subject to the U.S. Bankruptcy Code, the Fund intends to comply with provisions
under the U.S. Bankruptcy Code that would allow it immediately to resell the
collateral. There is no limitation on the amount of the Fund's assets that may
be subject to repurchase agreements at any given time. The Fund will not enter
into a repurchase agreement with a maturity of more than seven days if, as a
result, more than 10% of the value of its total assets would be invested in such
repurchase agreements and other illiquid investments.
Repurchase agreements are transactions in which the Fund 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 Fund if the other party
to the repurchase agreement becomes bankrupt, the Fund intends 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 Fund's Board of Trustees, as applicable.
The Manager will review and monitor the creditworthiness of such institutions
under the Board's general supervision.
BORROWING AND REVERSE REPURCHASE AGREEMENTS
The Fund's borrowings will not exceed 33 1/3% of the Fund's total assets, I.E.,
the Fund's total assets at all times will equal at least 300% of the amount of
outstanding borrowings. If market fluctuations in the value of the Fund's
portfolio holdings or other factors cause the ratio of the Fund's total assets
to outstanding borrowings to fall below 300%, the Fund may be required to sell
portfolio securities to restore 300% asset coverage, even though from an
investment standpoint such sales might be disadvantageous. The Fund also may
borrow up to 5% of its total assets for temporary or emergency purposes other
than to meet redemptions. Any borrowing by the Fund may cause greater
fluctuation in the value of its shares than would be the case if the Fund did
not borrow. The Fund's fundamental investment limitations prohibit the Fund from
purchasing securities during times when outstanding borrowings represent more
than 5% of its total assets.
The Fund may enter into reverse repurchase agreements. A reverse repurchase
agreement is a borrowing transaction in which the Fund 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. The Fund will maintain in a segregated
account with a custodian cash or other liquid securities in an amount sufficient
to cover its obligations under reverse repurchase agreements with
broker/dealers. No segregation is required for reverse repurchase agreements
with banks.
SHORT SALES
The Fund is authorized to make short sales of securities, although it has no
current intention of doing so. A short sale is a transaction in which the Fund
sells a security in anticipation that the market price of that security will
decline. The Fund may make short sales (i) as a form of hedging to offset
potential declines in long positions in securities it owns, or anticipates
acquiring, and (ii) in order to maintain portfolio flexibility.
When the Fund 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 Fund 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.
The Fund's obligation to replace the borrowed security when the borrowing is
called or expires will be secured by collateral deposited with the intermediary.
The Fund 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
the Fund on such security, the Fund 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 the Fund replaces the borrowed security, the Fund will incur a
loss; conversely, if the price declines, the Fund will realize a gain. Any gain
will be
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GT GLOBAL LATIN AMERICA GROWTH FUND
decreased, and any loss increased, by the transaction costs associated with the
transaction. Although the Fund's gain is limited by the price at which it sold
the security short, its potential loss is theoretically unlimited.
The Fund will not 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 Fund's aggregate short sales of the securities of any one issuer
exceed the lesser of 2% of the Fund's net assets or 2% of the securities of any
class of the issuer. Moreover, the Fund may engage in short sales only with
respect to securities listed on a national securities exchange. The Fund 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 Fund owns the security it has
sold short or has the immediate and unconditional right to acquire at no
additional cost the identical security.
- --------------------------------------------------------------------------------
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 the Fund entered into a
short hedge because the Manager projected a decline in the price of a
security in the Fund'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 Fund could suffer a loss. In either such case, the Fund
would have been in a better position had it not hedged at all.
(4) As described below, the Fund 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 Fund 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 Fund'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 Fund sell a portfolio security at
a disadvantageous time. The Fund'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 Fund.
WRITING CALL OPTIONS
The Fund may write (sell) call options on securities, indices and currencies.
Call options will generally 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 Fund.
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GT GLOBAL LATIN AMERICA GROWTH FUND
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 may be assigned an
exercise notice, requiring him 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.
Portfolio securities or currencies on which call options may be written will be
purchased solely on the basis of investment considerations consistent with the
Fund's investment objectives. When writing a call option, the Fund, 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, the Fund 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 the Fund has written expires, the
Fund 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 Fund 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. The Fund does not consider a
security or currency covered by a call option to be "pledged" as that term is
used in the Fund'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 the Fund will be obligated to
sell the security or currency at less than its market value.
The premium that the Fund receives for writing a call option is deemed to
constitute the market value of an option. The premium the Fund 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 the Fund to write
another call option on the underlying security or currency with either a
different exercise price, expiration date or both.
The Fund 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 or currencies at the time the options
are written. From time to time, the Fund 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.
The Fund 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 will generally 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 the Fund.
WRITING PUT OPTIONS
The Fund 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.
The Fund would generally write put options in circumstances where the Manager
wishes to purchase the underlying security or currency for the Fund's portfolio
at a price lower than the current market price of the security or currency. In
such event, the Fund would write a put option at an exercise price that, reduced
by the premium received on the option,
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GT GLOBAL LATIN AMERICA GROWTH FUND
reflects the lower price it is willing to pay. Since the Fund 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 the Fund will be obligated
to purchase the security or currency at more than its market value.
PURCHASING PUT OPTIONS
The Fund may purchase put options on securities, indices and currencies. As the
holder of a put option, the Fund 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. The Fund may enter into closing sale
transactions with respect to such options, exercise them or permit them to
expire.
The Fund may purchase a put option on an underlying security or currency
("protective put") owned by the Fund to protect against an anticipated decline
in the value of the security or currency. Such protection is provided only
during the life of the put option when the Fund, 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.
The Fund may also purchase put options at a time when the Fund does not own the
underlying security or currency. By purchasing put options on a security or
currency it does not own, the Fund 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 Fund 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
The Fund may purchase call options on securities, indices and currencies. As the
holder of a call option, the Fund 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. The Fund may enter
into closing sale transactions with respect to such options, exercise them or
permit them to expire.
Call options may be purchased by the Fund for the purpose of acquiring the
underlying security or currency for its portfolio. Utilized in this fashion, the
purchase of call options would enable the Fund 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 the Fund 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 Fund 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.
The Fund also may 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 Fund's current return.
For example, where the Fund 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 the Fund, an increase in the market price could
result in the exercise of the call option written by the Fund and the
realization of a loss on the underlying security or currency. Accordingly, the
Fund could purchase a call option on the same underlying security or currency,
which could be exercised to fulfill the Fund's delivery obligations under its
written call (if it is exercised). This strategy could allow the Fund to avoid
selling the portfolio security or currency at a time when it has an unrealized
loss; however, the Fund would have to pay a premium to purchase the call option
plus transaction costs.
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GT GLOBAL LATIN AMERICA GROWTH FUND
Aggregate premiums paid for put and call options will not exceed 5% of the
Fund's total assets at the time of purchase.
The Fund 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 Fund 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. A call option gives the Fund
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. The Fund 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
the Fund 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
the Fund anticipates purchasing securities.
Options may be either listed on an exchange or traded over-the-counter ("OTC").
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. The Fund 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. The Fund may also sell OTC options and,
in connection therewith, segregate assets or cover its obligations with respect
to OTC options written by the Fund. The assets used as cover for OTC options
written by the Fund will be considered illiquid unless the OTC options are sold
to qualified dealers who agree that the Fund 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.
The Fund's ability to establish and close out positions in exchange-listed
options depends on the existence of a liquid market. The Fund 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 the Fund
will enter into OTC options only with contra parties that are expected to be
capable of entering into closing transactions with the Fund, there is no
assurance that the Fund 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 Fund 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 the Fund 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 Fund 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 the Fund buys a call on an
index, it pays a premium and has the same rights as to such call as are
indicated above. When the Fund 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 Fund's exercise of the put, to deliver to the Fund 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 Fund writes a put on an index, it receives a
premium and the purchaser has the right, prior to the expiration date, to
require the Fund 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.
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GT GLOBAL LATIN AMERICA GROWTH FUND
The risks of investment in index options may be greater than options on
securities. Because index options are settled in cash, when the Fund writes a
call on an index it cannot provide in advance for its potential settlement
obligations by acquiring and holding the underlying securities. The Fund 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, the Fund 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 the Fund 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 Fund, 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 the Fund 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 Fund 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 AND CURRENCY FUTURES CONTRACTS
The Fund 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 prices in order to establish more definitely
the effective return on securities or currencies held or intended to be acquired
by the Fund. The Fund's transactions may include sales of Futures as an offset
against the effect of expected increases in interest rates, and decreases in or
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 and stock prices.
The Fund will only 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 the Fund's exposure to interest rate, currency exchange rate and
stock market fluctuations, the Fund 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. An
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 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 the securities 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 are usually 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 Fund realizes a gain; if it is
more, the Fund realizes a loss. Conversely, if the offsetting sale price is
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GT GLOBAL LATIN AMERICA GROWTH FUND
more than the original purchase price, the Fund realizes a gain; if it is less,
the Fund realizes a loss. The transaction costs must also be included in these
calculations. There can be no assurance, however, that the Fund will be able to
enter into an offsetting transaction with respect to a particular Futures
Contract at a particular time. If the Fund is not able to enter into an
offsetting transaction, the Fund 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 Treasury Bills 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 Treasury Bills 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 Fund.
The Fund'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 the Fund owns, or Futures Contracts will be
purchased to protect the Fund 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 the Fund in order to initiate Futures trading and to maintain the
Fund's open positions in Futures Contracts. A margin deposit made when the
Futures Contract is entered into ("initial margin") is intended to assure the
Fund'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 Fund 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, among other things, by 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 the Fund'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 Contract 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 the Fund 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 Fund would continue to be subject to
market risk with respect to the position. In addition, except in the case of
purchased options, the Fund would continue to be
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GT GLOBAL LATIN AMERICA GROWTH FUND
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 the Fund 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.
The Fund 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 the Fund 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 Fund's portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the Fund 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 without a shareholder vote. This limitation does not limit
the percentage of the Fund'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. The Fund may either
accept or make delivery of the currency at the maturity of the Forward Contract.
The Fund may also, if its contra party agrees, prior to maturity, enter into a
closing transaction involving the purchase or sale of an offsetting contract.
The Fund engages in forward currency transactions in anticipation of, or to
protect itself against, fluctuations in exchange rates. The Fund might sell a
particular foreign currency forward, for example, when it holds securities
denominated in a foreign currency but anticipates, and seeks to be protected
against, a decline in the currency against the U.S. dollar.
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Similarly, the Fund might sell the U.S. dollar forward when it holds securities
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, the Fund
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. The Fund 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 Company's Board of Directors.
The Fund may enter into Forward Contracts either with respect to specific
transactions or with respect to the Fund's portfolio positions. The precise
matching of the Forward Contract amounts and the value of specific securities
will not generally 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 the Fund 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 Fund 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
Fund 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 accurately predicted, causing the
Fund to sustain losses on these contracts and transaction costs.
At or before the maturity of a Forward Contract requiring the Fund to sell a
currency, the Fund may either sell a portfolio 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 Fund will obtain, on the same maturity date, the same
amount of the currency that it is obligated to deliver. Similarly, the Fund 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.
The Fund 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 the Fund 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 the Fund 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, at the same time
they limit any potential gain that might result should the value of the
currencies increase.
FOREIGN CURRENCY STRATEGIES -- SPECIAL CONSIDERATIONS
The Fund 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 Fund's securities
are denominated. Such currency hedges can protect against price movements in a
security that the Fund 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.
The Fund 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 Fund 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 Fund 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.
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GT GLOBAL LATIN AMERICA GROWTH FUND
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 Fund 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 the Fund has purchased) expose the Fund to an obligation to another
party. The Fund 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. The Fund will comply
with SEC guidelines regarding cover for these instruments and, if the guidelines
so require, set aside cash or other 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 the Fund's assets are used for cover or otherwise set aside, it could affect
portfolio management or the Fund's ability to meet redemption requests or other
current obligations.
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RISK FACTORS
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POLITICAL, SOCIAL AND ECONOMIC RISKS. Investing in securities of Latin
American 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, the Fund could lose its
entire investment in any such country.
In addition, even though opportunities for investment may exist in Latin
American countries, any change in the leadership or policies of the governments
of those countries or in the leadership or policies of any other government
which exercises a significant influence over those countries, may halt the
expansion of or reverse the liberalization of foreign investment policies now
occurring and thereby eliminate any investment opportunities which may currently
exist.
Investors should note that upon the accession to power of authoritarian regimes,
the governments of a number of Latin American countries previously expropriated
large quantities of real and personal property, similar to the property which
will be represented by the securities purchased by the Fund. The claims of
property owners against those governments were never finally settled. There can
be no assurance that any property represented by securities purchased by the
Fund will not also be expropriated, nationalized, or otherwise confiscated. If
such confiscation were to occur, the Fund could lose a substantial portion of
its investments in such countries. The Fund's investments would similarly be
adversely affected by exchange control regulations in any of those countries.
RELIGIOUS AND ETHNIC INSTABILITY. Certain countries in which the Fund 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 the Fund'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,
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GT GLOBAL LATIN AMERICA GROWTH FUND
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 the Fund invests and adversely affect the value of
the Fund's assets.
ILLIQUID SECURITIES. The Fund may invest up to 10% of its net assets in
illiquid securities. Securities may be considered illiquid if the Fund cannot
reasonably expect within seven days to sell the securities for approximately the
amount at which the Fund values such securities. See "Investment Limitations."
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 the over-the-
counter 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, the Fund 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 Fund may be permitted to sell a security
under an effective registration statement. If, during such a period, adverse
market conditions were to develop, the Fund 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
the Fund, however, could affect adversely the marketability of such portfolio
securities and the Fund might be unable to dispose of such securities promptly
or at favorable prices.
With respect to liquidity determinations generally, the Company's Board of
Directors has the ultimate responsibility for determining whether specific
securities, including restricted securities pursuant to Rule 144A under the 1933
Act,are liquid or illiquid. The Board has delegated the function of making
day-to-day determinations of liquidity to the Manager in accordance with
procedures approved by the Company's Board of Directors. 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 who 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 in the
Fund's portfolio and periodically reports such determinations to the Board of
Directors. Moreover, as noted in the Prospectus, certain securities, such as
those subject to repatriation restrictions of more than seven days, will
generally be treated as illiquid.
More than 10% of the Fund's total assets may consist of illiquid securities from
time to time either because of adverse events which occur following the purchase
of the securities which cause them to become illiquid or because liquid
securities are sold to meet redemption requests or other needs of the Fund.
Illiquid securities are more difficult to value accurately due to, among other
things, the fact that such securities often trade infrequently or only in
smaller amounts.
On December 31, 1995 the market capitalizations of listed equity securities on
the major exchanges in Argentina, Brazil, Chile and Mexico were US$26.0 billion,
$77.0 billion, $36.9 billion and $59.3 billion, respectively. By comparison, at
December 31, 1995 the market capitalization of the NYSE alone was US$6.0
trillion. A high proportion of the shares of
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GT GLOBAL LATIN AMERICA GROWTH FUND
many Latin American companies may be held by a limited number of persons, which
may further limit the number of shares available for investment by the Fund. A
limited number of issuers in most, if not all, Latin American securities markets
may represent a disproportionately large percentage of market capitalization and
trading value. The limited liquidity of Latin American securities markets also
may affect the Fund's ability to acquire or dispose of securities at the price
and time it wishes to do so. In addition, certain Latin American securities
markets, including those of Argentina, Brazil, Chile and Mexico, are susceptible
to being influenced by large investors trading significant blocks of securities
or by large dispositions of securities resulting from the failure to meet margin
calls when due.
The high volatility of certain Latin American securities markets is evidenced by
dramatic movements in the Brazilian and Mexican markets in recent years. The
stock markets in Brazil declined sharply in mid 1989, and closed briefly,
following a large settlement failure. Another significant decline occurred in
the first quarter of 1990. In 1987, the Mexican stock exchange experienced a
severe correction, its index declining over 70 percent. This market volatility
may result in greater volatility in the Fund's net asset value than would be the
case for companies investing in domestic securities. If the Fund were to
experience unexpected net redemptions, it could be forced to sell securities in
its portfolio without regard to investment merit, thereby decreasing the asset
base over which Fund expenses can be spread and possibly reducing the Fund's
rate of return.
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 the Fund. These restrictions
or controls may at times limit or preclude investment in certain securities and
may increase the cost and expenses of the Fund. 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 may 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. The Fund 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.
Recent relevant foreign investment restrictions in each of the four principal
economies of Latin America, which are susceptible to significant and immediate
changes, can be summarized in part as follows:
ARGENTINA. Previous restrictions on foreign investment have been abolished
and prior approval of such investment is no longer required (except where
required in specific statutes governing certain activities), ensuring equal
treatment of national and foreign capital applied to economic activities. At
present foreign capital can move freely in and out of Argentina and no foreign
exchange restrictions are applied to dividend or capital gains remittance.
BRAZIL. Under regulations adopted by the government of Brazil, the Fund is
able to purchase Brazilian securities without regard to any diversification or
repatriation restrictions. However, the regulations require that the Fund's
investments be limited to securities issued by publicly-held corporations
acquired on the Brazilian stock exchanges or on over-the-counter markets
organized by the Commissao de Valores Mobiliarios (CVM) or units of certain
Financial Investment Funds. The Fund's authority to invest in Brazil pursuant to
this regulation remains subject to approval by the CVM. In addition, the Fund is
required to appoint a Brazilian administrator to perform certain functions with
respect to its holdings of Brazilian securities.
CHILE. Direct investment by foreign investors in Chile is subject to certain
Chilean investment restrictions, including a requirement that invested capital
must remain in Chile for a minimum of at least one year. The remittance of
dividends and capital gains can be effected without material restrictions on
timing and amount. Indirect investments, however, may be made through already
established investment funds and such investments will not be subject to the
restriction regarding residency of capital, although they will be subject to the
limitations, described above, regarding investments by the Fund in the
securities of other investment companies. In addition to investing indirectly in
the Chilean market, the Fund may establish its own foreign investment fund in
Chile for which a Chilean administrator will be required. The Fund may also gain
access to investment in Chile via the 18 American Depositary Receipts ("ADRs")
currently traded in the U.S. on the New York Stock Exchange. The Manager
believes these events significantly broadened the Fund's ability to gain access
to the Chilean market.
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GT GLOBAL LATIN AMERICA GROWTH FUND
MEXICO. Generally, foreigners may directly acquire shares of Mexican
companies up to a limit of 49 percent of the share capital of the issuer without
prior approval. Foreigners may acquire shares in the share capital of certain
Mexican listed companies usually reserved to Mexican nationals, and may acquire
in excess of the 49 percent limit referred to above, through trust arrangements
with Nacional Financiera, S.N.C. ("Nafin"), the Mexican government development
finance bank. Under this arrangement Nafin will acquire the securities that the
Fund purchases and then issue Ordinary Certificates of Participation ("CEPOS").
As a holder of the CEPOS, the Fund would have all rights of the shares acquired,
but it would not have voting rights. There are no restrictions on the movement
of capital in and out of Mexico. Dividends and capital gains can also be freely
remitted, subject to any withholding tax.
VENEZUELA. In order to stabilize the country's financial system, the
government suspended foreign exchange trading on July 6, 1994. The market was
"officially" opened July 11, however, the Bolivar did not begin trading until
January 10, 1995 at a level of 212 and 220 (the level held since December 1994).
The Venezuelan Exchange Administration Board issued Resolution No. 41 regarding
foreign investment registration and repatriation for capital dividends and
interest. The Resolution provides that all investment should be registered with
the Superintendency of Foreign Investment (SEIX) and the Technical
Administration Exchange Office (OTAC). Article 2 of the Resolution states that
"investments" is defined as those transactions executed through the local stock
exchange (this prohibits OTC transaction proceeds from being eligible for
repatriation).
Resolution No. 41 also required re-filing by funds previously approved. The Fund
has complied with the regulations and has obtained approval by the Regulatory
Commission. This avoids jeopardizing the assets held by the fund.
In November 1994 the government passed a Resolution allowing foreign investors
to repatriate without restrictions under the new controlled exchange system. It
is now possible to repatriate any capital or income provided that the OTAC has
proof that the investor has obtained a tax identification code and complied with
all tax return filing requirements.
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 the Fund 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 the Fund 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. In addition, for companies that keep accounting records
in local currency, inflation accounting rules in some Latin American countries
require, for both tax and accounting purposes, that certain assets and
liabilities be restated on the company's balance sheet in order to express items
in terms of currency of constant purchasing power. Inflation accounting may
indirectly generate losses or profits. Consequently, data concerning Latin
American securities shown elsewhere in this Statement of Additional Information
may be materially affected by restatements for inflation and may not accurately
reflect the real conditions of companies and securities markets. There is
substantially less publicly available information about foreign companies,
including Latin American companies, and the governments of Latin American
countries than there are reports and ratings published about U.S. companies and
the U.S. Government. 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 the Fund 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 the
Fund'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 the
Fund's holdings of securities and cash denominated in such currency and,
therefore, will cause an overall decline in the 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 Fund. Moreover, if the value
of the foreign currencies in which the Fund receives its income falls relative
to the U.S. dollar between receipt of the income and the making of Fund
distributions, the Fund may be required to liquidate securities in order to make
distributions if the Fund has insufficient cash in U.S. dollars to meet
distribution requirements.
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GT GLOBAL LATIN AMERICA GROWTH FUND
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 the Fund values its assets daily in terms of U.S. dollars, the Fund
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. The Fund 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 (the "spread") between the prices at which they are buying and
selling various currencies. Thus, a dealer may offer to sell a foreign currency
to the Fund at one rate, while offering a lesser rate of exchange should the
Fund 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 are generally
subject to less governmental supervision and regulation than in the United
States, and foreign securities transactions are usually subject to fixed
commissions, which are generally 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 the Fund are
uninvested and no return is earned thereon. The inability of the Fund to make
intended security purchases due to settlement problems could cause the Fund to
miss attractive investment opportunities. Inability to dispose of a portfolio
security due to settlement problems either could result in losses to the Fund
due to subsequent declines in value of the portfolio security or, if the Fund
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 the Fund's assets, although the Manager does not
believe that such difficulties will have a material adverse effect on the Fund's
portfolio trading activities.
SPECIAL CONSIDERATIONS AFFECTING EMERGING MARKETS. Emerging securities
markets, such as the markets of Latin America, 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 volume 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 markets
there may be share registration and delivery delays or failures.
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 and corresponding currency devaluations have had
and may continue to have negative effects on the economies and securities
markets of certain Latin American countries.
It should be noted that some Latin American countries require governmental
approval for the repatriation of investment income, capital, or the proceeds of
securities sales by foreign investors. For instance, at present, cpaital
invested directy in Chile cannot under most circumstances be repatriated for at
least one year. The Fund 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.
SOVEREIGN DEBT. Sovereign Debt generally offers high yields, reflecting not
only perceived credit risk, but also the need to compete with other local
investments in domestic financial markets. Certain Latin American countries are
among the largest debtors to commercial banks and foreign governments. A
sovereign debtor's willingness or ability to repay principal and interest due in
a timely manner may be affected by, among other factors, its cash flow
situation, the extent of its foreign reserves, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of the debt
service burden to the economy as a whole, the sovereign debtor's policy towards
the International Monetary Fund and the political constraints to which a
sovereign debtor may be subject. Sovereign debtors may default on their
Sovereign Debt. Sovereign debtors may also be dependent on expected
disbursements from foreign governments, multilateral agencies and others abroad
to reduce principal and interest arrearages on their debt. The commitment on the
part of these governments, agencies and others to make such disbursements may be
conditioned on a sovereign debtor's implementation of economic reforms and/or
economic performance and the timely service of such debtor's obligations.
Failure to
Statement of Additional Information Page 17
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
implement such reforms, achieve such levels of economic performance or repay
principal or interest when due, may result in the cancellation of such third
parties' commitments to lend funds to the sovereign debtor, which may further
impair such debtor's ability or willingness to timely service its debts.
In recent years, some of the Latin American countries in which the Fund expects
to invest have encountered difficulties in servicing their Sovereign Debt. Some
of these countries have withheld payments of interest and/or principal of
Sovereign Debt. These difficulties have also led to agreements to restructure
external debt obligations -- in particular, commercial bank loans, typically by
rescheduling principal payments, reducing interest rates and extending new
credits to finance interest payments on existing debt. In the future, holders of
Sovereign Debt may be requested to participate in similar reschedulings of such
debt.
The ability of Latin American governments to make timely payments on their
Sovereign Debt is likely to be influenced strongly by a country's balance of
trade and its access to trade and other international credits. A country whose
exports are concentrated in a few commodities could be vulnerable to a decline
in the international prices of one or more of such commodities. Increased
protectionism on the part of a country's trading partners could also adversely
affect its exports. Such events could diminish a country's trade account
surplus, if any. To the extent that a country receives payment for its exports
in currencies other than hard currencies, its ability to make hard currency
payments could be affected.
The occurrence of political, social or diplomatic changes in one or more of the
countries issuing Sovereign Debt could adversely affect the Fund's investments.
The countries issuing such instruments are faced with social and political
issues and some of them have experienced high rates of inflation in recent years
and have extensive internal debt. Among other effects, high inflation and
internal debt service requirements may adversely affect the cost and
availability of future domestic sovereign borrowing to finance governmental
programs, and may have other adverse social, political and economic
consequences. Political changes or a deterioration of a country's domestic
economy or balance of trade may affect the willingness of countries to service
their Sovereign Debt. While the Manager intends to manage the Fund's portfolio
in a manner that will minimize the exposure to such risks, there can be no
assurance that adverse political changes will not cause the Fund to suffer a
loss of interest or principal on any of its holdings.
Periods of economic uncertainty may result in the volatility of market prices of
Sovereign Debt and in turn, the Fund's net asset value, to a greater extent than
the volatility inherent in domestic securities. The value of Sovereign Debt will
likely vary inversely with changes in prevailing interest rates, which are
subject to considerable variance in the international market. If the Fund were
to experience unexpected net redemptions, it may be forced to sell Sovereign
Debt in its portfolio without regard to investment merit, thereby decreasing its
asset base over which Fund expenses can be spread and possibly reducing its rate
of return.
WITHHOLDING TAXES. The Fund's net investment income from foreign issuers may
be subject to withholding taxes by the foreign issuer's country, thereby
reducing the Fund's net investment income or delaying the receipt of income
where those taxes may be recaptured. See "Taxes."
- --------------------------------------------------------------------------------
INVESTMENT LIMITATIONS
- --------------------------------------------------------------------------------
The Fund has adopted the following investment limitations as fundamental
policies which (unless otherwise noted) may not be changed without approval by
the holders 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, and
(ii) more than 50% of the outstanding shares.
The Fund may not:
(1) Invest 25% or more of the value of its total assets in the
securities of issuers conducting their principal business activities in the
same industry, except that this limitation shall not apply to securities
issued or guaranteed as to principal and interest by the U.S. Government or
any of its agencies or instrumentalities;
(2) Buy or sell real estate (including real estate limited partnerships)
or commodities or commodity contracts; however, the 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, and may purchase or sell
Statement of Additional Information Page 18
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
currencies (including forward currency exchange contracts), futures
contracts and related options generally as described in the Prospectus and
Statement of Additional Information;
(3) Engage in the business of underwriting securities of other issuers,
except to the extent that the disposal 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 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 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 for temporary or emergency purposes
not in excess of 33 1/3% of the value of the Fund's total assets (at the
lower of cost or fair market value). The Fund will not purchase securities
while borrowings (including reverse repurchase agreements) in excess of 5%
of its total assets are outstanding. This restriction shall not prevent the
Fund from entering into reverse repurchase agreements, provided that reverse
repurchase agreements, and any other transactions constituting borrowing by
the Fund may not exceed one-third of the Fund's total assets. In the event
that the asset coverage for the Fund's borrowings falls below 300%, the Fund
will reduce, within three days (excluding Sundays and holidays), the amount
of its borrowings in order to provide for 300% asset coverage;
(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 Fund may invest in the
securities of companies that engage in these activities.
For purposes of the Fund's concentration policy contained in limitation (1),
above, the Fund intends to comply with the SEC staff position that securities
issued or guaranteed as to principal and interest by any single foreign
government are considered to be securities of issuers in the same industry.
The following operating policies of the Fund are not fundamental policies of the
Fund and may be changed by vote of a majority of the Company's Board of
Directors without shareholder approval. The Fund may not:
(1) Invest in securities of an issuer if the investment would cause the
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 10% 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 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;
or
(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 Fund's portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the Fund
has entered into.
The Fund has the authority to invest up to 10% of its total assets in shares of
other investment companies pursuant to the 1940 Act. The 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.
Statement of Additional Information Page 19
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
Investors should refer to the Prospectus for further information with respect to
the Fund's investment objective, which may not be changed without the approval
of the shareholders, and other investment policies, techniques and limitations,
which may be changed without shareholder approval.
- --------------------------------------------------------------------------------
EXECUTION OF PORTFOLIO
TRANSACTIONS
- --------------------------------------------------------------------------------
Subject to policies established by the Company's Board of Directors, the Manager
is responsible for the execution of the Fund's portfolio transactions and the
selection of broker/dealers who execute such transactions on behalf of the Fund.
In executing portfolio transactions, the Manager seeks the best net results for
the Fund, 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. While 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 the Fund may engage in soft dollar arrangements for research
services, as described below, the Fund 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 the Fund, the Manager may select brokers to
execute the Fund's portfolio transactions on the basis of the research and
brokerage services they provide to the Manager for its use in managing the Fund
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 brokers are in addition to, and not in lieu of, the
services required to be performed by the Manager under the Management Contract
(defined below). A commission paid to such broker/dealers 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 the Fund and its other clients and that
the total commissions paid by the Fund will be reasonable in relation to the
benefits received by the Fund over the long term. Research services may also be
received from dealers who execute Fund transactions.
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 the Fund toward payment of the Fund's expenses, such as
transfer agent and custodian fees.
Investment decisions for the Fund 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 may occasionally be made for
two or more of such accounts including the Fund. 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 the Fund is concerned, in other cases the Manager
believes that coordination and the ability to participate in volume transactions
will be beneficial to the Fund.
Under a policy adopted by the Company's Board of Directors, 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 Fund and the other funds for which the
Manager serves as investment manager in selecting brokers and 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 Fund and such other funds.
The Fund 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
United States 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.
Statement of Additional Information Page 20
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
Foreign equity securities may be held by the Fund 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 over-the-
counter 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 the Fund may invest are generally traded in the
over-the-counter markets.
The Fund 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 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. For the Fund's fiscal years ended October 31, 1996,
1995, and 1994, the Fund paid aggregate brokerage commissions of $
- --------, $891,513, and $708,799.
PORTFOLIO TURNOVER AND TRADING
The portfolio turnover rate is calculated by dividing the lesser of sales or
purchases of portfolio securities by the Fund's average month-end portfolio
value, excluding short-term investments. For purposes of this calculation,
portfolio securities exclude purchases and sales of debt securities having a
maturity at the date of purchase of one year or less. The Fund engages in
portfolio trading when the Manager has concluded that the sale of a security
owned by the Fund and/or the purchase of another security of better value can
enhance principal and/or increase income. A security may be sold to avoid any
prospective decline in market value, or a security may be purchased in
anticipation of a market rise. Consistent with the Fund's investment objective,
a security also may be sold and a comparable security purchased coincidentally
in order to take advantage of what is believed to be a disparity in the normal
yield and price relationship between the two securities. Although the Fund does
not intend generally to trade for short-term profits, the securities in the
Fund's portfolio will be sold whenever management believes it is appropriate to
do so, without regard to the length of time a particular security may have been
held. The Fund's portfolio turnover rate will not be a limiting factor when the
Manager deems portfolio changes appropriate. Higher portfolio turnover involves
correspondingly greater brokerage commissions and other transaction costs that
the Fund will bear directly. The Fund's portfolio turnover rates for the fiscal
years ended October 31, 1996 and 1995 were
- ---% and 125%, respectively.
Statement of Additional Information Page 21
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
DIRECTORS AND EXECUTIVE
OFFICERS
- --------------------------------------------------------------------------------
The Company's Directors and Executive Officers are listed below.
<TABLE>
<CAPTION>
NAME, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- --------------------------------------- ------------------------------------------------------------------------------------------
<S> <C>
David A. Minella,* 43 Chairman, the Manager since October 1996; Director, Liechtenstein Global Trust (holding
Director, Chairman of the Board and company of the various international LGT companies) since 1990; President, Asset
President Management Division, Liechtenstein Global Trust since 1995; Director and President, LGT
50 California Street Asset Management, Inc. ("LGT Asset Management"), formerly LGT Asset Management Holdings,
San Francisco, CA 94111 Inc., since 1988; Director and President, the Manager from 1989 to October 1996; Director,
GT Global since 1987 and President, GT Global from 1987 to 1995; Director, GT Services
since 1990; President, GT Services from 1990 to 1995; Director, G.T. Global Insurance
Agency, Inc. ("G.T. Insurance") since 1992; and President, G.T. Insurance from 1992 to
1995. Mr. Minella also is a director or trustee of each of the other investment companies
registered under the 1940 Act that is managed or administered by the Manager.
C. Derek Anderson, 54 Chief Executive Officer, Anderson Capital Management, Inc.; Chairman and Chief Executive
Director Officer, Plantagenet Holdings, Ltd. from 1991 to present; Director, Munsingwear, Inc.; and
220 Sansome Street Director, American Heritage Group Inc. and various other companies. Mr. Anderson also is a
Suite 400 director or trustee of each of the other investment companies registered under the 1940
San Francisco, CA 94104 Act that is managed or administered by the Manager.
Frank S. Bayley, 55 Partner with Baker & McKenzie (a law firm); Director and Chairman, C.D. Stimson Company (a
Director private investment company); and Trustee, Seattle Art Museum. Mr. Bayley also is a
Two Embarcadero Center director or trustee of each of the other investment companies registered under the 1940
Suite 2400 Act that is managed or administered by the Manager.
San Francisco, CA 94111
Arthur C. Patterson, 52 Managing Partner, Accel Partners (a venture capital firm). He also serves as a director of
Director various computing and software companies. Mr. Patterson also is a director or trustee of
One Embarcadero Center each of the other investment companies registered under the 1940 Act that is managed or
Suite 3820 administered by the Manager.
San Francisco, CA 94111
Ruth H. Quigley, 59 Private investor; and President, Quigley Friedlander & Co., Inc. (a financial advisory
Director services firm) from 1984 to 1986. Ms. Quigley also is a director or trustee of each of the
1055 California Street other investment companies registered under the 1940 Act that is managed or administered
San Francisco, CA 94108 by the Manager.
</TABLE>
Statement of Additional Information Page 22
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
<TABLE>
<CAPTION>
NAME, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- --------------------------------------- ------------------------------------------------------------------------------------------
<S> <C>
James R. Tufts, 37 Chief Information Officer for the Manager since October 1996; President, GT Services since
Vice President and Chief 1995; Senior Vice President of Finance and Administration, GT Global, GT Services and G.T.
Financial Officer Insurance, from 1994 to 1995; Senior Vice President of Finance and Administration, LGT
50 California Street Asset Management and the Manager from 1994 to October 1996; Vice President of Finance, LGT
San Francisco, CA 94111 Asset Management, the Manager, GT Global and GT Services from 1990 to 1994; Vice President
of Finance, G.T. Insurance from 1992 to 1994; and a Director of the Manager, GT Global and
GT Services since 1991.
</TABLE>
<TABLE>
<S> <C>
Kenneth W. Chancey, 50 Vice President of Mutual Fund Accounting, the Manager since 1992; and
Vice President and Vice President, Putnam Fiduciary Trust Company from 1989 to 1992.
Principal Accounting Officer
50 California Street
San Francisco, CA 94111
Helge K. Lee, 49 Executive Vice President, Asset Management Division, Liechtenstein
Vice President and Secretary Global Trust since October 1996; Senior Vice President, LGT Asset
50 California Street Management, the Manager, GT Global, GT Services and G.T. Insurance from
San Francisco, CA 94111 February 1996 to October 1996; Vice President, LGT Asset Management, the
Manager, GT Global, GT Services and G.T. Insurance from May 1994 to
February 1996; General Counsel, LGT Asset Management, the Manager, GT
Global, GT Services and G.T. Insurance from May 1994 to October 1996;
Secretary, the Manager, since May 1994; Secretary, LGT Asset Management,
GT Global, GT Services and G.T. Insurance from May 1994 to October 1996;
Senior Vice President, General Counsel and Secretary, Strong/Corneliuson
Management, Inc.; and Secretary, each of the Strong Funds from October
1991 to May 1994.
</TABLE>
------------------------
The Board of Directors has a Nominating and Audit Committee, comprised of Miss
Quigley and Messrs. Anderson, Bayley and Patterson, which is responsible for
nominating persons to serve as Directors, reviewing audits of the Company and
its funds and recommending firms to serve as independent auditors for the
Company. Each of the Directors and officers of the Company is also a Director
and officer of G.T. Investment Portfolios, Inc., G.T. Global Developing Markets
Fund, Inc. and GT Global Floating Rate Fund, Inc., a Trustee and officer of G.T.
Global Growth Series and a Trustee of G.T. Greater Europe Fund, G.T. Global
Variable Investment Trust, G.T. Global Variable Investment Series, Global High
Income Portfolio, Global Investment Portfolio and Growth Portfolio, which are
also registered investment companies managed by the Manager. Each Director and
Officer serves in total as a Director and/or Trustee and Officer, respectively,
of __ registered investment companies with __ series managed or administered by
the Manager. The Company pays each Director, who is not a director, officer or
employee of the Manager or any affiliated company, $5,000 per annum, plus $300
per Fund for each meeting of the Board attended, and reimburses travel and other
expenses incurred in connection with attendance at such meetings. Other
Directors and officers receive no compensation or expense reimbursement from the
Company. For the fiscal year ended October 31, 1996, Mr. Anderson, Mr. Bayley,
Mr. Patterson and Ms. Quigley, who are not directors, officers or employees of
the Manager or any affiliated company, received total compensation of $
- ---------, $
- ---------, $
- --------- and $
- ---------, respectively, from the Company for their services as Directors. For
the year ended October 31, 1996, Mr. Anderson, Mr. Bayley, Mr. Patterson and Ms.
Quigley received total compensation of $
- ---------, $
- ---------, $
- --------- and $
- ---------, respectively, from the 40 GT Global Mutual Funds for which he or she
serves as a Director or Trustee. Fees and expenses disbursed to the Directors
contained no accrued or payable pension or retirement benefits. As of the date
of this Statement of Additional Information, the officers and Directors and
their families as a group owned in the aggregate beneficially or of record less
than 1% of the outstanding shares of the Fund or of all the Company's funds in
the aggregate.
- --------------
* Mr. Minella is an "interested person" of the Company as defined by the 1940
Act due to his affiliation with the LGT companies.
Statement of Additional Information Page 23
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT AND ADMINISTRATION
Chancellor LGT Asset Management, Inc. (the "Manager") serves as the Fund's
investment manager and administrator under an Investment Management and
Administration Contract ("Management Contract") between the Company and the
Manager. As investment manager and administrator, the Manager makes all
investment decisions for the Fund and administers the Fund's affairs. Among
other things, the Manager furnishes the services and pays the compensation and
travel expenses of persons who perform the executive, administrative, clerical
and bookkeeping functions of the Company and the Fund, and provides suitable
office space, necessary small office equipment and utilities.
The Management Contract may be renewed for one-year terms, provided that any
such renewal has been specifically approved at least annually by: (i) the
Company's Board of Directors, or by the vote of a majority of the Fund's
outstanding voting securities (as defined in the 1940 Act), and (ii) a majority
of Directors who are not parties to the Management Contract or "interested
persons" of any such party (as defined in the 1940 Act), cast in person at a
meeting called for the specific purpose of voting on such approval. The
Management Contract provides that with respect to the Fund either the Company or
the Manager may terminate the Contract without penalty upon sixty (60) days'
written notice. The Management Contract terminates automatically in the event of
its assignment (as defined in the 1940 Act).
The Manager and GT Global have undertaken to limit the Fund's Class A and Class
B share expenses to 2.40% and 2.90% of average daily net assets of the Class A
and Class B shares, respectively, and the Manager has agreed to reimburse the
Fund if the Fund's annual ordinary expenses exceed 2.40% and 2.90% of average
daily net assets of each class (exclusive of brokerage commissions, interest,
taxes, certain expenses attributable to investing outside the U.S. and
extraordinary expenses).
For the fiscal year ended October 31, 1996, the Fund paid management and
administration fees in the amount of $
- --------- to the Manager. For the fiscal year ended October 31, 1995, the Fund
paid management and administration fees in the amount of $3,913,429 to the
Manager. For the fiscal year ended October 31, 1994, the Fund paid management
and administration fees in the amount of $3,601,301 to the Manager.
Certain Latin American countries require a local entity to provide
administrative services for all direct investments by foreigners. Where required
by local law, the Fund intends to retain a local entity to provide such
administrative services. The local administrator will be paid a fee by the Fund
for its services.
DISTRIBUTION SERVICES
The Fund's Class A and Class B shares are continuously offered 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 separate Distribution
Plans with respect to each class of shares of the Fund in accordance with the
provisions of Rule 12b-1 under the 1940 Act ("Class A Plan" and "Class B Plan")
(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 the Class A Plan will have been
incurred within one year of such reimbursement. The Fund makes no payments to
any party other than GT Global, which is the distributor (principal underwriter)
of the Fund's shares. The Class B Plan took effect on April 1, 1993. The
following table discloses payments made by the Fund to GT Global under the Plans
during the Fund's last fiscal year:
<TABLE>
<CAPTION>
CLASS A CLASS B
AMOUNT PAID AMOUNT PAID
------------- --------------
<S> <C> <C>
Year ended October 31, 1996.................................................. $ $
</TABLE>
In approving the Plans, the Directors determined that each Plan was in the best
interests of the Fund and its shareholders. Agreements related to the Plans must
also be approved by such vote of the Directors and Qualified Directors as
described above. A plan of distribution which was substantially similar to the
Class A Plan, was approved by the Fund's shareholders on January 20, 1992, which
was subsequently amended to reflect certain changes, including (i) reference to
the addition of
Statement of Additional Information Page 24
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
the Class B Plan and (ii) changes in the rules of the National Association of
Securities Dealers, Inc. ("NASD"). The Class B Plan was approved by the Manager
as initial sole shareholder of the Class B shares of the Fund on March 31, 1993.
Each Plan requires that, at least quarterly, the Directors review the amounts
expended thereunder and the purposes for which such expenditures were made. Each
Plan requires that so long as they are in effect the selection and nomination of
Directors who are not "interested persons" of the Company will be committed to
the discretion of the Directors who are not "interested persons" of the Company,
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 which sell shares. The following
table reviews the extent of such activity for the Fund during the periods shown:
<TABLE>
<CAPTION>
SALES CHARGES AMOUNTS AMOUNTS
YEAR ENDED OCTOBER 31, COLLECTED RETAINED REALLOWED
- ------------------------------------------------------------------------------ ------------- ----------- -------------
<S> <C> <C> <C>
1996.......................................................................... $ $ $
1995.......................................................................... 2,082,087 291,788 1,790,299
1994.......................................................................... 4,668,275 443,629 4,224,646
</TABLE>
GT Global receives no compensation or reimbursements relating to its
distribution efforts with respect to Class A shares other than as described
above. GT Global receives any contingent deferred sales charges payable with
respect to redemptions of Class B shares. For the fiscal year ended October 31,
1996, GT Global collected contingent deferred sales charges in the amount of $
- ---------. For the fiscal year ended October 31, 1995, GT Global collected
contingent deferred sales charges in the amount of $699,275. For the fiscal year
ended October 31, 1994, GT Global collected contingent deferred sales charges in
the amount of $362,155. Purchases of Class A shares exceeding $500,000 may be
subject to a contingent deferred sales charge upon redemption. GT Global
collected contingent deferred sales charges in the amount of $
- ------ and $60,973 for the fiscal years ended October 31, 1996 and October 31,
1995, respectively.
TRANSFER AGENCY AND ACCOUNTING AGENT SERVICES
GT Global Investor Services, Inc. ("Transfer Agent") has been retained by the
Fund to perform shareholder servicing, reporting and general transfer agent
functions for the Fund. 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, stationary and office supplies.
The Manager also serves as the Fund's pricing and accounting agent. The monthly
fee for these services to the Manager is a percentage, not to exceed 0.03%
annually, of the Fund's average daily net assets. The annual fee rate is derived
by applying 0.03% to the first $5 billion of assets of all registered mutual
funds advised by the Manager ("GT Global Mutual Funds") and 0.02% to the assets
in excess of $5 billion and, allocating the result according to the Fund's
average daily net assets. As of October 31, 1996, the Fund paid the Manager fees
of $
- ------ for such accounting services.
EXPENSES OF THE FUND
The Fund pays all expenses not assumed by the Manager, GT Global and other
agents. These expenses include, in addition to the advisory, distribution and
brokerage fees discussed above, legal and audit expenses, custodian and transfer
agency and pricing and accounting fees, directors' fees, organizational fees,
fidelity bond and other insurance premiums, taxes, extraordinary expenses and
the expenses of reports and prospectuses sent to existing investors. The
allocation of general Company expenses and expenses shared by the Fund and other
funds organized as series of the Company with one another are allocated on a
basis deemed fair and equitable, which may be based on the relative net assets
of the Fund or the nature of the services performed and relative applicability
to the Fund. Expenditures, including costs incurred in connection with the
purchase or sale of portfolio securities, which are capitalized in accordance
with generally accepted accounting principles applicable to investment
companies, are accounted for as capital items and not as expenses. The ratio of
the Fund's expenses to its relative net assets can be expected to be higher than
the expense ratios of funds investing solely in domestic securities, since the
cost of maintaining the custody of foreign securities and the rate of investment
management fees paid by the Fund generally are higher than the comparable
expenses of such other funds.
Statement of Additional Information Page 25
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GT GLOBAL LATIN AMERICA GROWTH FUND
VALUATION OF FUND SHARES
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The Fund's portfolio securities and other assets are valued as follows:
As described in the Prospectus, the Fund's net asset value per share for each
class of shares is determined at the close of normal trading on The New York
Stock Exchange, Inc. ("NYSE") (currently 4:00 p.m. Eastern time) (unless
weather, equipment failure or other factors contribute to an earlier closing
time) on each day for which the NYSE is open for business. 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.
Equity securities, including ADRs, ADSs, CDRs and EDRs, which are traded on
stock exchanges are valued at the last sale price on the exchange on which such
securities are traded, as of the close of business on the day the securities are
being valued or, lacking any sales, at the last available bid price. In cases
where securities are traded on more than one exchange, the securities are valued
on the exchange determined by the Manager to be the primary market. Securities
traded in the over-the-counter market are valued at the last available bid price
prior to the time of valuation.
Long-term debt obligations are valued at the mean of representative quoted bid
and asked prices for such securities or, if such prices are not available, at
prices for securities of comparable maturity, quality and type; however, when
the Manager deems it appropriate, prices obtained for the day of valuation from
a bond pricing service will be used. Short-term debt investments are amortized
to maturity based on their cost, adjusted for foreign exchange translation,
provided such valuations represent fair value.
Options on indices, securities and currencies purchased by the Fund are valued
at their last bid price in the case of listed options or, in the case of OTC
options, at the 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. The value of each security denominated in a currency other
than U.S. dollars will be translated into U.S. dollars at the prevailing
exchange rate as determined by the Manager on that day. When market quotations
for futures and options on futures held by the Fund are readily available, those
positions will be valued based upon such quotations.
Securities and other assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or under the
direction of the Company's Board of Directors. The valuation procedures applied
in any specific instance are likely to vary from case to case. However,
consideration is generally given to the financial position of the issuer and
other fundamental analytical data relating to the investment and to the nature
of the restrictions on disposition of the securities (including any registration
expenses that might be borne by the Fund in connection with such disposition).
In addition, specific factors are also generally considered, such as the cost of
the investment, the market value of any unrestricted securities of the same
class (both at the time of purchase and at the time of valuation), the size of
the holding, the prices of any recent transactions or offers with respect to
such securities and any available analysts' reports regarding the issuer.
The fair value of any other assets is added to the value of all securities
positions to arrive at the value of the Fund's total assets. The Fund's
liabilities, including accruals for expenses, are deducted from its total
assets. Once the total value of the Fund's net assets is so determined, that
value is then divided by the total number of shares outstanding (excluding
treasury shares), and the result, rounded to the nearer cent, is the net asset
value per share.
Any assets or liabilities initially denominated in terms of foreign currencies
are translated into U.S. dollars at the official exchange rate or at the mean of
the current bid and asked prices of such currencies against the U.S. dollar last
quoted by a major bank that is a regular participant in the foreign exchange
market or on the basis of a pricing service that takes into account the quotes
provided by a number of such major banks. If none of these alternatives are
available or none are deemed to provide a suitable methodology for converting a
foreign currency into U.S. dollars, the Board of Directors in good faith will
establish a conversion rate for such currency.
Latin American securities trading may not take place on all days on which the
NYSE is open. Further, trading takes place in various foreign markets on days on
which the NYSE is not open. Consequently, the calculation of the Fund's net
asset value may not take place contemporaneously with the determination of the
prices of securities held by the Fund. Events
Statement of Additional Information Page 26
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GT GLOBAL LATIN AMERICA GROWTH FUND
affecting the values of portfolio securities that occur between the time their
prices are determined and the close of regular trading on the NYSE will not be
reflected in the Fund's net asset value unless the Manager, under the
supervision of the Company's Board of Directors, determines that the particular
event would materially affect net asset value. As a result, the Fund's net asset
value may be significantly affected by such trading on days when a shareholder
cannot purchase or redeem shares of the Fund.
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INFORMATION RELATING TO SALES AND REDEMPTIONS
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PAYMENT AND TERMS OF OFFERING
Payment for Class A or Class B shares 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 cancelled due to nonpayment (for example, because a check is returned for
"not sufficient funds"), the person who made the order will be responsible for
any loss incurred by the 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 cancelled 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.
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 assure 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
13-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 20 days after written request, the
appropriate number of escrowed shares will be redeemed and the proceeds paid to
GT Global.
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 restrictively
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.
Statement of Additional Information Page 27
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GT GLOBAL LATIN AMERICA GROWTH FUND
INDIVIDUAL RETIREMENT ACCOUNTS (IRAS)
Class A or Class B shares of the Fund may also be purchased as the underlying
investment for an IRA meeting the requirements of section 408(a) of the Internal
Revenue Code of 1986, as amended ("Code"). IRA applications are available from
brokers or GT Global.
EXCHANGES BETWEEN FUNDS
A shareholder may exchange shares of the Fund for shares of other GT Global
Mutual Funds, based on their respective net asset values without imposition of
any sales charges provided the registration remains identical. 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 60 days' written
notice to the shareholders of such fund and is available only in states where
the exchange 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 for
Class B shares of other GT Global Mutual Funds. 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 objectives 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,
will be 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 30 days' written notice.
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 determined by the SEC, (2) when an
emergency exists, as defined by the SEC, which makes it not reasonably
practicable for the Fund to dispose of securities owned by it or fairly to
determine the value of its assets, or (3) as the SEC may otherwise permit.
AUTOMATIC INVESTMENT PLAN -- CLASS A SHARES AND CLASS B SHARES
To establish participation in the Funds' Automatic Investment Plan ("AIP"),
investors or their brokers should specify whether the investment will be in
Class A shares or Class B shares and 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 prospectus. Providing 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 a 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, a stop payment order or 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 a 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 Funds upon 30 days' written notice or by the participant, at any
time, without penalty, upon written notice to the pertinent Fund or the Transfer
Agent.
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 a 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 beginning
quarterly on the 25th day of the month the investor first selects). In the event
that the 25th 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
Statement of Additional Information Page 28
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
(or partnership) also must submit a "Corporation Resolution" or "Certification
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 30 days' written notice or by a shareholder upon
written notice to the Fund or its Transfer Agent. Applications and further
details regarding establishment of a 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 from disposing of
its portfolio securities 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 Company's Board of Directors, 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 Company 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 value of the net
assets 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.
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TAXES
- --------------------------------------------------------------------------------
GENERAL
In order to continue 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, net short-term capital gain and net gains
from certain foreign currency transactions) ("Distribution Requirement") and
must meet several additional requirements. These requirements include the
following: (1) the Fund must derive at least 90% of its gross income each
taxable year from dividends, interest, payments with respect to securities loans
and gains from the sale or other disposition of securities or foreign
currencies, or other income (including gains from options, Futures or Forward
Contracts) derived with respect to its business of investing in securities or
those currencies ("Income Requirement"); (2) 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
- -- options or Futures (other than those on foreign currencies), or foreign
currencies (or options, Futures or Forward Contracts thereon) that are not
directly related to the Fund's principal business of investing in securities (or
options and Futures with respect to securities) ("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.
Statement of Additional Information Page 29
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
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 from U.S.
corporations. However, dividends received by a corporate shareholder and
deducted by it pursuant to the dividends-received deduction are subject
indirectly to the alternative minimum tax.
If 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.
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.
FOREIGN TAXES
Dividends and interest received by the Fund may be subject to income,
withholding, or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors. If more than 50% of the value of
the Fund's total assets at the close of its taxable year consists of securities
of foreign corporations, the Fund will be eligible to, and may, file an election
with the Internal Revenue Service that will enable its shareholders, in effect,
to receive the benefit of the foreign tax credit with respect to any foreign
income taxes paid by it. Pursuant to the election, the Fund will treat those
taxes as dividends paid to its shareholders and each shareholder will be
required to (1) include in gross income, and treat as paid by him, his
proportionate share of those taxes, (2) treat his share of those taxes and of
any dividend paid by the Fund that represents income from foreign sources as his
own income from those sources, and (3) either deduct the taxes deemed paid by
him in computing his taxable income or, alternatively, use the foregoing
information in calculating the foreign tax credit against his federal income
tax. The Fund will report to its shareholders shortly after each taxable year
their respective shares of the Fund's income from sources within, and taxes paid
to, foreign countries if it makes this election.
PASSIVE FOREIGN INVESTMENT COMPANIES
The Fund may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is a foreign corporation that, in general, meets either of the
following tests: (1) at least 75% of its gross income is passive or (2) an
average of at least 50% of its assets produce, or are held for the production
of, passive income. Under certain circumstances, the Fund would be subject to
federal income tax on a portion of any "excess distribution" received on, or of
any gain from disposition of, stock of a PFIC (collectively "PFIC income"), plus
interest thereon, even if the Fund distributed the PFIC income as a taxable
dividend to its shareholders. The balance of the PFIC income would be included
in the Fund's investment company taxable income and, accordingly, would not be
taxable to the Fund to the extent that income is distributed to its
shareholders.
If the Fund does invest in a PFIC and elects to treat the PFIC as a "qualified
electing fund" ("QEF"), then in lieu of the foregoing tax and interest
obligation, the Fund would be required to include in income each taxable year
its pro rata share of the QEF's ordinary earnings and net capital gain (the
excess of net long-term capital gain over net short-term capital loss) -- which
most likely would have to be distributed to satisfy the Distribution Requirement
and to avoid imposition of the Excise Tax -- even if those earnings and gain
were not received by the Fund. In most instances it will be very difficult, if
not impossible, to make this election because of certain requirements thereof.
Pursuant to proposed regulations, open-end RICs, such as the Fund, would be
entitled to elect to "mark-to-market" their stock in certain PFICs.
"Marking-to-market," in this context, means recognizing as gain for each taxable
year the excess, as of the end of that year, of the fair market value of each
such PFIC's stock over the adjusted basis in that stock (including
mark-to-market gain for each prior year for which an election was in effect).
NON-U.S. SHAREHOLDERS
Dividends paid by the Fund to a shareholder who, as to the United States, is a
nonresident alien individual, nonresident alien fiduciary of a trust or estate,
foreign corporation or foreign partnership ("foreign shareholder") will be
subject to
Statement of Additional Information Page 30
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GT GLOBAL LATIN AMERICA GROWTH FUND
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 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.
OPTIONS, FUTURES AND FOREIGN CURRENCY TRANSACTIONS
The use of hedging transactions, such as selling (writing) and purchasing
options and Futures Contracts and entering into Forward Contracts, involves
complex rules that will determine, for federal income tax purposes, the
character and timing of recognition of the gains and losses the Fund realizes in
connection therewith. Gains from foreign currencies (except certain gains that
may be excluded by future regulations), and gains from the disposition of
options, Futures and Forward Contracts derived by the Fund with respect to its
business of investing in securities or foreign currencies, will qualify as
permissible income under the Income Requirement. However, income from the
disposition by the Fund of options and Futures (other than those on foreign
currencies) will be subject to the Short-Short Limitation if they are held for
less than three months. Income from the disposition by the Fund of foreign
currencies, and options, Futures and Forward Contracts on foreign currencies,
that are not directly related to the Fund's principal business of investing in
securities, (or options and Futures with respect thereto) also will be subject
to the Short-Short Limitation if they are held for less than three months.
If the Fund satisfies certain requirements, any increase in value of a position
that is part of a "designated hedge" will be offset by any decrease in value
(whether realized or not) of the offsetting hedging position during the period
of the hedge for purposes of determining whether the Fund satisfies the
Short-Short Limitation. Thus, only the net gain (if any) from the designated
hedge will be included in gross income for purposes of that limitation. The Fund
intends that, when it engages in hedging transactions, it will qualify for this
treatment, but at the present time it is not clear whether this treatment will
be available for all those transactions. To the extent this treatment is not
available, the Fund may be forced to defer the closing out of certain options,
Futures, Forward Contracts or foreign currency positions beyond the time when it
otherwise would be advantageous to do so, in order for the Fund to continue to
qualify as a RIC.
Futures and Forward Contracts that are subject to Section 1256 of the Code
(other than those that are part of a "mixed straddle") ("Section 1256
Contracts") and that are held by the Fund at the end of its taxable year
generally will be deemed to have been sold at market value for federal income
tax purposes. Sixty percent of any net gain or loss recognized on these deemed
sales, and 60% of any net gain or loss realized from any actual sales of Section
1256 Contracts, will be treated as long-term capital gain or loss, and the
balance will be treated as short-term capital gain or loss. Section 988 of the
Code also may apply to gains and losses from transactions in foreign currencies,
foreign-currency-denominated debt securities and options, Futures and Forward
Contracts on foreign currencies ("Section 988" gains or losses). Each Section
988 gain or loss generally is computed separately and treated as ordinary income
or loss. In the case of overlap between Sections 1256 and 988, special
provisions determine the character and timing of any income, gain or loss. The
Fund attempts to monitor Section 988 transactions to minimize any adverse tax
impact.
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.
Statement of Additional Information Page 31
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GT GLOBAL LATIN AMERICA GROWTH 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, located 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, Japan; LGT
Asset Management Pte. Ltd., formerly G.T. Management (Singapore) PTE Ltd.
located in Singapore; LGT Asset Management Ltd., formerly G.T. Management
(Australia) Ltd., located in Sydney, Australia; and LGT Asset Management GmbH,
formerly BIL Asset Management GmbH, located in Frankfurt, Germany.
CUSTODIAN
State Street Bank and Trust Company ("State Street"), 225 Franklin Street,
Boston, Massachusetts 02110, acts as custodian of the Fund's assets. State
Street is authorized to establish and has established separate accounts in
foreign currencies and to cause securities of the Fund to be held in separate
accounts outside the United States in the custody of non-U.S. banks.
INDEPENDENT ACCOUNTANTS
The Funds' independent accountants are Coopers & Lybrand L.L.P., One Post Office
Square, Boston, Massachusetts 02109. Coopers & Lybrand L.L.P. will conduct an
annual audit of the Fund, assists in the preparation of the Fund's federal and
state income tax returns and consults with the Company and the Fund as to
matters of accounting, regulatory filings, and federal and state income
taxation.
The audited financial statements of the Company 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 said firm as experts in accounting and auditing.
USE OF NAME
The Manager has granted the Company 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 Company and/or the Fund at any time, or to grant the use of such
names to any other company.
Statement of Additional Information Page 32
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GT GLOBAL LATIN AMERICA GROWTH FUND
INVESTMENT RESULTS
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The Fund's "Standardized Return", as referred to in the Prospectus (see "Other
Information -- Performance Information"), is calculated separately for Class A
and Class B shares of the Fund, as follows: Standardized Return ("T") is
computed by using the value at the end of the period ("EV") 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)(n) = EV. 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
Board; and (4) a complete redemption at the end of any period illustrated. The
Fund's Standardized Return for its Class A shares stated as average annualized
total returns, for the periods shown, were as follows:
<TABLE>
<CAPTION>
STANDARDIZED
PERIOD RETURN
- ---------------------------------------- ------------------
<S> <C>
Year ended October 31, 1996............. %
October 31, 1991 through October 31,
1996................................... %
August 13, 1991 (commencement of
operations) to October 31, 1996........ %
</TABLE>
The Fund's Standardized Returns for its Class B shares which were first offered
on April 1, 1993, stated as average annual total returns, for the periods shown,
were:
<TABLE>
<CAPTION>
STANDARDIZED
PERIOD RETURN
- ---------------------------------------- ------------------
<S> <C>
Year ended October 31, 1996............. %
April 1, 1993 (commencement of
operations) to October 31, 1996........ %
</TABLE>
"Non-Standardized Return," as referred to in the Prospectus, is calculated for a
specified period of time by assuming the investment of $1,000 in Fund shares and
further assuming the reinvestment of all dividends and other distributions made
to Fund shareholders in additional Fund shares at their net asset value.
Percentage rates of return are then calculated by comparing this assumed initial
investment to the value of the hypothetical account at the end of the period for
which the Non-Standardized Return is quoted.
As discussed in the Prospectus, the Fund may quote Non-Standardized Total
Returns that do not reflect the effect of sales charges. Non-Standardized
Returns may be quoted for the same or different time periods for which
Standardized Returns are quoted.
The Fund's Non-Standardized Returns, for its Class A shares, stated as aggregate
total returns, for the periods shown, were as follows:
<TABLE>
<CAPTION>
AGGREGATE TOTAL
PERIOD RETURN
- ---------------------------------------- ------------------
<S> <C>
Year ended October 31, 1996............. %
October 31, 1991 through October 31,
1996................................... %
August 13, 1991 (commencement of
operations) to October 31, 1996........ %
</TABLE>
The Fund's Non-Standardized Return for its Class B shares which were first
offered on April 1, 1993, stated as aggregate total returns, for the periods
shown, were as follows:
<TABLE>
<CAPTION>
NON-STANDARDIZED
PERIOD RETURN
- ---------------------------------------- ------------------
<S> <C>
Year ended October 31, 1996............. %
April 1, 1993 (commencement of
operations) to October 31, 1996........ %
</TABLE>
Statement of Additional Information Page 33
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
The Fund's Non-Standardized Returns, for its Class A shares, stated as average
annualized total returns, for the periods shown, were as follows:
<TABLE>
<CAPTION>
NON-STANDARDIZED
AVERAGE ANNUALIZED
PERIOD TOTAL RETURN
- ---------------------------------------- ------------------
<S> <C>
Year ended October 31, 1996............. %
August 13, 1991 (commencement of
operations) to October 31, 1996........ %
</TABLE>
The Fund's Non-Standardized Returns for its Class B shares, stated as average
annualized total returns, for the periods shown, were:
<TABLE>
<CAPTION>
NON-STANDARDIZED
AVERAGE ANNUALIZED
PERIOD TOTAL RETURN
- ---------------------------------------- ------------------
<S> <C>
Year ended October 31, 1996............. %
April 1, 1993 (commencement of
operations) to October 31, 1996........ %
</TABLE>
IMPORTANT POINTS TO NOTE ABOUT DATA RELATING TO WORLD EQUITY AND BOND MARKETS
Information relating to foreign market performance, market capitalization and
diversification is based on sources believed to be reliable, but is not
all-inclusive nor warranted as to discovery by the Fund or the Manager. The
authors and publishers of such material are not to be considered as "experts"
under the Securities Act of 1933 on account of the inclusion of such information
herein. Stocks chosen by Morgan Stanley Capital International for inclusion in
its various international market indices may not necessarily constitute a
representative cross-section of the particular markets.
GT Global believes information relating to foreign market performance, market
capitalization and diversification may be useful to investors considering
whether and to what extent to diversify their investments through the purchase
of mutual funds investing in equity and/or debt 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 the indices represented above. The
performance of indices does not take expenses into account, while the Fund
incurs expenses in its operations that will reduce performance. Moreover, the
Fund is actively managed, i.e. the Manager as the Fund's investment manager
actively purchases and sells securities in seeking the Fund's investment
objective; this will cause the performance of the Fund to differ from the
indices shown above. Moreover, the Fund's concentration in the equity and debt
securities of Latin American issuers will cause the Fund's performance to differ
from the general equity and bond indices referred to in the historical
performance data provided above.
The Fund and GT Global may from time to time 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 or BBB by S&P, or, in
the case of nonrated bonds, BBB by Fitch Investors Service (excluding
Collateralized Mortgage Obligations).
(3) 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.
(4) 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).
(5) Data and mutual fund rankings published or prepared by Lipper
Analytical Data Services, Inc. ("Lipper"), CDA/Wiesenberger Investment
Company 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 the Fund may be compared to the Fund's "peer
group" as defined by Lipper, CDA/Wiesenberger and/or other firms as
applicable, or to specific funds or groups of funds within or without such
peer group. Morningstar is a mutual fund rating service that also rates
mutual funds on the basis of risk-adjusted
Statement of Additional Information Page 34
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
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.
(6) Bear Stearns Foreign Bond Index, which provides simple average
returns for individual countries and GNP-weighted index, beginning in 1975.
The returns are broken down by local market and currency.
(7) Ibbottson Associates International Bond Index, which provides a
detailed breakdown of local market and currency returns since 1960.
(8) Standard & Poor's "500" 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 U.S.
(9) Salomon Brothers Broad Investment Grade Index which is a widely used
index composed of U.S. domestic government, corporate and mortgage-back
fixed income securities.
(10) Dow Jones Industrial Average.
(11) CNBC/Financial News Composite Index.
(12) 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 800
companies of Europe, Australia and the Far East.
(13) Morgan Stanley Capital International Latin America Emerging Market
Indices, including the Morgan Stanley Emerging Markets Free Latin America
Index (which excludes Mexican banks and securities companies which cannot be
purchased by foreigners) and the Morgan Stanley Emerging Markets Global
Latin America Index. Both indices include 60% of the market capitalization
of the following countries: Argentina, Brazil, Chile and Mexico. The indices
are weighted by market capitalization and are calculated without dividends
reinvested.
(14) International Financial Corporation ("IFC") Latin American Indices
which include 60% of the market capitalization in the covered countries and
are market weighted. One index includes dividends and one excludes
dividends.
(15) 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.
(16) The World Bank Publication of Trends in Developing Countries (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.
(17) Salomon Brothers Global Telecommunications Index is composed of
telecommunications companies in the developing and emerging countries.
(18) Datastream and Worldscope each is an on-line database retrieval
service for information including but not limited to international financial
and economic data.
(19) International Financial Statistics, which is produced by the
International Monetary Fund.
(20) Various publications and reports produced by the World Bank and its
affiliates.
(21) Various publications from the International Bank for Reconstruction
and Development/The World Bank.
(22) Various publications including but not limited to ratings agencies
such as Moody's Investors Services, Fitch Investors Service, and Standard &
Poor's.
(23) Various publications from the Organization for Economic Cooperation
and Development (OECD).
(24) Wilshire Associates which is an on-line database for international
financial and economic data including performance measure for a wide range
of securities.
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, 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
Statement of Additional Information Page 35
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
respective Central Banks of various nations. In addition, GT Global may use
performance rankings, ratings and commentary reported periodically in national
financial publications, included but not limited to, Money 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 indicies of comparable quality to those listed above and other
indicies which may be developed and made available.
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. 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.
GT Global believes that a growing number of consumer products, including but not
limited to home appliances, automobiles and clothing, purchased by Americans are
manufactured abroad. GT Global believes that investing globally in the companies
that produce products for U.S. consumers can help U.S. investors seek protection
of the value of their assets against the potentially increasing costs of foreign
manufactured goods. Of course, there can be no assurance that there will be any
correlation between global investing and the costs of such foreign goods unless
there is a corresponding change in value of the U.S. dollar to foreign
currencies. From time to time, GT Global may refer to or advertise the names of
such companies although there can be no assurance that any GT Global Mutual Fund
may own the securities of these companies.
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 Fund assets under management or
rankings by DALBAR Surveys, Inc. in advertising materials.
The Fund may compare its performance to that of other compilations or indices of
comparable quality to those listed above which may be developed and made
available in the future. The Fund may be compared in advertising to Certificates
of Deposit (CDs), the Bank Rate Monitor National Index, an average of the quoted
rates for 100 leading banks and thrifts in ten U.S. cities chosen to represent
the ten largest Consumer Metropolitan statistical areas, or other investments
issued by banks. The Fund differs from bank investments in several respects. The
Fund may offer greater liquidity or higher potential returns than CDs; but
unlike CDs, the Fund will have a fluctuating share price and return and is not
FDIC insured.
The Fund's performance may be compared to the performance of other mutual funds
in general, or to the performance of particular types of mutual funds. These
comparisons may be expressed as mutual fund rankings prepared by Lipper
Analytical Services, Inc. (Lipper), an independent service which monitors the
performance of mutual funds. 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 Fund's performance
may be compared to mutual fund performance indices prepared by Lipper.
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.
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 is 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.
In advertising materials, GT Global may reference or discuss its products and
services, which may include: retirement investing; the effects of dollar-cost
averaging and saving for college or a home. In addition, GT Global may quote
financial or business publications and periodicals, including model portfolios
or allocations, as they relate to fund management, investment philosophy, and
investment techniques.
Statement of Additional Information Page 36
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
The Fund may discuss its Quotron number, CUSIP number, and its current portfolio
management team.
From time to time, the Fund's performance also may be compared to other mutual
funds tracked by financial or business publications and periodicals. For
example, the fund may quote Morningstar, Inc. in its advertising materials.
Morningstar, Inc. is a mutual fund rating service that rates mutual funds on the
basis of risk-adjusted performance. In addition, the Fund may quote financial or
business publications and periodicals as they relate to fund management,
investment philosophy, and investment techniques. Rankings that compare the
performance of GT Global Mutual Funds to one another in appropriate categories
over specific periods of time may also be quoted in advertising.
The Fund may quote various measures of volatility and benchmark correlation such
as beta, standard deviation and R(2) 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. Measures of benchmark correlation indicate how valid a
comparative benchmark may be. 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. 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.
Each 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 the GT Global Mutual Funds through various retirement accounts and
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. The Funds may also discuss these accounts and plans
which include:
INDIVIDUAL RETIREMENT ACCOUNTS (IRAS): Any individual who receives earned income
from employment (including self-employment) can contribute up to $2,000 each
year to an IRA (or 100% of compensation, whichever is less). If your spouse is
not employed, a total of $2,250 may be contributed each year to IRAs set up for
each individual (subject to the maximum of $2,000 per IRA). 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.
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 rollover (or make a direct transfer of) their
distribution to a Rollover IRA. These accounts can also receive rollovers or
transfers from an existing IRA.
SEP-IRAS AND SALARY-REDUCTION SEP-IRAS: Simplified employee pension (SEP) plans
and salary-reduction SEPs provide self-employed individuals (and any eligible
employees) with benefits similar to Keogh-type plans or 401(k) plans, but with
fewer administrative requirements and therefore lower annual administration
expenses.
403(B)(7) CUSTODIAL ACCOUNTS: Employees of public schools and most other
not-for-profit corporations can make pre-tax salary reduction contributions to
these accounts.
PROFIT-SHARING (INCLUDING 401(K)) AND MONEY PURCHASE PENSION PLANS: Corporations
can sponsor these qualified defined contribution plans for their employees. A
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).
GT Global may from time to time in its sales methods and advertising discuss the
risks inherent in investing. The major
types of investment risk are market risk, industry risk, credit risk, interest
rate 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.
Statement of Additional Information Page 37
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
From time to time, the Funds and GT Global will quote certain information
regarding individual countries, regions, world stock exchanges, and economic and
demographic statistics from sources GT Global deems reliable including, but not
limited to, the economic and financial data of such financial organizations as:
1) Stock market capitalization: Morgan Stanley Capital International World
Indices, International Finance Corporation and Datastream.
2) Stock market trading volume: Morgan Stanley Capital International World
Indices, International Finance Corporation.
3) The number of listed companies: International Finance Corporation, G.T.
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 Indices.
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, International Finance Corporation and Datastream.
7) The Consumer Price Index and inflation rate: The World Bank, Datastream and
International Finance Corporation.
8) Gross Domestic Product (GDP): Datastream and The World Bank.
9) GDP growth rate: International Finance Corporation, 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: Organization for Economic Cooperation
and Development and United Nations.
13) Total exports and imports by year: International Finance Corporation, The
World Bank and Datastream.
14) Top three companies by country, industry or market: International Finance
Corporation, G.T. Guide to World Equity Markets, Salomon Brothers Inc., and
S.G. Warburg.
15) Foreign Direct Investments to developing countries.
16) Standard deviation and performance returns for U.S. and non-U.S. equity and
bond markets: Morgan Stanley Capital International.
17) Countries restructuring their debt, including those under the Brady Plan:
the Manager.
18) Political and economic structure of countries: Economist Intelligence Unit.
19) Government and corporate bonds -- credit ratings, yield to maturity and
performance returns: Salomon Brothers, Inc.
20) Dividend yields for U.S. and non-U.S. companies: Bloomberg.
21) 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, 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).
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 GT Asset Management Ltd. as one of the first foreign
discretionary investment management 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.
Statement of Additional Information Page 38
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
THE GT ADVANTAGE
The Manager has developed a unique team approach to its global money management
which we call the GT Advantage. The Manager's money management style combines
the best of the "top-down" and "bottom-up" investment manager strategies. The
top-down approach is implemented by the Manager's Investment Policy Committee
which sets broad guidelines for asset allocation and currency management based
on the Manager's own macroeconomic forecasts and research from our worldwide
offices. The bottom-up approach utilizes regional teams of individual portfolio
managers to implement the committee's guidelines by selecting local securities
that offer strong growth potential.
- --------------------------------------------------------------------------------
DESCRIPTION OF DEBT RATINGS
- --------------------------------------------------------------------------------
DESCRIPTION OF COMMERCIAL PAPER RATINGS
MOODY'S INVESTORS SERVICE, INC. ("Moody's") employs the designations "Prime-1,"
"Prime-2" and "Prime-3" to indicate commercial paper having the highest capacity
for timely repayment. Issuers rated Prime-1 have a superior capacity for
repayment of senior short-term promissory obligations. Prime-1 repayment ability
will often be evidenced by 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 protections; 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 have a strong capacity for repayment of short-term
promissory obligations. This will normally 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. Issuers rated Prime-3 have
an acceptable ability for repayment of senior short-term obligations. The effect
of industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
STANDARD & POOR'S RATINGS GROUP ("S&P") ratings of commercial paper are graded
into four categories ranging from "A" for the highest quality obligations to "D"
for the lowest. A -- Issues assigned its highest rating are regarded as having
the greatest capacity for timely payment. Issues in this category are delineated
with numbers 1, 2, and 3 to indicate the relative degree of safety. A-1 -- This
designation indicates that the degree of safety regarding timely payment is
either overwhelming or very strong. Those issues determined to possess
overwhelming safety characteristics will be denoted with a plus (++) sign
designation. A-2 -- Capacity for timely payments on issues with this designation
is strong. However, the relative degree of safety is not as high as for issues
designated "A-1." A-3 -- Issues carrying this designation have a satisfactory
capacity for timely payment. They are, however, somewhat more vulnerable to the
adverse effects of changes in circumstances than obligations carrying the higher
designations.
DESCRIPTION OF BOND RATINGS
Moody's rates the long-term debt securities issued by various entities from
"Aaa" to "C." Ratings are as follows:
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 bond because margins of protection may not be as large as in
Aaa securities, fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the long-term
risks appear somewhat larger than the Aaa securities.
A -- Upper medium grade obligations. These bonds possess many favorable
investment attributes. 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
Statement of Additional Information Page 39
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and, in fact, have speculative
characteristics as well.
Ba -- These bonds are judged to have speculative elements; 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 other good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B -- These bonds 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 -- These bonds are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.
Ca -- These bonds represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
C -- These bonds are the lowest rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
S&P rates the long-term securities debt of various entities in categories
ranging from "AAA" to "D" according to quality. Investment grade ratings are as
follows:
AAA -- Highest rating. Capacity to pay interest and repay principal is
extremely strong.
AA -- High grade. Very strong capacity to pay interest and repay
principal. Generally, these bonds differ from AAA issues only in a small
degree.
A -- Have a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of change
in circumstances and economic conditions, than debt in higher rated
categories.
Speculative grade ratings are as follows:
BBB -- Regarded as having adequate capacity to pay interest and repay
principal. These bonds normally exhibit adequate protection parameters, but
adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity to pay interest and repay principal than for
debt in higher rated categories.
BB -- Have less near-term vulnerability to default than other
speculative issues. However, these bonds face 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.
This rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied 'BBB-' rating.
B -- Have greater vulnerability to default but currently have 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. This rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied 'BB' or 'BB-' rating.
CCC -- Have a currently identifiable vulnerability to default and are
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, these bonds are 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 -- This rating typically is applied to debt subordinated to senior
debt that is assigned an actual or implied 'CCC' rating.
C -- This rating typically is applied to debt subordinated to senior
debt that is assigned an actual or implied 'CCC-' debt rating. This rating
may be used to cover a situation where a bankruptcy petition has been filed,
but debt service payments are continued.
CI -- This rating is reserved for income bonds on which no interest is
being paid.
D -- Are in payment default. This 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. This rating also will be
used up on the filing of a bankruptcy petition if debt service payments are
jeopardized.
Statement of Additional Information Page 40
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The audited financial statements of G.T. Latin America Growth Fund at October
31, 1996 and for the period then ended appear on the following pages.
Statement of Additional Information Page 41
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
NOTES
- --------------------------------------------------------------------------------
Statement of Additional Information Page 42
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
NOTES
- --------------------------------------------------------------------------------
Statement of Additional Information Page 43
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
NOTES
- --------------------------------------------------------------------------------
Statement of Additional Information Page 44
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
GT GLOBAL MUTUAL FUNDS
GT GLOBAL OFFERS A BROAD RANGE OF MUTUAL FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY GT GLOBAL MUTUAL
FUND, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR CALL GT GLOBAL DIRECTLY AT
1-800-824-1580.
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL WORLDWIDE GROWTH FUND
Invests around the world, including the U.S.
GT GLOBAL INTERNATIONAL GROWTH FUND
Provides portfolio diversity by investing outside the U.S.
GT GLOBAL EMERGING MARKETS FUND
Gives access to the growth potential of developing economies
/ / GLOBAL THEME FUNDS
GT GLOBAL CONSUMER PRODUCTS AND
SERVICES FUND
Invests in companies that manufacture, market, retail, or distribute consumer
products or services
GT GLOBAL FINANCIAL SERVICES FUND
Focuses on the worldwide opportunities from the demand for financial services
and products
GT GLOBAL HEALTH CARE FUND
Invests in the growing health care industries worldwide
GT GLOBAL INFRASTRUCTURE FUND
Seeks companies that build, improve or maintain a country's infrastructure
GT GLOBAL NATURAL RESOURCES FUND
Concentrates on companies that own, explore or develop natural resources
GT GLOBAL TELECOMMUNICATIONS FUND
Invests in companies worldwide that develop, manufacture or sell
telecommunications services or equipment
/ / REGIONALLY DIVERSIFIED FUNDS
GT GLOBAL NEW PACIFIC GROWTH FUND
Offers access to the emerging and established markets of the Pacific Rim,
excluding Japan
GT GLOBAL EUROPE GROWTH FUND
Focuses on investment opportunities in the new, unified Europe
GT GLOBAL LATIN AMERICA GROWTH FUND
Invests in the emerging markets of Latin America
/ / SINGLE COUNTRY FUNDS
GT GLOBAL AMERICA SMALL CAP GROWTH FUND
Invests in equity securities of small U.S. companies
GT GLOBAL AMERICA MID CAP GROWTH FUND
Concentrates on medium-sized companies in the U.S.
GT GLOBAL AMERICA VALUE FUND
Concentrates on equity securities of large cap U.S. companies believed to be
undervalued
GT GLOBAL JAPAN GROWTH FUND
Provides U.S. investors with direct access to the Japanese market
GROWTH AND INCOME FUNDS
GT GLOBAL GROWTH & INCOME FUND
Invests in blue-chip stocks and government bonds from around the world
FIXED INCOME FUNDS
GT GLOBAL GOVERNMENT INCOME FUND
Earns monthly income from global government securities
GT GLOBAL STRATEGIC INCOME FUND
Allocates its assets among debt securities from the U.S., developed foreign
countries and emerging markets
GT GLOBAL HIGH INCOME FUND
Invests in debt securities in emerging markets
MONEY MARKET FUND
GT GLOBAL DOLLAR FUND
Invests in high quality, U.S. dollar-denominated money market securities
worldwide for stability and preservation of capital
[LOGO]
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY G.T. INVESTMENT FUNDS, INC.,
GT GLOBAL LATIN AMERICA GROWTH FUND, CHANCELLOR LGT ASSET MANAGEMENT, INC.
OR GT GLOBAL, INC. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON IN SUCH JURISDICTION TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER.
LATSA610MC
<PAGE>
GT GLOBAL EMERGING
MARKETS FUND
50 California Street, 27th Floor
San Francisco, California 94111
(415) 392-6181
Toll Free: (800) 824-1580
Statement of Additional Information
March 1, 1997
- --------------------------------------------------------------------------------
GT Global Emerging Markets Fund ("Fund") is a diversified mutual fund organized
as a separate series of G.T. Investment Funds, Inc. ("Company"), a registered
open-end management investment company. This Statement of Additional Information
relating to the Class A and Class B shares of the Fund, which is not a
prospectus, supplements and should be read in conjunction with the Fund's
current Class A and Class B Prospectus dated March 1, 1997. A copy of the Fund's
Prospectus is available without charge by writing to the above address or by
calling the Fund at the toll-free telephone number listed above.
Chancellor LGT Asset Management, Inc. (the "Manager") serves as the Fund's
investment manager and administrator. 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 "Transfer Agent").
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Investment Objective and Policies........................................................................................ 2
Options, Futures and Currency Strategies................................................................................. 6
Risk Factors............................................................................................................. 14
Investment Limitations................................................................................................... 17
Execution of Portfolio Transactions...................................................................................... 19
Directors and Executive Officers......................................................................................... 21
Management............................................................................................................... 23
Valuation of Fund Shares................................................................................................. 24
Information Relating to Sales and Redemptions............................................................................ 26
Taxes.................................................................................................................... 28
Additional Information................................................................................................... 31
Investment Results....................................................................................................... 32
Description of Debt Ratings.............................................................................................. 38
Financial Statements..................................................................................................... 40
</TABLE>
[LOGO]
Statement of Additional Information Page 1
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
INVESTMENT OBJECTIVE
AND POLICIES
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is long-term growth of capital. The Fund
seeks this objective by investing, under normal circumstances, at least 65% of
its total assets in equity securities of companies in emerging markets. The Fund
does not consider the following countries to be emerging markets: Australia,
Austria, Belgium, Canada, Denmark, England, Finland, France, Germany, Ireland,
Italy, Japan, the Netherlands, New Zealand, Norway, Spain, Sweden, Switzerland
and United States. The Fund normally may invest up to 35% of its assets in a
combination of (i) debt securities of government or corporate issuers in
emerging markets; (ii) equity and debt securities of issuers in developed
countries, including the United States; (iii) securities of issuers in emerging
markets not included in the list of emerging markets set forth in the Fund's
current Prospectus, if investing therein becomes feasible and desirable
subsequent to the date of the Fund's current Prospectus; and (iv) cash and money
market instruments.
In determining what countries constitute emerging markets, the Manager will
consider, among other things, data, analysis, and classification of countries
published or disseminated by the International Bank for Reconstruction and
Development (commonly known as the World Bank) and the International Finance
Corporation.
SELECTION OF EQUITY INVESTMENTS
Chancellor LGT Asset Management, Inc. (the "Manager") is the investment manager
of the Fund. In determining the appropriate distribution of investments among
various countries and geographic regions for the Fund, the Manager ordinarily
considers the following factors: prospects for relative economic growth between
the different countries in which the Fund may invest; expected levels of
inflation; government policies influencing business conditions; the outlook for
currency relationships; and the range of the individual investment opportunities
available to international investors.
In analyzing companies in emerging markets for investment by the Fund, the
Manager ordinarily looks for one or more of the following characteristics: an
above-average earnings growth per share; high return on invested capital;
healthy balance sheet; sound financial and accounting policies and overall
financial strength; strong competitive advantages; effective research and
product development and marketing; efficient service; pricing flexibility;
strength of management; and general operating characteristics which will enable
the companies to compete successfully in their respective marketplaces. In
certain countries, governmental restrictions and other limitations on investment
may affect the maximum percentage of equity ownership in any one company by the
Fund. 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.
Although the Fund values its assets daily in terms of U.S. dollars, the Fund
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. The Fund 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 are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign currency to the
Fund at one rate, while offering a lesser rate of exchange should the Fund
desire to sell that currency to the dealer.
The Fund may be prohibited under the Investment Company Act of 1940, as amended
("1940 Act") from purchasing the securities of any foreign company that, in its
most recent fiscal year, derived more than 15% of its gross revenues from
securities-related activities ("securities-related companies"). In a number of
countries, commercial banks act as securities broker/dealers, investment
advisers and underwriters or otherwise engage in securities-related activities,
which may limit the Fund's ability to hold securities issued by banks. The Fund
has obtained an exemption from the Securities and Exchange Commission ("SEC") to
permit the Fund to invest in certain of these securities subject to certain
restrictions.
INVESTMENTS IN OTHER INVESTMENT COMPANIES
With respect to certain countries investments by the Fund presently may be made
only by acquiring shares of other investment companies with local governmental
approval to invest in those countries. The Fund may invest in the securities of
closed-end investment companies within the limits of the 1940 Act. These
limitations currently provide, in part, that the Fund may purchase shares of a
closed-end investment company unless (a) such a purchase would cause the Fund to
own in
Statement of Additional Information Page 2
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
the aggregate more than 3 percent of the total outstanding voting stock of the
investment company or (b) such a purchase would cause the Fund to have more than
5 percent of its total assets invested in the investment company or more than 10
percent of its total assets invested in the aggregate in all such investment
companies. Investment in such investment companies may involve the payment of
substantial premiums above the value of such companies' portfolio securities.
The Fund does not intend to invest in such funds 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. At such time as direct investment in these countries
is allowed, the Fund anticipates investing directly in these markets.
SAMURAI AND YANKEE BONDS
Subject to its fundamental investment restrictions, the Fund may invest in
yen-denominated bonds sold in Japan by non-Japanese issuers ("Samurai bonds"),
and may invest in dollar-denominated bonds sold in the United States by non-U.S.
issuers ("Yankee bonds"). As compared with bonds issued in their countries of
domicile, such bond issues normally carry a higher interest rate but are less
actively traded. It is the policy of the Fund to invest in Samurai or Yankee
bond issues only after taking into account considerations of quality and
liquidity, as well as yield. These bonds would be issued by governments which
are members of the Organization for Economic Cooperation and Development or have
AAA ratings.
DEPOSITORY RECEIPTS
The Fund 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 securities may not necessarily be denominated in
the same currency as the securities for which they may be exchanged. ADRs and
ADSs typically are 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 United States securities markets and
EDRs and CDRs in bearer form are designed for use in European securities
markets. For purposes of the Fund's investment policies, the Fund's investments
in ADRs, ADSs, EDRs, and CDRs 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
Fund may invest in both sponsored and unsponsored ADRs.
WARRANTS OR RIGHTS
Warrants or rights may be acquired by the Fund in connection with other
securities or separately and provide the Fund with the right to purchase at a
later date other securities of the issuer.
COMMERCIAL BANK OBLIGATIONS
For the purposes of the Fund'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, however, may be limited by the terms of a specific
obligation and by government regulation. As with investment in non-U.S.
securities in general, investments in the obligations of foreign branches of
U.S. banks and of foreign banks may subject the Fund to investment risks that
are different in some respects from those of investments in
Statement of Additional Information Page 3
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
obligations of domestic issuers. Although the Fund typically will acquire
obligations issued and supported by the credit of U.S. or foreign banks having
total assets at the time of purchase in excess of $1 billion, this $1 billion
figure is not a fundamental investment policy or restriction of the Fund. 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
Repurchase agreements are transactions in which the Fund 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 Fund if the other party
to the repurchase agreement becomes bankrupt, the Fund intends to enter into
repurchase agreements only with banks and dealers believed by the Manager to
present minimal credit risks in accordance with guidelines approved by the
Company's Board of Trustees. The Manager reviews and monitors the
creditworthiness of such institutions under the Board's general supervision.
The Fund 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, the Fund 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 the Fund's ability
to sell the collateral and the Fund could suffer a loss. However, with respect
to financial institutions whose bankruptcy or liquidation proceedings are
subject to the U.S. Bankruptcy Code, the Fund intends to comply with provisions
under the U.S. Bankruptcy Code that would allow it immediately to resell the
collateral. There is no limitation on the amount of the Fund's assets that may
be subject to repurchase agreements at any given time. The Fund 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 would be invested in such
repurchase agreements and other illiquid investments.
BORROWING, REVERSE REPURCHASE AGREEMENTS AND "ROLL" TRANSACTIONS
The Fund's borrowings will not exceed 33 1/3% of the Fund's total assets, I.E.,
the Fund's total assets at all times will equal at least 300% of the amount of
outstanding borrowings. If market fluctuations in the value of the Fund's
portfolio holdings or other factors cause the ratio of the Fund's total assets
to outstanding borrowings to fall below 300%, the Fund may be required to sell
portfolio securities to restore 300% asset coverage, even though from an
investment standpoint such sales might be disadvantageous. The Fund also may
borrow up to 5% of its total assets for temporary or emergency purposes other
than to meet redemptions. Any borrowing by the Fund may cause greater
fluctuation in the value of its shares than would be the case if the Fund did
not borrow.
The Fund's fundamental investment limitations permit the Fund to borrow money
for leveraging purposes. The Fund, however, currently is prohibited, pursuant to
a non-fundamental investment policy, from purchasing securities during times
when outstanding borrowings represent more than 5% of its assets. Nevertheless,
this policy may be changed in the future by vote of a majority of the Company's
Board of Directors. In the event that the Fund 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 Fund's net asset value. When the income and gains on securities
purchased with the proceeds of borrowings exceed the costs of such borrowings,
the Fund's earnings or net asset value will increase faster than otherwise would
be the case; conversely, if such income and gains fail to exceed such costs, the
Fund's earnings or net asset value would decline faster than would otherwise be
the case.
The Fund may enter into reverse repurchase agreements. A reverse repurchase
agreement is a borrowing transaction in which the Fund 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. The Fund also may engage in "roll"
borrowing transactions which involve the Fund's sale of Government National
Mortgage Association certificates or other securities together with a commitment
(for which the Fund may receive a fee) to purchase similar, but not identical,
securities at a future date. The Fund will maintain in a segregated account with
a custodian cash or other 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.
LENDING OF PORTFOLIO SECURITIES
For the purpose of realizing additional income, the Fund may make secured loans
of portfolio securities 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 continuously be secured by collateral at
least equal at all times to the value of the
Statement of Additional Information Page 4
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
securities lent plus any accrued interest, "marked to market" on a daily basis.
While the securities loan is outstanding, the Fund 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.
The Fund has a right to call each loan and obtain the securities on five
business days' notice. The Fund will not have the right to vote equity
securities while they are being lent, but it will call in a loan in anticipation
of any important vote. The risks in lending portfolio securities, as with other
extensions of secured credit, consist of possible delay in receiving additional
collateral or in recovery of the securities or possible loss of rights in the
collateral should the borrower fail financially. Loans only will 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.
SHORT SALES
The Fund is authorized to make short sales of securities, although it has no
current intention of doing so. A short sale is a transaction in which the Fund
sells a security in anticipation that the market price of that security will
decline. The Fund may make short sales (i) as a form of hedging to offset
potential declines in long positions in securities it owns, or anticipates
acquiring, and (ii) in order to maintain portfolio flexibility.
When the Fund 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 Fund 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.
The Fund's obligation to replace the borrowed security when the borrowing is
called or expires will be secured by collateral deposited with the intermediary.
The Fund also will 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
the Fund on such security, the Fund 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 the Fund replaces the borrowed security, the Fund will incur a
loss; conversely, if the price declines, the Fund will realize a gain. Any gain
will be decreased, and any loss increased, by the transaction costs associated
with the transaction. Although the Fund's gain is limited by the price at which
it sold the security short, its potential loss theoretically is unlimited.
The Fund will not 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 Fund's aggregate short sales of the securities of any one issuer
exceed the lesser of 2% of the Fund's net assets or 2% of the securities of any
class of the issuer. Moreover, the Fund may engage in short sales only with
respect to securities listed on a national securities exchange. The Fund 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 Fund owns the security it has
sold short or has the immediate and unconditional right to acquire at no
additional cost the identical security.
Statement of Additional Information Page 5
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
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 the Fund entered into a
short hedge because the Manager projected a decline in the price of a
security in the Fund'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 Fund could suffer a loss. In either such case, the Fund
would have been in a better position had it not hedged at all.
(4) As described below, the Fund 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 Fund 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 Fund'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 Fund sell a portfolio security at
a disadvantageous time. The Fund'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 Fund.
WRITING CALL OPTIONS
The Fund 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 Fund.
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). As long as
the obligation of the writer of a call option continues, he may be assigned an
exercise notice, requiring him 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.
Portfolio securities or currencies on which call options may be written will be
purchased solely on the basis of investment considerations consistent with the
Fund's investment objectives. When writing a call option, the Fund, in return
for the
Statement of Additional Information Page 6
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
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, the Fund 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 the Fund has written expires, the Fund 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 Fund 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. The Fund does not consider a
security or currency covered by a call option to be "pledged" as that term is
used in the Fund'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 the Fund will be obligated to
sell the security or currency at less than its market value.
The premium that the Fund receives for writing a call option is deemed to
constitute the market value of an option. The premium the Fund 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 the Fund to write
another call option on the underlying security or currency with either a
different exercise price, expiration date or both.
The Fund 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 or currencies at the time the options
are written. From time to time, the Fund 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.
The Fund 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 the Fund.
WRITING PUT OPTIONS
The Fund 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 identical substantially to that of call options.
The Fund generally would write put options in circumstances where the Manager
wishes to purchase the underlying security or currency for the Fund's portfolio
at a price lower than the current market price of the security or currency. In
such event, the Fund 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 Fund 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 the Fund will be obligated
to sell the security or currency at more than its market value.
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PURCHASING PUT OPTIONS
The Fund may purchase put options on securities, indices and currencies. As the
holder of a put option, the Fund 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. The Fund may enter into closing sale
transactions with respect to such options, exercise them or permit them to
expire.
The Fund may purchase a put option on an underlying security or currency
("protective put") owned by the Fund to protect against an anticipated decline
in the value of the security or currency. Such protection is provided only
during the life of the put option when the Fund, 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.
The Fund also may purchase put options at a time when the Fund does not own the
underlying security or currency. By purchasing put options on a security or
currency it does not own, the Fund 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 Fund 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
The Fund may purchase call options on securities, indices and currencies. As the
holder of a call option, the Fund 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. The Fund may enter
into closing sale transactions with respect to such options, exercise them or
permit them to expire.
Call options may be purchased by the Fund for the purpose of acquiring the
underlying security or currency for its portfolio. Utilized in this fashion, the
purchase of call options would enable the Fund 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 also may be useful to the Fund 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 Fund 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.
The Fund also may 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 also may be purchased at times to avoid
realizing losses that would result in a reduction of the Fund's current return.
For example, where the Fund 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 the Fund, an increase in the market price could
result in the exercise of the call option written by the Fund and the
realization of a loss on the underlying security or currency. Accordingly, the
Fund could purchase a call option on the same underlying security or currency,
which could be exercised to fulfill the Fund's delivery obligations under its
written call (if it is exercised). This strategy could allow the Fund to avoid
selling the portfolio security or currency at a time when it has an unrealized
loss; however, the Fund 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 the
Fund's total assets at the time of purchase.
The Fund may attempt to accomplish objectives similar to those involved in its
use of Forward Contracts by purchasing put or call options on currencies. A put
option gives the Fund 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. A call option gives the Fund
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. The Fund 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
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GT GLOBAL EMERGING MARKETS FUND
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 the
Fund 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 the Fund
anticipates purchasing securities.
Options may be either listed on an exchange or traded over-the-counter ("OTC").
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. The Fund 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. The Fund may also sell OTC options and,
in connection therewith, segregate assets or cover its obligations with respect
to OTC options written by the Fund. The assets used as cover for OTC options
written by the Fund will be considered illiquid unless the OTC options are sold
to qualified dealers who agree that the Fund 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.
The Fund's ability to establish and close out positions in exchange-listed
options depends on the existence of a liquid market. The Fund 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 the Fund
will enter into OTC options only with contra parties that are expected to be
capable of entering into closing transactions with the Fund, there is no
assurance that the Fund 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 Fund 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 the Fund 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 Fund 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 the Fund buys a call on an
index, it pays a premium and has the same rights as to such call as are
indicated above. When the Fund 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 Fund's exercise of the put, to deliver to the Fund 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 Fund writes a put on an index, it receives a
premium and the purchaser has the right, prior to the expiration date, to
require the Fund 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 the Fund writes a
call on an index it cannot provide in advance for its potential settlement
obligations by acquiring and holding the underlying securities. The Fund 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, the Fund 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 the Fund 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
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GT GLOBAL EMERGING MARKETS FUND
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 Fund, 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 the Fund 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 Fund 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 AND CURRENCY FUTURES CONTRACTS
The Fund 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 prices in order to establish more definitely
the effective return on securities or currencies held or intended to be acquired
by the Fund. The Fund's transactions 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 and stock prices.
The Fund will only 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 the Fund's exposure to interest rate, currency exchange rate and
stock market fluctuations, the Fund 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. An
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 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 the securities 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 are usually 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 Fund realizes a gain; if it is
more, the Fund realizes a loss. Conversely, if the offsetting sale price is more
than the original purchase price, the Fund realizes a gain; if it is less, the
Fund realizes a loss. The transaction costs must also be included in these
calculations. There can be no assurance, however, that the Fund will be able to
enter into an offsetting transaction with respect to a particular Futures
Contract at a particular time. If the Fund is not able to enter into an
offsetting transaction, the Fund 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
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GT GLOBAL EMERGING MARKETS FUND
Contract was sold and the price paid for the offsetting purchase, after
allowance for transaction costs, represents the profit or loss to the Fund.
The Fund'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 the Fund owns, or Futures Contracts will be
purchased to protect the Fund 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 the Fund in order to initiate Futures trading and to maintain the
Fund's open positions in Futures Contracts. A margin deposit made when the
Futures Contract is entered into ("initial margin") is intended to assure the
Fund'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 modified significantly 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 Fund 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, among other things, by 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 the Fund'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 Contract 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 the Fund 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 Fund would continue to be subject to
market risk with respect to the position. In addition, except in the case of
purchased options, the Fund 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
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GT GLOBAL EMERGING MARKETS FUND
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 the Fund 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.
The Fund 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 the Fund 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 Fund's portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the Fund 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 without a shareholder vote. This limitation does not limit
the percentage of the Fund'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. The Fund may either
accept or make delivery of the currency at the maturity of the Forward Contract.
The Fund may also, if its contra party agrees, prior to maturity, enter into a
closing transaction involving the purchase or sale of an offsetting contract.
The Fund engages in forward currency transactions in anticipation of, or to
protect itself against, fluctuations in exchange rates. The Fund might sell a
particular foreign currency forward, for example, when it holds securities
denominated in a foreign currency but anticipates, and seeks to be protected
against, a decline in the currency against the U.S. dollar. Similarly, the Fund
might sell the U.S. dollar forward when it holds securities 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, the Fund 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. The Fund 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 Company's Board of Directors.
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The Fund may enter into Forward Contracts either with respect to specific
transactions or with respect to the Fund's portfolio positions. The precise
matching of the Forward Contract amounts and the value of specific securities
will not generally 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 the Fund 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 Fund 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
Fund 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 accurately predicted, causing the
Fund to sustain losses on these contracts and transaction costs.
At or before the maturity of a Forward Contract requiring the Fund to sell a
currency, the Fund may either sell a portfolio 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 Fund will obtain, on the same maturity date, the same
amount of the currency that it is obligated to deliver. Similarly, the Fund 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.
The Fund 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 the Fund 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 usually are 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 the Fund 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
The Fund 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 Fund's securities
are denominated. Such currency hedges can protect against price movements in a
security that the Fund 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.
The Fund 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 Fund 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 Fund 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.
Statement of Additional Information Page 13
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GT GLOBAL EMERGING MARKETS FUND
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 Fund 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 the Fund has purchased) expose the Fund to an obligation to another
party. The Fund 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. The Fund will comply
with SEC guidelines regarding cover for these instruments and, if the guidelines
so require, set aside cash or other 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 the Fund's assets are used for cover or otherwise set aside, it could affect
portfolio management or the Fund's ability to meet redemption requests or other
current obligations.
- --------------------------------------------------------------------------------
RISK FACTORS
- --------------------------------------------------------------------------------
SPECIAL CONSIDERATIONS AFFECTING EMERGING MARKETS. Investing in equity
securities of companies in emerging markets may entail greater risks than
investing in equity securities in developed countries. These risks include (i)
less social, political and economic stability; (ii) the small current size of
the markets for such securities and the currently low or nonexistent volume of
trading, which result in a lack of liquidity and in greater price volatility;
(iii) certain national policies which may restrict the Fund's investment
opportunities, including restrictions on investment in issuers or industries
deemed sensitive to national interests; (iv) foreign taxation; and (v) the
absence of developed structures governing private or foreign investment or
allowing for judicial redress for injury to private property. Investing in the
securities of companies in emerging markets, including the markets of Latin
America and certain Asian markets such as Taiwan, Malaysia and Indonesia, may
entail special risks relating to the 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, the Fund
could lose its entire investment in any such country.
Settlement mechanisms in emerging securities markets may be less efficient and
reliable than in more developed markets. In such emerging securities markets
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.
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, the Fund could lose its entire investment in
any such country.
In addition, even though opportunities for investment may exist in emerging
markets, any change in the leadership or policies of the governments of those
countries or in the leadership or policies of any other government which
exercises a significant influence over those countries, may halt the expansion
of or reverse the liberalization of foreign investment policies now occurring
and thereby eliminate any investment opportunities which may currently exist.
Investors should note that upon the accession to power of authoritarian regimes,
the governments of a number of Latin American countries previously expropriated
large quantities of real and personal property similar to the property which
Statement of Additional Information Page 14
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
will be represented by the securities purchased by the Fund. The claims of
property owners against those governments were never finally settled. There can
be no assurance that any property represented by securities purchased by the
Fund will not also be expropriated, nationalized, or otherwise confiscated. If
such confiscation were to occur, the Fund could lose its entire investment in
such countries. The Fund's investments would similarly be adversely affected by
exchange control regulation in any of those countries.
RELIGIOUS AND ETHNIC INSTABILITY. Certain countries in which the Fund 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 the Fund'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
the Fund invests and adversely affect the value of the Fund's assets.
ILLIQUID SECURITIES. The Fund may invest up to 15% of its net assets in
illiquid securities. Securities may be considered illiquid if the Fund cannot
reasonably expect within seven days to sell the securities for approximately the
amount at which the Fund values such securities. See "Investment Limitations."
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 the sale of liquid securities such as securities
eligible for trading on U.S. securities exchanges or in the over-the-counter
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, the Fund 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 Fund may be permitted to sell a security
under an effective registration statement. If, during such a period, adverse
market conditions were to develop, the Fund 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
the Fund, however, could affect adversely the marketability of such portfolio
securities and the Fund might be unable to dispose of such securities promptly
or at favorable prices.
With respect to liquidity determinations generally, the Company's Board of
Directors has the ultimate responsibility for determining whether specific
securities, including restricted securities pursuant to Rule 144A under the 1993
Act, are liquid or illiquid. The Board has delegated the function of making
day-to-day determinations of liquidity to the Manager, in accordance with
procedures approved by the Company's Board of Directors. 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 who make quotes for the security: (iii) the number of dealers who 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 affected
(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 in the
Fund's portfolio and periodically reports on such decisions to the Board of
Directors.
Statement of Additional Information Page 15
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
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 the Fund. These restrictions
or controls may at times limit or preclude investment in certain securities and
may increase the cost and expenses of the Fund. 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 may 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. The Fund 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 the Fund 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 the Fund 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 the Fund, 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 the
Fund'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 the
Fund's holdings of securities and cash denominated in such currency and,
therefore, will cause an overall decline in the 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 Fund. Moreover, if the value
of the foreign currencies in which the Fund receives its income falls relative
to the U.S. dollar between receipt of the income and the making of Fund
distributions, the Fund may be required to liquidate securities in order to make
distributions if the Fund 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
U.S., and other economic and financial conditions affecting the world economy.
Although the Fund values its assets daily in terms of U.S. dollars, the Fund
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. The Fund 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 are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign currency to the
Fund at one rate, while offering a lesser rate of exchange should the Fund
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 are generally
subject to less governmental supervision and regulation than in the United
States, and foreign securities transactions are usually subject to fixed
commissions, which are generally higher than negotiated commissions on U.S.
transactions. In addition, foreign
Statement of Additional Information Page 16
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
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 the Fund are uninvested and no return is earned thereon.
The inability of the Fund to make intended security purchases due to settlement
problems could cause the Fund to miss attractive investment opportunities.
Inability to dispose of a portfolio security due to settlement problems either
could result in losses to the Fund due to subsequent declines in value of the
portfolio security or, if the Fund 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 the Fund's assets,
although the Manager does not believe that such difficulties will have a
material adverse effect on the Fund's portfolio trading activities.
The Fund may use foreign custodians, which may involve risks in addition to
those related to the use of U.S. custodians. Such risks include uncertainties
relating to: (i) determining and monitoring the financial strength, reputation
and standing of the foreign custodian; (ii) maintaining appropriate safeguards
to protect the Fund's investments and (iii) possible difficulties in obtaining
and enforcing judgments against such custodians.
WITHHOLDING TAXES. The Fund's net investment income from foreign issuers may
be subject to withholding taxes by the foreign issuer's country, thereby
reducing the Fund's net investment income or delaying the receipt of income
where those taxes may be recaptured. See "Taxes."
- --------------------------------------------------------------------------------
INVESTMENT LIMITATIONS
- --------------------------------------------------------------------------------
The Fund has adopted the following investment limitations as fundamental
policies which (unless otherwise noted) may not be changed without approval by
the holders 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, and
(ii) more than 50% of the outstanding shares.
The Fund may not:
(1) Invest 25% or more of the value of its total assets in the
securities of issuers conducting their principal business activities in the
same industry, except that this limitation shall not apply to securities
issued or guaranteed as to principal and interest by the U.S. Government or
any of its agencies or instrumentalities;
(2) Purchase or sell real estate, provided that the Fund may invest in
securities secured by real estate or interests therein or issued by
companies that invest in real estate or interests therein;
(3) Purchase or sell commodities or commodity contracts, except that the
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 transactions in
foreign currencies;
(4) Underwrite securities of other issuers, except to the extent that,
in connection with the disposition of portfolio securities, the Fund may be
deemed an underwriter under federal or state securities laws;
(5) Make loans, except that the Fund may purchase debt securities and
enter into repurchase agreements and make loans of portfolio securities;
(6) Purchase securities on margin, provided that the 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 the use of options, futures contracts, options thereon or
forward currency contracts. The Fund may make deposits of margin in
connection with futures and forward contracts and options thereon;
(7) Borrow money in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed), less all liabilities and indebtedness
(other than borrowing). Transactions involving options, futures contracts,
options on futures contracts and forward currency contracts, and collateral
arrangements relating thereto will not be deemed to be borrowings;
(8) Mortgage, pledge, or in any other manner transfer as security for
any indebtedness any of its assets, except to secure permitted borrowings.
Collateral arrangements with respect to initial or variation margin for
futures contracts will not be deemed to be a pledge of the Fund's assets;
Statement of Additional Information Page 17
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
(9) Invest in direct interests or leases in oil, gas, or other mineral
exploration or development programs, however, the Fund may invest in
securities of companies that engage in these activities; or
(10) With respect to 75% of its total assets, invest more than 5% of its
assets in the securities of any one issuer or purchase more than 10% of the
outstanding voting securities of any one issuer.
For purposes of concentration policy of the Fund contained in limitation (1)
above, the Fund intends to comply with the SEC staff position that securities
issued or guaranteed as to principal and interest by any single foreign
government or any supranational organizations in the aggregate are considered to
be securities of issuers in the same industry.
The following operating policies of the Fund are not fundamental policies and
may be changed by vote of a majority of the Company's Board of Directors without
shareholder approval. The Fund may not:
(1) Invest in securities of an issuer if the investment would cause the
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) Purchase or retain the securities of any issuer, if, to the Fund's
knowledge, one or more of the officers or Directors of the Fund, its
investment adviser, or distributor, each own beneficially more than 1/2 of
1% of the securities of such issuer and together own beneficially more than
5% of the securities of such issuer;
(4) 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 Fund's portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the Fund
has entered into;
(5) Borrow money except for temporary or emergency purposes (not for
leveraging) not in excess of 33 1/3% of the value of the Fund's total
assets, except that the Fund may purchase securities when outstanding
borrowings represent less than 5% of the Fund's assets;
(6) 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; or
(7) Invest more than 10% of its total assets in securities that are
restricted as to resale without registration under the 1933 Act.
Investors should refer to the Prospectus for further information with respect to
the Fund's investment objective, which may not be changed without the approval
of the shareholders, and other investment policies, techniques and limitations,
which may be changed without shareholder approval.
Statement of Additional Information Page 18
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
EXECUTION OF PORTFOLIO
TRANSACTIONS
- --------------------------------------------------------------------------------
Subject to policies established by the Company's Board of Directors, the Manager
is responsible for the execution of the Fund's portfolio transactions and the
selection of brokers and dealers who execute such transactions on behalf of the
Fund. In executing portfolio transactions, the Manager seeks the best net
results for the Fund, 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 the Fund may engage in soft dollar
arrangements for research services, as described below, the Fund 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 the Fund, the Manager may select brokers to
execute the Fund's portfolio transactions on the basis of the research and
brokerage services they provide to the Manager for its use in managing the Fund
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 brokers are in addition to, and not in lieu of, the
services required to be performed by the Manager under the Management Contract
(defined below). A commission paid to such brokers 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 the Fund and its other clients and that the
total commissions paid by the Fund will be reasonable in relation to the
benefits received by the Fund over the long term. Research services may also be
received from dealers who execute Fund transactions.
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 the Fund toward payment of the Fund's expenses, such as
transfer agent and custodian fees.
Investment decisions for the Fund 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 the Fund. 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 the Fund is concerned, in other cases the Manager
believes that coordination and the ability to participate in volume transactions
will be beneficial to the Fund.
Under a policy adopted by the Company's Board of Directors, 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 Fund and the other funds for which the
Manager serves as investment manager in selecting brokers and 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 Fund and such other funds.
The Fund contemplates purchasing most foreign equity securities in
over-the-counter 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 United States transactions. There generally is less
government supervision and regulation of foreign stock exchanges and
broker/dealers 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 the Fund 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 over-the-
counter markets in the United States or Europe, as the case may be. ADRs, like
other securities traded in the United States,
Statement of Additional Information Page 19
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
will be subject to negotiated commission rates. The foreign and domestic debt
securities and money market instruments in which the Fund may invest are
generally traded in the over-the-counter markets.
The Fund contemplates that, consistent with the policy of obtaining the best net
results, brokerage transactions may be conducted through certain companies that
are affiliates of Liechtenstein Global Trust. The Company's Board of Directors
has adopted procedures in conformity with Rule 17e-1 under the 1940 Act to
ensure that all brokerage commissions paid to 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. For the fiscal years ended October 31, 1994, 1995
and 1996, the Fund paid aggregate brokerage commissions of $2,361,620,
$1,747,307 and $
- ---------.
PORTFOLIO TRADING AND TURNOVER
The portfolio turnover rate is calculated by dividing the lesser of sales or
purchases of portfolio securities by the Fund's average month-end portfolio
value, excluding short-term investments. For purposes of this calculation,
portfolio securities exclude purchases and sales of debt securities having a
maturity at the date of purchase of one year or less. The Fund engages in
portfolio trading when the Manager has concluded that the sale of a security
owned by the Fund and/or the purchase of another security of better value can
enhance principal and/or increase income. A security may be sold to avoid any
prospective decline in market value, or a security may be purchased in
anticipation of a market rise. Consistent with the Fund's investment objective,
a security also may be sold and a comparable security purchased coincidentally
in order to take advantage of what is believed to be a disparity in the normal
yield and price relationship between the two securities.
Although the Fund generally does not intend to trade for short-term profits, the
securities in the Fund's portfolio will be sold whenever the Manager believes it
is appropriate to do so, without regard to the length of time a particular
security may have been held. Portfolio turnover rate will not be a limiting
factor when management deems portfolio changes appropriate. Higher portfolio
turnover involves correspondingly greater brokerage commissions and other
transaction costs that the Fund will bear directly, and may result in
realization of net capital gains that are taxable when distributed to the Fund's
shareholders. For the fiscal year ended October 31, 1995 and 1996, the Fund's
portfolio turnover rates were 114% and %, respectively.
Statement of Additional Information Page 20
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
DIRECTORS AND EXECUTIVE
OFFICERS
- --------------------------------------------------------------------------------
The Company's Directors and Executive Officers are listed below.
<TABLE>
<CAPTION>
NAME, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- --------------------------------------- ------------------------------------------------------------------------------------------
<S> <C>
David A. Minella*, 43 Chairman, the Manager since October 1996; Director, Liechtenstein Global Trust (holding
Director, Chairman of the Board and company of the various international LGT companies) since 1990; President, Asset
President Management Division, Liechtenstein Global Trust since 1995; Director and President, LGT
50 California, Street Asset Management, Inc. ("LGT Asset Management"), formerly LGT Asset Management Holdings,
San Francisco CA 94111 Inc., since 1988; Director and President, the Manager from 1989 to October 1996; Director,
GT Global since 1987 and President, GT Global from 1987 to 1995; Director, GT Services
since 1990; President, GT Services from 1990 to 1995; Director, G.T. Global Insurance
Agency, Inc. ("G.T. Insurance") since 1992; and President, G.T. Insurance from 1992 to
1995. Mr. Minella also is a director or trustee of each of the other investment companies
registered under the 1940 Act that is managed or administered by the Manager.
C. Derek Anderson, 54 Chief Executive Officer, Anderson Capital Management, Inc.; Chairman and Chief Executive
Director Officer, Plantagenet Holdings, Ltd. from 1991 to present; Director, Munsingwear, Inc.; and
220 Sansome Street Director, American Heritage Group Inc. and various other companies. Mr. Anderson also is a
Suite 400 director or trustee of each of the other investment companies registered under the 1940
San Francisco, CA 94104 Act that is managed or administered by the Manager.
Frank S. Bayley, 55 Partner with Baker & McKenzie (a law firm); Director and Chairman, C.D. Stimson Company (a
Director private investment company); and Trustee, Seattle Art Museum. Mr. Bayley also is a
Two Embarcadero Center director or trustee or each of the other investment companies registered under the 1940
Suite 2400 Act that is managed or administered by the Manager.
San Francisco, CA 94111
Arthur C. Patterson, 52 Managing Partner, Accel Partners (a venture capital firm). He also serves as a director of
Director various computing and software companies. Mr. Patterson also is a director or trustee of
One Embarcadero Center each of the other investment companies registered under the 1940 Act that is managed or
Suite 3820 administered by the Manager.
San Francisco, CA 94111
Ruth H. Quigley, 59 Private investor; and President, Quigley Friedlander & Co., Inc. (a financial advisory
Director services firm) from 1984 to 1986. Ms. Quigley also is a director or trustee or each of the
1055 California Street other investment companies registered under the 1940 Act that is managed or administered
San Francisco, CA 94108 by the Manager.
James R. Tufts, 37 Chief Information Officer for the Manager since October 1996; President, GT Services since
Vice President and Chief 1995; Senior Vice President of Finance and Administration, GT Global, GT Services and G.T.
Financial Officer Insurance, from 1994 to 1995; Senior Vice President of Finance and Administration, LGT
50 California Street Asset Management and the Manager from 1994 to October 1996; Vice President of Finance, LGT
San Francisco, CA 94111 Asset Management, the Manager, GT Global and GT Services from 1990 to 1994; Vice President
of Finance, G.T. Insurance from 1992 to 1994; and a Director of the Manager, GT Global and
GT Services since 1991.
</TABLE>
- --------------
* Mr. Minella is an "interested person" of the Company as defined by the 1940
Act due to his affiliation with the LGT companies.
Statement of Additional Information Page 21
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
<TABLE>
<CAPTION>
NAME, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- --------------------------------------- ------------------------------------------------------------------------------------------
<S> <C>
Kenneth W. Chancey, 50 Vice President of Mutual Fund Accounting, the Manager since 1992; and
Vice President and Vice President, Putnam Fiduciary Trust Company from 1989 to 1992.
Principal Accounting Officer
50 California Street
San Francisco, CA 94111
Helge K. Lee, 49 Executive Vice President, Asset Management Division, Liechtenstein
Vice President and Secretary Global Trust since October 1996; Senior Vice President, LGT Asset
50 California Street Management, the Manager, GT Global, GT Services and G.T. Insurance from
San Francisco, CA 94111 February 1996 to October 1996; Vice President, LGT Asset Management, the
Manager, GT Global, GT Services and G.T. Insurance from May 1994 to
February 1996; General Counsel, LGT Asset Management, the Manager, GT
Global, GT Services and G.T. Insurance from May 1994 to October 1996;
Secretary, the Manager, since May 1994; Secretary, LGT Asset Management,
GT Global, GT Services and G.T. Insurance from May 1994 to October 1996;
Senior Vice President, General Counsel and Secretary, Strong/Corneliuson
Management, Inc.; and Secretary, each of the Strong Funds from October
1991 to May 1994.
</TABLE>
------------------------------
The Board of Directors has a Nominating and Audit Committee, comprised of Miss
Quigley and Messrs. Anderson, Bayley and Patterson, which is responsible for
nominating persons to serve as Directors, reviewing audits of the Company and
its funds and recommending firms to serve as independent auditors of the
Company. Each of the Directors and officers of the Company is also a Director
and officer of G.T. Investment Portfolios, Inc., G.T. Global Developing Markets
Fund, Inc., and GT Global Floating Rate Fund, Inc., a Trustee and officer of
G.T. Global Growth Series and a Trustee and officer of G.T. Greater Europe Fund,
Global High Income Portfolio, G.T. Global Variable Investment Trust, G.T. Global
Variable Investment Series and Global Investment Portfolio, which also are
registered investment companies managed by the Manager, and Floating Rate
Portfolio, administered by the Manager. Each Director and Officer serves in
total as a Director and/or Trustee and Officer, respectively, of
- ---- registered investment companies with
- ---- series managed or administered by the Manager. The Company pays each
Director who is not a director, officer or employee of the Manager or any
affiliated company $5,000 per annum, plus $300 per Fund for each meeting of the
Board attended, and reimburses travel and other expenses incurred in connection
with attendance at such meetings. Other Directors and officers receive no
compensation or expense reimbursement from the Company. For the fiscal year
ended October 31, 1996, Mr. Anderson, Mr. Bayley, Mr. Patterson and Ms. Quigley,
who are not directors, officers or employees of the Manager or any affiliated
company, received total compensation of $
- ---------, $
- ---------, $
- --------- and $
- ---------, respectively, from the Company for their services as Directors. For
the year ended October 31, 1995, Mr. Anderson, Mr. Bayley, Mr. Patterson and Ms.
Quigley received total compensation of $
- ---------, $
- ---------, $
- --------- and $
- ---------, respectively, from the 40 GT Global Mutual Funds for which he or she
serves as a Director or Trustee. Fees and expenses disbursed to the Directors
contained no accrued or payable pension, or retirement benefits. As of the date
of this Statement of Additional Information, the officers and Directors and
their families as a group owned in the aggregate beneficially or of record less
than 1% of the outstanding shares of the Fund or of all the Company's funds in
the aggregate.
Statement of Additional Information Page 22
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
The Manager serves as the Fund's investment manager and administrator under an
Investment Management and Administration Contract ("Management Contract")
between the Company and the Management. As investment manager and administrator,
the Manager makes all investment decisions for the Fund and administers the
Fund's affairs. Among other things, the Manager furnishes the services and pays
the compensation and travel expenses of persons who perform the executive,
administrative, clerical and bookkeeping functions of the Company and the Fund,
and provides suitable office space, necessary small office equipment and
utilities. For these services, the Fund pays the Manager investment management
and administration fees, based on the Fund's average daily net assets, computed
daily and paid monthly at the annualized rate of .975% on the first $500
million, .95% on the next $500 million, .925% on the next $500 million and .90%
on amounts thereafter.
The Management Contract may be renewed for one-year terms, provided that any
such renewal has been specifically approved at least annually by: (i) the
Company's Board of Directors, or by the vote of a majority of the Fund's
outstanding voting securities (as defined in the 1940 Act), and (ii) a majority
of Directors who are not parties to the Management Contract or "interested
persons" of any such party (as defined in the 1940 Act), cast in person at a
meeting called for the specific purpose of voting on such approval. The
Management Contract provides that with respect to the Fund either the Company or
the Manager may terminate the Contract without penalty upon sixty (60) days'
written notice to the other party. The Management Contract terminates
automatically in the event of its assignment (as defined in the 1940 Act).
For the fiscal years ended October 31, 1994, 1995 and 1996, the Fund paid
investment management and administration fees to the Manager in the amounts of
$4,702,869, $5,410,744 and $
- ---------, respectively.
Certain emerging market countries require a local entity to provide
administrative services for all direct investments by foreigners. Where required
by local law, the Fund intends to retain a local entity to provide such
administrative services. The local administrator will be paid a fee by the Fund
for its services.
DISTRIBUTION SERVICES
The Fund's Class A and Class B shares are offered 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 separate Distribution Plans with
respect to each Class of shares of the Fund in accordance with the provisions of
Rule 12b-1 under the 1940 Act ("Class A Plan" and "Class B Plan") (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 the Class A Plan will have been incurred within one
year of such reimbursement. The Fund makes no payments under the Plans to any
party other than GT Global, which is the distributor (principal underwriter) of
the Fund's shares. The following table discloses payments made by the Fund to GT
Global under the two plans of distribution during the Fund's fiscal year ended
October 31, 1996:
<TABLE>
<CAPTION>
CLASS A CLASS B
AMOUNT PAID AMOUNT PAID
------------- -------------
<S> <C> <C>
Year ended October 31, 1996................................................................. $ $
</TABLE>
In approving the Plans, the Directors determined that the continuation of each
Plan was in the best interests of the Fund and its shareholders. Agreements
related to the Plans must also be approved by such vote of the Directors and
Qualified Directors as described above. The Fund's plan of distribution pursuant
to Rule 12b-1 in effect prior to the issuance of two classes of shares, which
was substantially similar to the current Class A Plan, was approved by the
Manager, as the initial shareholder of the Fund, on May 11, 1992. The Class B
Plan was approved by the Manager as initial sole shareholder of the Class B
shares of the Fund on March 31, 1993.
Each Plan requires that, at least quarterly, the Directors 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
Directors who are not "interested persons" of the Company will be committed to
the discretion of the Directors who are
Statement of Additional Information Page 23
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
not "interested persons" of the Company, as defined in the 1940 Act. If the
offering of Fund shares is suspended in the future, the Directors will consider
that fact in connection with their quarterly review of amounts expended under
the Plans and the purposes for which such expenditures were made and the
Directors, including the Qualified Directors, will consider that fact in
connection with their annual review of the Plans.
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. The following
table reviews the extent of such activity for the fiscal years ended October 31,
1994, 1995 and 1996:
<TABLE>
<CAPTION>
SALES CHARGES AMOUNTS AMOUNTS
YEAR ENDED OCTOBER 31, COLLECTED RETAINED REALLOWED
- ----------------------------------------------------------------------------------- ------------- --------- ----------
<S> <C> <C> <C>
1996............................................................................... $ $ $
1995............................................................................... 1,652,309 230,239 1,422,070
1994............................................................................... 4,220,962 460,124 3,768,838
</TABLE>
GT Global receives no compensation or reimbursements relating to its
distribution efforts with respect to Class A Shares other than as described
above. GT Global receives any contingent deferred sales charges payable with
respect to redemption of Class B Shares. For the fiscal years ended October 31,
1994, 1995 and 1996, GT Global collected contingent deferred sales charges in
the amount of $433,744, $1,059,193 and $
- ---------, respectively. Purchases of Class A shares exceeding $500,000 may be
subject to a contingent deferred sales charge upon redemption. GT Global
collected contingent deferred sales charges in the amount of $
- --------- for the fiscal year ended October 31, 1996, and $56,294 for the fiscal
year ended October 31, 1995.
TRANSFER AGENCY AND ACCOUNTING AGENT SERVICES
The Transfer Agent has been retained by the Fund to perform shareholder
servicing, reporting and general transfer agent functions for the Fund. 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 also is 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. The monthly
fee for these services to the Manager is a percentage, not to exceed 0.03%
annually, of the Fund's average daily net assets. The annual fee rate is derived
by applying 0.03% to the first $5 billion of assets of all registered mutual
funds advised by the Manager ("GT Global Mutual Funds") and 0.02% to the assets
in excess of $5 billion and allocating the result according to each Fund's
average daily net assets.
As of October 31, 1996, the Fund paid the Manager fees of $
- ------ for such accounting services.
EXPENSES OF THE FUND
As described in the Prospectus, the Fund pays all of its own expenses not
assumed by other parties. The allocation of general Company expenses and
expenses shared among the Fund and other funds organized as series of the
Company are allocated on a basis deemed fair and equitable, which may be based
on the relative net assets of the Fund or the nature of the services performed
and relative applicability to the Fund. Expenditures, including costs incurred
in connection with the purchase or sale of portfolio securities, which are
capitalized in accordance with generally accepted accounting principles
applicable to investment companies, are accounted for as capital items and not
as expenses. The ratio of the Fund's expenses to its relative net assets can be
expected to be higher than the expense ratios of funds investing solely in
domestic securities, since the cost of maintaining the custody of foreign
securities and the rate of investment management fees paid by the Fund generally
are higher than the comparable expenses of such other funds.
- --------------------------------------------------------------------------------
VALUATION OF FUND SHARES
- --------------------------------------------------------------------------------
As described in the Prospectus, the Fund's net asset value per share for each
class of shares is determined at the end of regular trading on The New York
Stock Exchange, Inc. ("NYSE") (currently at 4:00 p.m. Eastern time, unless
weather, equipment failure or other factors contribute to an earlier closing
time), on each Business Day as open for business.
Statement of Additional Information Page 24
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
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 Funds' portfolio securities and other assets are valued as follows:
Equity securities, including ADRs, ADSs, CDRs and EDRs, which are traded on
stock exchanges, are valued at the last sale price on the exchange, or in the
principal over-the-counter market on which such securities are traded, as of the
close of business on the day the securities are being valued or, lacking any
sales, at the last available bid price. In cases where securities are traded on
more than one exchange, the securities are valued on the exchange determined by
the Manager to be the primary market. Securities and assets for which market
quotations are not readily available (including restricted securities which are
subject to limitations as to their sale) are valued at fair value as determined
in good faith by or under the direction of the Board of Directors. Trading in
securities on European and Far Eastern securities exchanges and over-the-counter
markets is normally completed well before the close of the business day in New
York.
Long-term debt obligations are valued at the mean of representative quoted bid
and asked prices for such securities or, if such prices are not available, at
prices for securities of comparable maturity, quality and type; however, when
the Manager deems it appropriate, prices obtained for the day of valuation from
a bond pricing service will be used. Short-term investments are amortized to
maturity based on their cost, adjusted for foreign exchange translation,
provided such valuations represent fair value.
Options on indices, securities and currencies purchased by the Fund are valued
at their last bid price in the case of listed options or, in the case of OTC
options, at the 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. The value of each security denominated in a currency other
than U.S. dollars will be translated into U.S. dollars at the prevailing
exchange rate as determined by the Manager on that day. When market quotations
for futures and options on futures held by the Fund are readily available, those
positions will be valued based upon such quotations.
Securities and other assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or under the
direction of the Company's Board of Directors. The valuation procedures applied
in any specific instance are likely to vary from case to case. However,
consideration generally is given to the financial position of the issuer and
other fundamental analytical data relating to the investment and to the nature
of the restrictions on disposition of the securities (including any registration
expenses that might be borne by the Fund in connection with such disposition).
In addition, specific factors also generally are considered, such as the cost of
the investment, the market value of any unrestricted securities of the same
class (both at the time of purchase and at the time of valuation), the size of
the holding, the prices of any recent transactions or offers with respect to
such securities and any available analysts' reports regarding the issuer.
The fair value of any other assets is added to the value of all securities
positions to arrive at the value of the Fund's total assets. The Fund's
liabilities, including accruals for expenses, are deducted from its total
assets. Once the total value of the Fund's net assets is so determined, that
value is then divided by the total number of shares outstanding (excluding
treasury shares), and the result, rounded to the nearer cent, is the net asset
value per share.
Any assets or liabilities initially denominated in terms of foreign currencies
are translated into U.S. dollars at the official exchange rate or at the mean of
the current bid and asked prices of such currencies against the U.S. dollar last
quoted by a major bank that is a regular participant in the foreign exchange
market or on the basis of a pricing service that takes into account the quotes
provided by a number of such major banks. If none of these alternatives are
available or none are deemed to provide a suitable methodology for converting a
foreign currency into U.S. dollars, the Board of Directors in good faith will
establish a conversion rate for such currency.
Securities trading in emerging markets may not take place on all days on which
the NYSE is open. Further, trading takes place in Japanese markets on certain
Saturdays and in various foreign markets on days on which the NYSE is not open.
Consequently, the calculation of the Fund's net asset values therefore may not
take place contemporaneously with the determination of the prices of securities
held by the Fund. Events affecting the values of portfolio securities that occur
between the time their prices are determined and the close of regular trading on
the NYSE will not be reflected in the Fund's net asset value unless the Manager,
under the supervision of the Company's Board of Directors, determines that the
particular event would materially affect net asset value. As a result, the
Fund's net asset value may be significantly affected by such trading on days
when a shareholder cannot provide or redeem the Fund.
Statement of Additional Information Page 25
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
INFORMATION RELATING TO SALES
AND REDEMPTIONS
- --------------------------------------------------------------------------------
PAYMENT AND TERMS OF OFFERING
Payment of Class A or Class B shares 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 cancelled due to nonpayment (for example, because a check is returned for
"not sufficient funds"), the person who made the order will be responsible for
any loss incurred by the 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 cancelled 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.
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 assure 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
13-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 20 days after written request, the
appropriate number of escrowed shares will be redeemed and the proceeds paid to
GT Global.
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 restrictively
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 also may be purchased as the underlying
investment for an IRA meeting the requirements of section 408(a) of the Internal
Revenue Code of 1986, as amended ("Code"). IRA applications are available from
brokers or GT Global.
EXCHANGES BETWEEN FUNDS
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 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 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
Statement of Additional Information Page 26
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
changed at any time by any of the funds upon 60 days prior notice to the
shareholders of such fund and is available only in states where the exchange may
be legally made. 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 30 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 a 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 beginning
quarterly on the 25th day of the month the investor first selects). In the event
that the 25th 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 "Certification 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 30 days' written notice or by a shareholder upon
written notice to the Fund or its Transfer Agent. Applications and further
details regarding establishment of a 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 make it not reasonably practicable for the
Fund to dispose of its portfolio securities or fairly to determine 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 Company's Board of Directors, 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 Company 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 value of the Fund's
net assets at the beginning of such period. This election is irrevocable so long
as Rule 18f-1 remains in effect, unless the SEC by order upon application
permits the withdrawal of such election.
Statement of Additional Information Page 27
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
AUTOMATIC INVESTMENT PLAN -- CLASS A SHARES AND CLASS B SHARES
To establish participation in the Fund's Automatic Investment Plan ("AIP"),
investors or their brokers should specify whether investment will be in Class A
shares or Class B shares and 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. Providing 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 a 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, a stop payment order or 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 30 days' written notice or by the participant, at any time,
without penalty, upon written notice to the Fund or the Transfer Agent.
- --------------------------------------------------------------------------------
TAXES
- --------------------------------------------------------------------------------
GENERAL
In order to continue 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, net short-term capital gain and net gains
from certain foreign currency transactions) ("Distribution Requirement") and
must meet several additional requirements. These requirements include the
following: (1) the Fund must derive at least 90% of its gross income each
taxable year from dividends, interest, payments with respect to securities loans
and gains from the sale or other disposition of securities or foreign
currencies, or other income (including gains from options, Futures or Forward
Contracts) derived with respect to its business of investing in securities or
those currencies ("Income Requirement"); (2) 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
- -- options or Futures (other than those on foreign currencies), or foreign
currencies (or options, Futures or Forward Contracts thereon) that are not
directly related to the Fund's principal business of investing in securities (or
options and Futures with respect to securities) ("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.
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 from U.S.
corporations. However, dividends received by a corporate shareholder and
deducted by it pursuant to the dividends-received deduction are subject
indirectly to the alternative minimum tax.
If 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.
Statement of Additional Information Page 28
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
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.
FOREIGN TAXES
Dividends and interest received by the Fund may be subject to income,
withholding or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors. If more than 50% of the value of
the Fund's total assets at the close of its taxable year consists of securities
of foreign corporations, the Fund will be eligible to, and may, file an election
with the Internal Revenue Service that will enable its shareholders, in effect,
to receive the benefit of the foreign tax credit with respect to any foreign
income taxes paid by it. Pursuant to the election, the Fund will treat those
taxes as dividends paid to its shareholders and each shareholder will be
required to (1) include in gross income, and treat as paid by him, his
proportionate share of those taxes, (2) treat his share of those taxes and of
any dividend paid by the Fund that represents income from foreign sources as his
own income from those sources, and (3) either deduct the taxes deemed paid by
him in computing his taxable income or, alternatively, use the foregoing
information in calculating the foreign tax credit against his federal income
tax. The Fund will report to its shareholders shortly after each taxable year
their respective shares of the Fund's income from sources within, and taxes paid
to, foreign countries if it makes this election.
PASSIVE FOREIGN INVESTMENT COMPANIES
The Fund may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is a foreign corporation that, in general, meets either of the
following tests: (1) at least 75% of its gross income is passive or (2) an
average of at least 50% of its assets produce, or are held for the production
of, passive income. Under certain circumstances, the Fund would be subject to
federal income tax on a portion of any "excess distribution" received on, the
stock or of any gain from disposition of, stock of a PFIC (collectively "PFIC
income"), plus interest thereon, even if the Fund distributed the PFIC income as
a taxable dividend to its shareholders. The balance of the PFIC income would be
included in the Fund's investment company taxable income and, accordingly, would
not be taxable to the Fund to the extent that income is distributed to its
shareholders.
If the Fund does invest in a PFIC and elects to treat the PFIC as a "qualified
electing fund" ("QEF"), then in lieu of the foregoing tax and interest
obligation, the Fund would be required to include in income each taxable year
its pro rata share of the QEF's ordinary earnings and net capital gain (the
excess of net long-term capital gain over net short-term capital loss) -- which
most likely would have to be distributed to satisfy the Distribution Requirement
and to avoid imposition of the Excise Tax -- even if those earnings and gain
were not received by the Fund. In most instances it will be very difficult, if
not impossible, to make this election because of certain requirements thereof.
Pursuant to proposed regulations, open-end RICs, such as the Fund, would be
entitled to elect to "mark-to-market" their stock in certain PFICs.
"Marking-to-market," in this context, means recognizing as gain for each taxable
year the excess, as of the end of that year, of the fair market value of each
such PFIC's stock over the adjusted basis in that stock (including
mark-to-market gain for each prior year for which an election was in effect).
NON-U.S. SHAREHOLDERS
Dividends paid by the Fund to a shareholder who, as to the United States, is a
nonresident alien individual, 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
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.
OPTIONS, FUTURES AND FOREIGN CURRENCY TRANSACTIONS
The use of hedging transactions, such as selling (writing) and purchasing
options and Futures Contracts and entering into Forward Contracts, involves
complex rules that will determine, for federal income tax purposes, the
character and timing of recognition of the gains and losses the Fund realizes in
connection therewith. Gains from foreign currencies (except certain gains that
may be excluded by future regulations), and gain from the disposition of
options, Futures and Forward Contracts derived by the Fund with respect to its
business of investing in securities or foreign currencies, will qualify as
permissible income under the Income Requirement. However, income from the
disposition by the Fund of options and
Statement of Additional Information Page 29
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
Futures (other than those on foreign currencies) will be subject to the
Short-Short Limitation if they are held for less than three months. Income from
the disposition by the Fund of foreign currencies, and options, Futures and
Forward Contracts on foreign currencies, that are not directly related to the
Fund's principal business of investing in securities (or options and Futures
with respect thereto) also will be subject to the Short-Short Limitation if they
are held for less than three months.
If the Fund satisfies certain requirements, any increase in value of a position
that is part of a "designated hedge" will be offset by any decrease in value
(whether realized or not) of the offsetting hedging position during the period
of the hedge for purposes of determining whether the Fund satisfies the
Short-Short Limitation. Thus, only the net gain (if any) from the designated
hedge will be included in gross income for purposes of that limitation. The Fund
intends that, when it engages in hedging transactions, it will qualify for this
treatment, but at the present time it is not clear whether this treatment will
be available for all of those transactions. To the extent this treatment is not
available, the Fund may be forced to defer the closing out of certain options,
Futures, Forward Contracts or foreign currency positions beyond the time when it
otherwise would be advantageous to do so, in order for the Fund to continue to
qualify as a RIC.
Futures and Forward Contracts that are subject to Section 1256 of the Code
(other than those that are part of a "mixed straddle") ("Section 1256
Contracts") and that are held by the Fund at the end of its taxable year
generally will be deemed to have been sold at market value for federal income
tax purposes. Sixty percent of any net gain or loss recognized on these deemed
sales, and 60% of any net gain or loss realized from any actual sales of Section
1256 Contracts, will be treated as long-term capital gain or loss, and the
balance will be treated as short-term capital gain or loss. Section 988 of the
Code also may apply to gains and losses from transactions in foreign currencies,
foreign currency-denominated debt securities and options, Futures and Forward
Contracts and options on foreign currencies ("Section 988" gains or losses).
Each Section 988 gain or loss generally is computed separately and treated as
ordinary income or loss. In the case of overlap between Sections 1256 and 988,
special provisions determine the character and timing of any income, gain or
loss. The Fund attempts to monitor Section 988 transactions to minimize any
adverse tax impact.
The foregoing is a general and abbreviated summary of certain U.S. 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.
Statement of Additional Information Page 30
<PAGE>
GT GLOBAL EMERGING MARKETS 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, located 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) in Tokyo; LGT Asset Management
Pte. Ltd., formerly G.T. Management (Singapore) PTE Ltd. located in Singapore;
LGT Asset Management Ltd., formerly G.T. Management (Australia) Ltd., located in
Sydney; and LGT Asset Management GmbH, formerly BIL Asset Management GmbH,
located in Frankfurt, Germany.
CUSTODIAN
State Street Bank and Trust Company ("State Street"), 225 Franklin Street,
Boston, Massachusetts 02110, acts as custodian of the Fund's assets. State
Street is authorized to establish and has established separate accounts in
foreign currencies and to cause securities of the Fund to be held in separate
accounts outside the United States in the custody of non-U.S. banks.
INDEPENDENT ACCOUNTANTS
The Funds' independent accountants are Coopers & Lybrand L.L.P., One Post Office
Square, Boston, Massachusetts 02109. Coopers & Lybrand L.L.P. will conduct an
annual audit of the Fund, assist in the preparation of the Fund's federal and
state income tax returns and consult with the Company and the Fund as to matters
of accounting, regulatory filings, and federal and state income taxation.
The audited financial statements of the Company 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 said firm as experts in accounting and auditing.
USE OF NAME
The Manager has granted the Company 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 Company and/or the Fund at any time, or to grant the use of such
names to any other company.
Statement of Additional Information Page 31
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
INVESTMENT RESULTS
- --------------------------------------------------------------------------------
The Fund's "Standardized Return," 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 ("T") is computed by using the value at the end of the period ("EV") 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)(n) = EV. 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
Board; and (4) a complete redemption at the end of any period illustrated.
The Fund's Standardized Returns for its Class A shares, stated as average
annualized total returns, for the periods shown, were as follows:
<TABLE>
<CAPTION>
PERIOD STANDARDIZED RETURN
- ---------------------------------------------------------------------------------------------------- ---------------------
<S> <C>
Fiscal year ended October 31, 1996.................................................................. %
May 18, 1992 (commencement of operations) to October 31, 1996....................................... %
</TABLE>
The Fund's Standardized Returns for its Class B shares which were first offered
on April 1, 1993, stated as average annualized total returns for the periods
shown, were:
<TABLE>
<CAPTION>
PERIOD STANDARDIZED RETURN
- ---------------------------------------------------------------------------------------------------- ---------------------
<S> <C>
Fiscal year ended October 31, 1996.................................................................. %
April 1, 1993 (commencement of operations) to October 31, 1996...................................... %
</TABLE>
"Non-Standardized Return," as referred to in the Prospectus, is calculated for a
specified period of time by assuming the investment of $1,000 in Fund shares and
further assuming the reinvestment of all dividends and other distributions made
to Fund shareholders in additional Fund shares at their net asset value.
Percentage rates of return are then calculated by comparing this assumed initial
investment to the value of the hypothetical account at the end of the period for
which the Non-Standardized Return is quoted. As discussed in the Prospectus, the
Fund may quote non-standardized total returns that do not reflect the effect of
sales charges. Non-Standardized Returns may be quoted from the same or different
time periods for which Standardized Returns are quoted. The Fund's
Non-Standardized Returns for its Class A shares, stated as aggregate total
returns, for the periods shown, were as follows:
<TABLE>
<CAPTION>
NON-STANDARDIZED
PERIOD AGGREGATE TOTAL RETURN
- -------------------------------------------------------------------------------------------------- -----------------------
<S> <C>
Fiscal year ended October 31, 1996................................................................ %
May 18, 1992 (commencement of operations) to October 31, 1996..................................... %
</TABLE>
The Fund's Non-Standardized Return for its Class B shares which were first
offered on April 1, 1993, stated as aggregate total returns, for the periods
shown, were as follows:
<TABLE>
<CAPTION>
NON-STANDARDIZED RETURN
PERIOD AGGREGATE TOTAL RETURN
- ------------------------------------------------------------------------------------------------ -------------------------
<S> <C>
Fiscal year ended October 31, 1996.............................................................. %
April 1, 1993 (commencement of operations) to October 31, 1996.................................. %
</TABLE>
The Fund's Non-Standardized Returns for its Class A shares, stated as average
annualized total returns, for the periods shown, were as follows:
<TABLE>
<CAPTION>
NON-STANDARDIZED
AVERAGE ANNUALIZED
PERIOD TOTAL RETURN
- ----------------------------------------------------------------------------------------------------- -------------------
<S> <C>
Fiscal year ended October 31, 1996................................................................... %
May 18, 1992 (commencement of operations) to October 31, 1996........................................ %
</TABLE>
Statement of Additional Information Page 32
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
The Fund's Non-Standardized Returns for its Class B shares, stated as average
annualized total returns, for the periods shown, were:
<TABLE>
<CAPTION>
NON-STANDARDIZED
AVERAGE ANNUALIZED
PERIOD TOTAL RETURN
- ----------------------------------------------------------------------------------------------------- ---------------------
<S> <C>
Fiscal year ended October 31, 1996................................................................... %
April 1, 1993 through October 31, 1996............................................................... %
</TABLE>
IMPORTANT POINTS TO NOTE ABOUT DATA RELATING TO EMERGING EQUITY AND BOND MARKETS
Information relating to foreign market performance, diversification and market
capitalization is based on sources believed to be reliable, but is neither
all-inclusive nor warranted as to accuracy by the Company or the Manager. The
authors and publishers of such material are not to be considered as "experts"
under the Securities Act of 1933 on account of the inclusion of such information
herein. Stocks chosen by Morgan Stanley Capital International or the IFC for
inclusion in its various international market indicies may not necessarily
constitute a representative cross-section of the particular markets.
GT Global believes that information relating to foreign market performance and
market capitalization 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 such indices. The performance of indices does not take expenses
into account, while the Fund incurs expenses in its operations which will reduce
performance. Moreover, the Fund is actively managed, i.e. the Manager as the
Fund's investment manager actively purchases and sells securities in seeking the
Fund's investment objective; this will cause the performance of the Fund to
differ from indices.
The Fund and GT Global may from time to time 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 or
BBB by Standard and Poor's Corporation, or, in the case of nonrated bonds,
BBB by Fitch Investors Service (excluding Collateralized Mortgage
Obligations).
(3) 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.
(4) 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).
(5) Data and mutual fund rankings published or prepared by Lipper
Analytical Data Services, Inc. ("Lipper"), CDA/Wiesenberger Investment
Company 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 the Fund may be compared to the 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
without such peer group. 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.
(6) Bear Stearns Foreign Bond Index, which provides simple average
returns for individual countries and GNP-weighted index, beginning in 1975.
The returns are broken down by local market and currency.
(7) Ibbottson Associates International Bond Index, which provides a
detailed breakdown of local market and currency returns since 1960.
Statement of Additional Information Page 33
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
(8) Standard & Poor's "500" 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 U.S.
(9) Salomon Brothers Broad Investment Grade Index which is a widely used
index composed of U.S. domestic government, corporate and mortgage-back
fixed income securities.
(10) Dow Jones Industrial Average.
(11) CNBC/Financial News Composite Index.
(12) 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 800
companies of Europe, Australia and the Far East.
(13) International Finance Corporation ("IFC") Emerging Markets Data Base
which provides detailed statistics on stock markets in developing countries.
(14) 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.
(15) The World Bank Publication of Trends in Developing Countries
("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.
(16) Salomon Brothers Global Telecommunications Index is composed of
telecommunications companies in the developing and emerging countries.
(17) Datastream and Worldscope an on-line database retrieval service for
information including but not limited to international financial and
economic data.
(18) International Financial Statistics, which is produced by the
International Monetary Fund.
(19) Various publications and annual reports such as the World
Development Report, produced by the World Bank and its affiliates.
(20) Various publications from the International Bank for Reconstruction
and Development/The World Bank.
(21) Various publications including but not limited to ratings agencies
such as Moody's Investors Services, Fitch Investors Service, and Standard &
Poor's.
(22) Wilshire Associates which is an on-line database for international
financial and economic data including performance measure for a wide range
of securities.
(23) Various publications from the Organization for Economic Cooperation
and Development ("OECD").
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, 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, included but not limited to, Money 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. Each 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.
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. The Fund does not represent a complete
investment program and investors should consider the Fund as appropriate for a
portion of their overall investment portfolio with regard to their long-term
investment goals.
GT Global believes that a growing number of consumer products, including but not
limited to home appliances, automobiles and clothing, purchased by Americans are
manufactured abroad. GT Global believes that investing globally in the companies
that produce products for U.S. consumers can help U.S. investors seek protection
of the value of their
Statement of Additional Information Page 34
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
assets against the potentially increasing costs of foreign manufactured goods.
Of course, there can be no assurance that there will be any correlation between
global investing and the costs of such foreign goods unless there is a
corresponding change in value of the U.S. dollar to foreign currencies. From
time to time, GT Global may refer to or advertise the names of such companies
although there can be no assurance that any GT Global Mutual Fund may own the
securities of these companies.
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 Fund assets under management or
rankings by DALBAR Savings, Inc. in advertising materials.
The Fund may compare its performance to that of other compilations or indices of
comparable quality to those listed above which may be developed and made
available in the future. The Fund may be compared in advertising to Certificates
of Deposit (CDs), the Bank Rate Monitor National Index, an average of the quoted
rates for 100 leading banks and thrifts in ten U.S. cities chosen to represent
the ten largest Consumer Metropolitan statistical areas, or other investments
issued by banks. The Fund differs from bank investments in several respects. The
Fund may offer greater liquidity or higher potential returns than CDs; but
unlike CDs, the Fund will have a fluctuating share price and return and is not
FDIC insured.
The Fund's performance may be compared to the performance of other mutual funds
in general, or to the performance of particular types of mutual funds. These
comparisons may be expressed as mutual fund rankings prepared by Lipper
Analytical Services, Inc. (Lipper), an independent service which monitors the
performance of mutual funds. 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 Fund's performance
may be compared to mutual fund performance indices prepared by Lipper.
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.
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 is 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.
In advertising materials, GT Global may reference or discuss its products and
services, which may include: retirement investing; the effects of dollar-cost
averaging and saving for college or a home. In addition, GT Global may quote
financial or business publications and periodicals, including model portfolios
or allocations, as they relate to fund management, investment philosophy, and
investment techniques.
The Fund may discuss its Quotron number, CUSIP number, and its current portfolio
management team.
From time to time, the Fund's performance also may be compared to other mutual
funds tracked by financial or business publications and periodicals. For
example, the fund may quote Morningstar,Inc. in its advertising materials.
Morningstar, Inc. is a mutual fund rating service that rates mutual funds on the
basis of risk-adjusted performance. In addition, the Fund may quote financial or
business publications and periodicals as they relate to fund management,
investment philosophy, and investment techniques. Rankings that compare the
performance of GT Global Mutual Funds to one another in appropriate categories
over specific periods of time may also be quoted in advertising.
The Fund may quote various measures of volatility and benchmark correlation such
as beta, standard deviation and R(2) 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. Measures of benchmark correlation indicate how valid a
comparative benchmark may be. All measures of volatility and correlation are
calculated using averages of historical data.
Statement of Additional Information Page 35
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
The Fund may advertise examples of the effects of periodic investment plans,
including the principle of dollar cost averaging. 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.
Each Fund may be available for purchase through retirement plans of 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 the GT Global Funds through various retirement accounts and plans
that offer deferral of income taxes on investment earnings and may also enable
you to make pre-tax contributions. Because of their advantages, these retirement
accounts and plans may produce returns superior to comparable non-retirement
investments. The Funds may also discuss these accounts and plans which include:
INDIVIDUAL RETIREMENT ACCOUNTS (IRAS): Any individual who receives earned income
from employment (including self-employment) can contribute up to $2,000 each
year to an IRA (or 100% of compensation, whichever is less). If your spouse is
not employed, a total of $2,250 may be contributed each year to IRAs set up for
each individual (subject to the maximum of $2,000 per IRA). 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.
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 rollover (or make a direct transfer of) their
distribution to a Rollover IRA. These accounts can also receive rollovers or
transfers from an existing IRA.
SEP-IRAS AND SALARY-REDUCTION SEP-IRAS: Simplified employee pension (SEP) plans
and salary-reduction SEPs provide self-employed individuals (and any eligible
employees) with benefits similar to Keogh-type plans or 401(k) plans, but with
fewer administrative requirements and therefore lower annual administration
expenses.
403(B)(7) CUSTODIAL ACCOUNTS: Employees of public schools and most other
not-for-profit corporations can make pre-tax salary reduction contributions to
these accounts.
PROFIT SHARING (INCLUDING 401(K)) AND MONEY PURCHASE PENSION PLANS: Corporations
can sponsor these qualified defined contribution plans for their employees. A
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).
GT Global may from time to time in its sales methods and advertising discuss the
risks inherent in investing. The major types of investment risk are market risk,
industry risk, credit risk, interest rate 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 Funds and GT Global will quote certain information
including but not limited to data regarding: individual countries, regions,
world stock exchanges, and economic and demographic statistics from sources GT
Global deems reliable, including but not limited to, the economic and financial
data of such financial organizations as:
1) Stock market capitalization: Morgan Stanley Capital International World
Indices, International Finance Corporation and Datastream.
2) Stock market trading volume: Morgan Stanley Capital International World
Indices, International Finance Corporation.
3) The number of listed companies: International Finance Corporation, G.T.
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 Indices.
5) International industry performance: Morgan Stanley Capital International
World Indices, Wilshire Associates and Salomon Brothers, Inc.
Statement of Additional Information Page 36
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
6) Stock market performance: Morgan Stanley Capital International World
Indices, International Finance Corporation and Datastream.
7) The Consumer Price Index and inflation rate: The World Bank, Datastream and
International Finance Corporation.
8) Gross Domestic Product (GDP): Datastream and The World Bank.
9) GDP growth rate: International Finance Corporation, 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: Organization for Economic Cooperation
and Development and United Nations.
13) Total exports and imports by year: International Finance Corporation, The
World Bank and Datastream.
14) Top three companies by country, industry or market: International Finance
Corporation, G.T. 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 for U.S. and non-U.S. companies: Bloomberg.
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.
THE GT ADVANTAGE
With respect to GT Global Emerging Markets Fund, the Manager has developed a
unique team approach to its emerging markets money management. The Manager's
economists and strategists in Hong Kong determine the geographic allocation of
the Fund's assets according to each country's relative industrial development,
potential for productivity gains, and the likely impact of financial
liberalization. Then, portfolio managers in London, San Francisco, Hong Kong and
Singapore identify the individual securities that they believe have the
strongest long-term growth potential in each emerging market. Generally,
securities in Asia are selected by managers in Hong Kong; San Francisco-based
managers look for opportunities in Latin America; and European securities are
selected by London-based personnel.
For the other funds in the GT Global Mutual Funds, the Manager has developed a
unique team approach to its global money management which we call the GT
Advantage. The Manager's money management style combines the best of the
"top-down" and "bottom-up" investment manager strategies. The top-down approach
is implemented by the Manager's Investment Policy Committee which sets broad
guidelines for asset allocation and currency management based on the Manager's
own macroeconomic forecasts and research from our worldwide offices. The
bottom-up approach utilizes regional teams of individual portfolio managers to
implement the committee's guidelines by selecting local securities that offer
strong growth potential.
Statement of Additional Information Page 37
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
DESCRIPTION OF DEBT RATINGS
- --------------------------------------------------------------------------------
DESCRIPTION OF COMMERCIAL PAPER RATINGS
MOODY'S INVESTORS SERVICE, INC. ("Moody's") employs the designations "Prime-1"
"Prime-2" and "Prime-3" to indicate commercial paper having the highest capacity
for timely repayment. Issuers rated Prime-1 have a superior capacity for
repayment of short-term promissory obligations. Prime-1 repayment capacity will
normally be evidenced by the following characteristics: leading market positions
in well-established industries; high rates of return on funds employed;
conservative capitalization structures with moderate reliance on debt and ample
asset protections; 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. Issues rated
Prime-2 have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the characteristics
cited above, but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained. Issuers rated Prime-3 have an acceptable ability for
repayment of senior short-term promissory obligations. The effect of industry
characteristics and market composition may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.
STANDARD & POOR'S RATINGS GROUP ("S & P") ratings of commercial paper are graded
into four categories ranging from "A" for the highest quality obligations to "D"
for the lowest. A -- Issues assigned its highest rating are regarded as having
the greatest capacity for timely payment. Issues in this category are delineated
with numbers 1, 2, and 3 to indicate the relative degree of safety. A-1 -- This
designation indicates that the degree of safety regarding timely payment is
either overwhelming or very strong. Those issues determined to possess
overwhelming safety characteristics will be denoted with a plus (++) sign
designation. A-2 -- Capacity for timely payments on issues with this designation
is strong. However, the relative degree of safety is not as high as for issues
designated "A-1." A-3 -- issues carrying this designation have a satisfactory
capacity for timely payment. They are, however, somewhat more vulnerable to the
adverse effects of changes in circumstances than obligations carrying the higher
designations.
DESCRIPTION OF BOND RATINGS
Moody's rates the long-term debt securities issued by various entities from
"Aaa" to "C." Investment grade ratings are as follows:
Aaa -- Best quality. These securities carry the smallest degree of
investment risk and are generally referred to as "gilt edge." 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. They are rated lower than the best
bond because margins of protection may not be as large as in Aaa securities,
fluctuation of protective elements may be of greater amplitude, or there may
be other elements present which make the long-term risk appear somewhat
greater.
A -- Upper medium grade obligations. These bonds possess many favorable
investment attributes. 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. 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.
Speculative grade ratings are as follows:
Ba -- These Bonds are judged to have speculative elements; 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 other good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
Statement of Additional Information Page 38
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
B -- These bonds 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 -- These bonds are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.
Ca -- These bonds represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
C -- These bonds are the lowest rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
S&P rates the long-term securities debt of various entities in categories
ranging from "AAA" to "D" according to quality. Investment grade ratings are as
follows:
AAA -- Highest rating. Capacity to pay interest and repay principal is
extremely strong.
AA -- High grade. Very strong capacity to pay interest and repay
principal. Generally, these bonds differ from AAA issues only in a small
degree.
A -- Have a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of change
in circumstances and economic conditions, than debt in higher rated
categories.
BBB -- Regarded as having adequate capacity to pay interest and repay
principal. These bonds normally exhibit adequate protection parameters, but
adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity to pay interest and repay principal than for
debt in higher rated categories.
Speculative grade ratings are as follows:
BB -- Have less near-term vulnerability to default than other
speculative issues. However, these bonds face 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.
This rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied "BBB-" rating.
B -- Have greater vulnerability to default but currently have 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. This rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied "BB" or "BB-" rating.
CCC -- Have currently identifiable vulnerability to default and are
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, these bonds are 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 -- This rating typically is applied to debt subordinated to senior
debt that is assigned an actual or implied "CCC" rating.
C -- This rating typically is applied to debt subordinated to senior
debt that is assigned an actual or implied "CCC-" debt rating. This rating
may be used to cover a situation where a bankruptcy petition has been filed,
but debt service payments are continued.
CI -- This rating is reserved for income bonds on which no interest is
being paid.
D -- Are in payment default. This 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. This rating also will be
used up on filing of a bankruptcy petition if debt service payments are
jeopardized.
Statement of Additional Information Page 39
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The audited financial statements of the GT Global Emerging Markets Fund at
October 31, 1996 and for the fiscal year then ended appear on the following
pages.
Statement of Additional Information Page 40
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
NOTES
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Statement of Additional Information Page 61
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
NOTES
- --------------------------------------------------------------------------------
Statement of Additional Information Page 62
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
NOTES
- --------------------------------------------------------------------------------
Statement of Additional Information Page 63
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL MUTUAL FUNDS
GT GLOBAL OFFERS A BROAD RANGE OF MUTUAL FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY GT GLOBAL MUTUAL
FUND, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR CALL GT GLOBAL DIRECTLY AT
1-800-824-1580.
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL WORLDWIDE GROWTH FUND
Invests around the world, including the U.S.
GT GLOBAL INTERNATIONAL GROWTH FUND
Provides portfolio diversity for U.S. investors by investing outside the U.S.
GT GLOBAL EMERGING MARKETS FUND
Gives access to the growth potential of developing economies
/ / GLOBAL THEME FUNDS
GT GLOBAL CONSUMER PRODUCTS AND
SERVICES FUND
Invests in companies that manufacture, market, retail, or distribute consumer
products or services
GT GLOBAL FINANCIAL SERVICES FUND
Focuses on the worldwide opportunities from the demand for financial services
and products
GT GLOBAL HEALTH CARE FUND
Invests in the growing health care industries worldwide
GT GLOBAL INFRASTRUCTURE FUND
Seeks companies that build, improve or maintain a country's infrastructure
GT GLOBAL NATURAL RESOURCES FUND
Concentrates on companies that own, explore or develop natural resources
GT GLOBAL TELECOMMUNICATIONS FUND
Invests in companies worldwide that develop, manufacture or sell
telecommunications services or equipment
/ / REGIONALLY DIVERSIFIED FUNDS
GT GLOBAL NEW PACIFIC GROWTH FUND
Offers access to the emerging and established markets of the Pacific Rim,
excluding Japan
GT GLOBAL EUROPE GROWTH FUND
Focuses on investment opportunities in the new, unified Europe
GT GLOBAL LATIN AMERICA GROWTH FUND
Invests in the emerging markets of Latin America
/ / SINGLE COUNTRY FUNDS
GT GLOBAL AMERICA SMALL CAP GROWTH FUND
Invests in equity securities of small U.S. companies
GT GLOBAL AMERICA MID CAP GROWTH FUND
Concentrates on medium-sized companies in the U.S.
GT GLOBAL AMERICA VALUE FUND
Concentrates on large cap equity securities of U.S. companies believed to be
undervalued
GT GLOBAL JAPAN GROWTH FUND
Provides U.S. investors with direct access to the Japanese market
GROWTH AND INCOME FUND
GT GLOBAL GROWTH & INCOME FUND
Invests in blue-chip stocks and government bonds from around the world
INCOME FUNDS
GT GLOBAL GOVERNMENT INCOME FUND
Invests in global government securities
GT GLOBAL STRATEGIC INCOME FUND
Allocates its assets among debt securities from the U.S., developed foreign
countries and emerging markets
GT GLOBAL HIGH INCOME FUND
Invests in a portfolio of emerging market debt securities
MONEY MARKET FUND
GT GLOBAL DOLLAR FUND
Invests in high quality, U.S. dollar-denominated money market securities
worldwide for stability and preservation of capital
[LOGO]
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
STATEMENT OF ADDITIONAL INFORMATION AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY GT
GLOBAL EMERGING MARKETS FUND, G.T. INVESTMENT FUNDS, INC., CHANCELLOR LGT
ASSET MANAGEMENT, INC. OR GT GLOBAL, INC. THIS STATEMENT OF ADDITIONAL
INFORMATION DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF ANY
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
EMESA610MC
<PAGE>
GT GLOBAL THEME FUNDS: ADVISOR CLASS
50 California Street, 27th Floor
San Francisco, California 94111
(415) 392-6181
Toll Free: (800) 824-1580
Statement of Additional Information
March 1, 1997
- --------------------------------------------------------------------------------
This Statement of Additional Information relates to the Advisor Class shares of
GT Global Financial Services Fund ("Financial Services Fund"), GT Global
Infrastructure Fund ("Infrastructure Fund"), GT Global Natural Resources Fund
("Natural Resources Fund"), GT Global Consumer Products and Services Fund
("Consumer Products and Services Fund"), GT Global Health Care Fund ("Health
Care Fund") and GT Global Telecommunications Fund ("Telecommunications Fund")
(individually, "Fund" or "Theme Fund," collectively, "Funds," "Theme Funds").
Each Fund is a diversified series of G.T. Investment Funds, Inc. ("Company"), a
registered open-end management investment company. The Financial Services Fund,
Infrastructure Fund, Natural Resources Fund and Consumer Products and Services
Fund (individually, "Feeder Fund," collectively "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 (individually, "Portfolio," collectively,
"Portfolios"), respectively. This Statement of Additional Information, which is
not a prospectus, supplements and should be read in conjunction with the GT
Global Theme Funds' current Advisor Class Prospectus dated March 1, 1997, a copy
of which is available without charge by writing to the above address or calling
the Funds at the toll-free telephone number printed above.
Chancellor LGT Asset Management, Inc. (the "Manager") serves as the investment
manager of and administrator for the Health Care Fund, Telecommunications Fund
and the Portfolios (each a "Theme Portfolio"), and also serves as the
administrator for each Feeder Fund. The principal underwriter and distributor of
the Funds' shares is GT Global, Inc. ("GT Global"). The Funds' transfer agent is
GT Global Investor Services, Inc. ("GT Services" or "Transfer Agent").
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Investment Objectives and Policies....................................................................................... 2
Options, Futures and Currency Strategies................................................................................. 6
Risk Factors............................................................................................................. 14
Investment Limitations................................................................................................... 18
Execution of Portfolio Transactions...................................................................................... 22
Directors and Executive Officers......................................................................................... 24
Management............................................................................................................... 26
Valuation of Fund Shares................................................................................................. 28
Information Relating to Sales and Redemptions............................................................................ 30
Taxes.................................................................................................................... 31
Additional Information................................................................................................... 34
Investment Results....................................................................................................... 35
Description of Debt Ratings.............................................................................................. 45
Financial Statements..................................................................................................... 47
</TABLE>
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Statement of Additional Information Page 1
<PAGE>
GT GLOBAL THEME FUNDS
INVESTMENT OBJECTIVES
AND POLICIES
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES
The investment objective of each Feeder Fund is long-term capital growth. The
investment objective of the GT Global Health Care Fund and Telecommunications
Fund is long-term capital appreciation and long-term growth of capital,
respectively.
The Financial Services Fund, Infrastructure Fund, Natural Resources Fund and
Consumer Products and Services Fund each seeks to achieve its investment
objective by investing all of its investable assets in the Financial Services
Portfolio, Infrastructure Portfolio, Natural Resources Portfolio and Consumer
Products and Services Portfolio, respectively, each of which 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 Fund. Whenever the phrase "all of the Funds' investable assets" is
used herein and in the Prospectus, it means that the only investment securities
that will be held by a Feeder Fund will be that Fund's 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 such 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 described below and in the Prospectus
with respect to its corresponding Portfolio.
SELECTION OF EQUITY INVESTMENTS
With respect to the Natural Resource 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 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 portion of each 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 Fund Shares to provide for ongoing expenses and to satisfy redemptions.
For each 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 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
Statement of Additional Information Page 2
<PAGE>
GT GLOBAL THEME FUNDS
substantially impair the operations of the Theme Portfolios as described in the
Prospectus and this Statement of Additional Information. Restrictions may in the
future, however, make it undesirable to invest in certain countries. None of the
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 Theme Portfolio with substantial or total loss
of its investment in such country or market.
INVESTMENTS IN OTHER INVESTMENT COMPANIES
Each 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 Theme Portfolio may
purchase shares of an investment company unless (a) such a purchase would cause
a 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
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 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
A 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 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 Theme Portfolio's investment policies, a 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
Theme Portfolios may invest in both sponsored and unsponsored ADRs.
WARRANTS OR RIGHTS
Warrants or rights may be acquired by a Theme Portfolio in connection with other
securities or separately and provide the Theme Portfolio with the right to
purchase at a later date other securities of the issuer.
LENDING OF PORTFOLIO SECURITIES
For the purpose of realizing additional income, each 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
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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 Theme Portfolios
may pay reasonable administrative and custodial fees in connection with the
loans of their securities. While the securities loan is outstanding, a 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. A Theme Portfolio will have a right
to call each loan and obtain the securities on five business days' notice. A
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. The
risks in lending portfolio securities, as with other extensions of secured
credit, consist of possible delay in receiving additional collateral or in
recovery of the securities or possible loss of rights in the collateral should
the borrower fail financially. 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.
COMMERCIAL BANK OBLIGATIONS
For the purposes of each 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 Theme Portfolio to
investment risks that are different in some respects from those of investments
in obligations of U.S. issuers. Although each 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 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
Repurchase agreements are transactions in which a 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 Theme
Portfolio if the other party to the repurchase agreement becomes bankrupt, the
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 a
Portfolio's Board of Trustees, as applicable. The Manager will review and
monitor the creditworthiness of such institutions under the applicable Board's
general supervision.
Each 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, a
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 a Theme Portfolio's ability to sell the collateral and a 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 Theme Portfolio intends to comply with provisions under such Code
that would allow the immediate resale of such collateral. Each 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 Theme Portfolio's borrowings will not exceed 33 1/3% of its total assets,
i.e., the 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
a Theme Portfolio's securities holdings or other factors cause the ratio of a
Theme Portfolio's total assets to outstanding borrowings to fall below 300%,
within three days (excluding Sundays and holidays) of such event that 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 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 a Theme Portfolio may cause greater fluctuation in the value of its
shares than would be the case if that Theme Portfolio did not borrow.
Each Theme Portfolio's fundamental investment limitations permit the Theme
Portfolio to borrow money for leveraging purposes. However, each Theme Portfolio
(except the Health Care Fund) is currently prohibited, pursuant to a non-
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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 Portfolios' Board of Trustees, as
applicable. In the event that a 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 a Theme
Portfolio. When the income and gains on securities purchased with the proceeds
of borrowings exceed the costs of such borrowings, a Theme Portfolio's earnings
or a 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, a Theme
Portfolio's earnings or a Fund's net asset value would decline faster than would
otherwise be the case.
Each Theme Portfolio may enter into reverse repurchase agreements, which involve
the sale of a security by a Theme Portfolio and its agreement to repurchase the
security at a specified time and price. Each Theme Portfolio may also engage in
"roll" transactions, which involve the sale of Government National Mortgage
Association certificates or other securities together with a commitment (for
which the Theme Portfolio may receive a fee) to purchase similar, but not
identical, securities at a future date. Each Theme Portfolio will maintain, in a
segregated account with a custodian, cash or other 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 Theme Portfolio (except the Health Care Fund) is authorized to make short
sales of securities. A short sale is a transaction in which a Theme Portfolio
sells a security in anticipation that the market price of that security will
decline. A 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 a 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 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.
A 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 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 Theme Portfolio on such security, a 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 a Theme Portfolio replaces the borrowed security, that Theme
Portfolio will incur a loss; conversely, if the price declines, the Theme
Portfolio will realize a gain. Any gain will be decreased, and any loss
increased, by the transaction costs associated with the transaction. Although a
Theme Portfolio's gain is limited by the price at which it sold the security
short, its potential loss theoretically is unlimited.
No 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 Theme Portfolio's aggregate short sales of the securities of
any one issuer exceed the lesser of 2% of the Theme Portfolio's net assets or 2%
of the securities of any class of the issuer. Moreover, a Theme Portfolio may
engage in short sales only with respect to securities listed on a national
securities exchange. A 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 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.
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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 instruemtns 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 a Theme Portfolio
entered into a short hedge because the Manager projected a decline in the
price of a security in the 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 Theme Portfolio could suffer a
loss. In either such case, the Theme Portfolio would have been in a better
position had it not hedged at all.
(4) As described below, a 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 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 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 Theme Portfolio sell a portfolio security at a
disadvantageous time. The 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 Theme Portfolio.
WRITING CALL OPTIONS
Each 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 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 an (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.
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Portfolio securities or currencies on which call options may be written will be
purchased solely on the basis of investment considerations consistent with each
Theme Portfolio's investment objective. When writing a call option, a 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,
a 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 a Theme Portfolio
has written expires, the 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 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 Theme Portfolio does not consider a security or
currency covered by a call option to be "pledged" as that term is used in that
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 a Theme Portfolio will be
obligated to sell the security or currency at less than its market value.
The premium that a Theme Portfolio receives for writing a call option is deemed
to constitute the market value of an option. The premium the 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 a 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 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, a 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.
A 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 a Theme Portfolio.
WRITING PUT OPTIONS
Each 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.
A Theme Portfolio generally would write put options in circumstances where the
Manager wishes to purchase the underlying security or currency for a Theme
Portfolio's holdings at a price lower than the current market price of the
security or currency. In such event, a 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 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.
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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 a Theme Portfolio will be
obligated to purchase the security or currency at greater than its market value.
PURCHASING PUT OPTIONS
Each Theme Portfolio may purchase put options on securities, indices and
currencies. As the holder of a put option, a 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. A Theme
Portfolio may enter into closing sale transactions with respect to such options,
exercise such option or permit such option to expire.
Each Theme Portfolio may purchase a put option on an underlying security or
currency ("protective put") owned by the 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
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.
A 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 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 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 Theme Portfolio may purchase call options on securities, indices and
currencies. As the holder of a call option, the 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. A
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 a 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 a 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 a 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 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.
A 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 Theme Portfolio's
current return. For example, where a 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 Theme Portfolio,
an increase in the market price could result in the exercise of the call option
written by the Theme Portfolio and the realization of a loss on the underlying
security or currency. Accordingly, the Theme Portfolio could purchase a call
option on the same underlying security or currency, which could be exercised to
fulfill the Theme Portfolio's delivery obligations under its written call (if it
is exercised). This strategy could allow the Theme Portfolio to avoid selling
the portfolio security or currency at a time when it has an unrelaized loss;
however, the 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
Theme Portfolio's total assets at the time of each purchase.
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A 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 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 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. A 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 a 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 a Theme
Portfolio anticipates purchasing securities.
Options may be either listed on an exchange or traded over-the-counter ("OTC
options"). 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. A 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. A 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 Theme Portfolio. The assets used as
cover for OTC options written by a Theme Portfolio will be considered illiquid
unless the OTC options are sold to qualified dealers who agree that the 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.
A Theme Portfolio's ability to establish and close out positions in
exchange-listed options depends on the existence of a liquid market. A 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 a Theme Portfolio will enter into OTC options only with contra
parties that are expected to be capable of entering into closing transactions
with the Theme Portfolio, there is no assurance that the 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 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 a 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 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 a 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 a 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 Theme
Portfolio's exercise of the put, to deliver to the 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 a 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 Theme Portfolio to deliver to it an amount of
cash
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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 a 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. A
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, a 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 a 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 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 a 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 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 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 Theme Portfolio. A 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 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 thereon in the United States. 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 a Theme Portfolio's exposure to interest rate, currency exchange
rate and stock market fluctuations, that 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
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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 Theme Portfolio realizes a gain;
if it is more, the Theme Portfolio realizes a loss. Conversely, if the
offsetting sale price is more than the original purchase price, the Theme
Portfolio realizes a gain; if it is less, the Theme Portfolio realizes a loss.
The transaction costs must also be included in these calculations. There can be
no assurance, however, that a Theme Portfolio will be able to enter into an
offsetting transaction with respect to a particular Futures Contract at a
particular time. If a Theme Portfolio is not able to enter into an offsetting
transaction, that 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 Theme
Portfolio.
Each 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 a Theme Portfolio owns, or Futures
Contracts will be purchased to protect the 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 a Theme Portfolio in order to initiate Futures trading and maintain
the 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 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 Theme Portfolio entered in 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 a 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 Contract 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.
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If a Theme Protfolio 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 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 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 a 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 on an
option on a Futures Contract are included in the initial margin deposit.
A 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 a 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 Theme Portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the 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 Portfolios' Board of Trustees, as applicable, without
a shareholder vote. This limitation does not limit the percentage of a 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. A Theme Portfolio
either may
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GT GLOBAL THEME FUNDS
accept or make delivery of the currency at the maturity of the Forward Contract.
A 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.
A Theme Portfolio engages in forward currency transactions in anticipation of,
or to protect itself against, fluctuations in exchange rates. A 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,
a 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, a 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 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 Portfolios' Board of Trustees or the
Company's Board of Directors, as applicable.
A Theme Portfolio may enter into Forward Contracts either with respect to
specific transactions or with respect to overall investments of that 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 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 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 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 a Theme Portfolio to sustain
losses on these contracts and transaction costs.
At or before the maturity of a Forward Contract requiring a Theme Portfolio to
sell a currency, that 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 Theme Portfolio will obtain, on the same maturity
date, the same amount of the currency that it is obligated to deliver.
Similarly, a 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. A 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 a 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 a 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
A 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
Theme Portfolio's securities are denominated. Such currency hedges can protect
against price movements in a security that the 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.
A 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 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
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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, a 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, a 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 a Theme Portfolio has purchased) expose the Theme Portfolio to an
obligation to another party. A 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 Future 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 Theme Portfolio will comply with SEC guidelines regarding cover for
these instruments and, if the guidelines so require, set aside cash or other
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 a Theme Portfolio's assets is used for cover or otherwise set aside, it could
affect portfolio management or the Theme Portfolio's ability to meet redemption
requests or other current obligations.
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RISK FACTORS
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ILLIQUID SECURITIES. Each 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 a Theme
Portfolio cannot reasonably expect within seven days to sell the security for
approximately the amount at which that Theme Portfolio values such securities.
See "Investment Limitations." 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, a 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 Theme Portfolio may be permitted
to sell a security under an effective registration statement. If, during
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GT GLOBAL THEME FUNDS
such a period, adverse market conditions were to develop, the 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
a Theme Portfolio, however, could affect adversely the marketability of such
portfolio securities and the 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 Theme Portfolio and
periodically reports such determinations to the Portfolios' Board of Trustees or
the Company's Board of Directors, as applicable.
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, a Theme Portfolio could lose its entire investment
in any such country.
RELIGIOUS, POLITICAL AND ETHNIC INSTABILITY. Certain countries in which a
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 a 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
extraconstitutional 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 a Theme
Portfolio invests and adversely affect the value of a 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 a Theme Portfolio. These
restrictions or controls may at times limit or preclude investment in certain
securities and may increase the cost and expenses of a 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 deteriation in a
country's balance of payments of for other reasons, a country may impose
restrictions on foreign capital remittances abroad. A Theme Portfolio could be
adversely affected by delays in,
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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 a 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 a 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 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 a 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 Theme Portfolio's holdings of securities and cash
denominated in such currency and, therefore, will cause an overall decline in
the appropriate 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 that Fund. Moreover, if the value of the foreign currencies in
which a Theme Portfolio receives its income falls relative to the U.S. dollar
between receipt of the income and the making of Fund distributions, the Theme
Portfolio may be required to liquidate securities in order to make distributions
if the 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 the pace of business activity in the other countries and the
United States, and other economic and financial conditions affecting the world
economy.
Although each Theme Portfolio values its assets daily in terms of U.S. dollars,
the Portfolios do not intend to convert their holdings of foreign currencies
into U.S. dollars on a daily basis. Each 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 a Portfolio at one rate, while offering a lesser rate of exchange
should a Portfolio desire to sell the 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 a Theme Portfolio
are uninvested and no return is earned thereon. The inability of a Theme
Portfolio to make intended security purchases due to settlement problems could
cause that 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 Theme Portfolio due to subsequent declines in
value of the portfolio security or, if that 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 a Theme Portfolio's assets, although the Manager does not believe
that such difficulties will have a material adverse effect on a Theme
Portfolio's portfolio trading activities.
Statement of Additional Information Page 16
<PAGE>
GT GLOBAL THEME FUNDS
Each 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 Theme Portfolio's investments; and possible difficulties in
obtaining and enforcing judgments against such custodians.
WITHHOLDING TAXES. Each Theme Portfolio's net investment income from foreign
issuers may be subject to withholding taxes by the foreign issuer's country,
thereby reducing that Theme Portfolio's net investment income or delaying the
receipt of income where those taxes may be recaptured. See "Taxes."
SPECIAL CONSIDERATIONS AFFECTING EUROPE. 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 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 or the emerging European markets, it is impossible to predict the
long-term impact of the implementation of these programs on the securities owned
by a Theme Portfolio.
SPECIAL CONSIDERATIONS AFFECTING JAPAN AND HONG KONG. The concentration of
investments by a Theme Portfolio in Japan means that that Portfolio may be more
volatile than a fund that is broadly diversified geographically. Overseas trade
is important to Japan's economy. Japan has few natural resources and must export
to pay for its imports of these basic requirements. Because of the concentration
of Japanese exports in highly visible products, 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 or other
protectionist measures could impact Japan adversely in both the short and the
long term. 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.
Hong Kong is a British colony which will transfer sovereignty to the Peoples
Republic of China in 1997. China has espoused policies antagonistic to free
enterprise capitalism and democracy. There can be no guarantee that property
rights will continue to be safeguarded in Hong Kong after 1997, although
recently China has moved toward free enterprise, and has established stock
exchanges of its own.
SPECIAL CONSIDERATIONS AFFECTIVE EMERGING MARKETS. Investing in the
securities of companies in emerging markets, including the markets of Latin
America and certain Asian markets such as Taiwan, Malaysia and Indonesia, 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, a 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 volume 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 markets
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 economics and securities
markets of certain emerging market countries.
DIVERSIFICATION REQUIREMENTS UNDER INTERNAL REVENUE CODE. The investment
flexibility of each Theme Portfolio may be restricted by the necessity of
satisfying certain diversification requirements in order to maintain the
qualification of the Theme Portfolio as a regulated investment company within
the meaning of the Internal Revenue Code of 1986, as amended (the "Code").
Statement of Additional Information Page 17
<PAGE>
GT GLOBAL THEME FUNDS
INVESTMENT LIMITATIONS
- --------------------------------------------------------------------------------
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 Portfolio,
Infrastructure Portfolio, Natural Resources Portfolio and Consumer Products and
Services Portfolio, respectively:
Notwithstanding any other investment policy of the Fund, the 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 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 Portfolio and
its Board of Trustees, it applies equally to each Feeder Fund and its Board of
Directors.
Each 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 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, that Fund will hold a meeting of its shareholders and
will cast its votes as instructed by its shareholders.
Each Portfolio may not:
(1) Buy or sell real estate (including real estate limited
partnerships); however, each 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
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 Securities Act
of 1933;
(4) Make loans, except that each 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 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 33 1/3 of the value
of each Portfolio's total assets, (including the amount borrowed), less all
liabilities and indebtedness (other than the borrowing). This restriction
shall not prevent any Portfolio from entering into reverse repurchase
agreements, provided that reverse repurchase agreements, and any other
transactions constituting borrowing by a Portfolio may not exceed one-third
of that Portfolio's total assets. Transactions involving options, futures
contracts, options on futures contracts and forward currency contracts, as
described in the Prospectus and 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 Portfolio may invest in
the securities of companies that engage in these activities.
Statement of Additional Information Page 18
<PAGE>
GT GLOBAL THEME FUNDS
In addition, each 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 Portfolio's total assets, no more than 5% will be
invested in the securities of any one issuer, and the 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
Portfolios' outstanding voting securities as defined above and in the
Prospectus.
The following investment policies of each Portfolio are not fundamental policies
and may be changed by vote of the Portfolios' Board of Trustees without
shareholder approval. No Portfolio may:
(1) Invest in securities of an issuer if the investment would cause the
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 Portfolio, the 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 Portfolio's portfolio, after taking into
account unrealized profits and unrealized losses on any contract the
Portfolio has entered into;
(7) Borrow money except for temporary or emergency purposes (not for
leveraging) in excess of 33 1/3% of the value of the Portfolio's total
assets (while borrowings exceed 5% of the Infrastructure Portfolio's and
Natural Resources Portfolio's total assets, such 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 Prospectus for further information with respect to
the investment objective of each Feeder Fund, which may not be changed without
the approval of Fund shareholders, and its corresponding 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 the Health Care
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.
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;
Statement of Additional Information Page 19
<PAGE>
GT GLOBAL THEME FUNDS
(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;
(6) Make loans, except through loans of portfolio securities as
authorized by the Health Care Fund's 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 the
Health Care Fund 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 the Health Care Fund's 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 the Health Care Fund's total assets, no more than 5% will
be invested in the securities of any one issuer, and the Health Care Fund 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 Prospectus.
Investors should refer to the 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 the
Telecommunications 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.
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 Securities Act of 1933;
(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;
Statement of Additional Information Page 20
<PAGE>
GT GLOBAL THEME FUNDS
(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 the
Telecommunications Fund may not exceed one-third of the Telecommunications
Fund's total assets. Transactions involving options, futures contracts,
options on futures contracts and forward currency contracts, as described in
the Prospectus and 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 the Telecommunications Fund's total assets, no more
than 5% will be invested in the securities of any one issuer, and the
Telecommunications Fund 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 Prospectus.
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 Fund's portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the Fund
has entered into; or
(7) Borrow money except for temporary or emergency purposes (not for
leveraging) not in excess of 33 1/3% 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 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 a Fund's or Portfolio's investment policies or
restrictions. A Fund or Portfolio may exchange securities, exercise conversion
or subscription rights, warrants
Statement of Additional Information Page 21
<PAGE>
GT GLOBAL THEME FUNDS
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 Fund's or Portfolio's investment policies and
restrictions. The original cost of the securities so acquired will be included
in any subsequent determination of a Fund's or Portfolio's compliance with the
investment percentage limitations referred to above and in the Prospectus.
- --------------------------------------------------------------------------------
EXECUTION OF PORTFOLIO
TRANSACTIONS
- --------------------------------------------------------------------------------
Subject to policies established by the Company's Board of Directors and the
Portfolios' Board of Trustees, the Manager is responsible for the execution of
each Theme Portfolio's securities transactions and the selection of
broker/dealers who execute such transactions on behalf of each Theme Portfolio.
In executing portfolio transactions, the Manager seeks the best net results for
each 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 Theme Portfolio may engage in
soft dollar arrangements for research services, as described below, each 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 Theme Portfolio, the Manager may select
broker/dealers to execute that 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 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 Theme Portfolio and its other
clients and that the total commissions paid by the Theme Portfolio will be
reasonable in relation to the benefits received by that Theme Portfolio over the
long term. Research services may also be received from dealers who execute Theme
Portfolio transactions in over-the-counter 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 a Theme Portfolio toward payment of that Theme
Portfolio's expenses, such as custodian fees.
Investment decisions for a 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 a 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 a 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 Theme
Portfolio.
Under a policy adopted by the Company's Board of Directors and the 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 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 Funds and such
other portfolios.
Each 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
Statement of Additional Information Page 22
<PAGE>
GT GLOBAL THEME FUNDS
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 a 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
over-the-counter 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 a Theme Portfolio may invest are generally traded in
the over-the-counter markets.
A 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 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 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.
For the fiscal years ended October 31, 1996, 1995, and 1994, the Health Care
Fund paid aggregate brokerage commissions of $_______, $545,743, and $480,241,
respectively. For the fiscal years ended October 31, 1996, 1995, and 1994, the
Telecommunications Fund paid aggregate brokerage commissions of $________,
$2,253,982, and $5,674,965, respectively. For the fiscal years ended October 31,
1996, and 1995, the Financial Services Portfolio, Infrastructure Portfolio and
Natural Resources Portfolio paid aggregate brokerage commissions of $______ and
$38,814, $_______ and $122,399, and $______ and $98,462, respectively. For the
fiscal period May 31, 1994 (commencement of operations) to October 31, 1994, the
Financial Services Portfolio, Infrastructure Portfolio and Natural Resources
Portfolio paid aggregate brokerage commissions of $18,145, $111,512 and
$132,572, respectively. For the fiscal year ended October 31, 1996 and for the
fiscal period December 30, 1994 (commencement of operations) to October 31,
1995, the Consumer Products and Services Portfolio paid aggregate brokerage
commissions of $______ and $17,605.
THEME PORTFOLIO TRADING AND TURNOVER
Although each Theme Portfolio does not intend generally to trade for short-term
profits, the securities held by that Theme Portfolio will be sold whenever
management believes it is appropriate to do so, without regard to the length of
time a particular security may have been held. Portfolio turnover rate is
calculated by dividing the lesser of sales or purchases of portfolio securities
by each Theme Portfolio's average month-end portfolio value, excluding
short-term investments. For purposes of this calculation, portfolio securities
exclude purchases and sales of debt securities having a maturity at the date of
purchase of one year or less. The portfolio turnover rate will not be a limiting
factor when management deems portfolio changes appropriate. Higher portfolio
turnover involves correspondingly greater brokerage commissions and other
transaction costs that the Theme Portfolio will bear directly, and may result in
the realization of net capital gains that are taxable when distributed to each
Fund's shareholders. For the fiscal years ended October 31, 1996 and 1995, the
Telecommunications Fund's portfolio turnover rates were __% and 62%,
respectively. For the fiscal years ended October 31, 1996 and 1995, the Health
Care Fund's portfolio turnover rates were __% and 99%, respectively. For the
fiscal years ended October 31, 1996 and 1995, the portfolio turnover rates for
the Financial Services Portfolio, Infrastructure Portfolio and Natural Resources
Portfolio were ___% and 170%, __% and 45%, and __% and 87%, respectively. For
the fiscal year ended October 31, 1996 and for the fiscal period December 30,
1994 (commencement of operations) to October 31, 1995, the portfolio turnover
rates for the Consumer Products and Services Portfolio were ___% and 240%,
respectively.
Statement of Additional Information Page 23
<PAGE>
GT GLOBAL THEME FUNDS
DIRECTORS AND EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
The Company's Directors and Executive Officers and the Portfolios' Trustees and
Executive Officers are listed below. The term "Directors" as used below refers
to the Company's Directors and the Portfolios' Trustees collectively.
<TABLE>
<CAPTION>
NAME, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- --------------------------------------- ------------------------------------------------------------------------------------------
<S> <C>
David A. Minella*, 43 Chairman, the Manager since October 1996; Director, Liechtenstein Global Trust (holding
Director, Chairman of the Board and company of the various international LGT companies) since 1990; President, Asset
President Management Division, Liechtenstein Global Trust since 1995; Director and President, LGT
50 California, Street Asset Management, Inc. ("LGT Asset Management"), formerly LGT Asset Management Holdings,
San Francisco CA 94111 Inc., since 1988; Director and President, the Manager from 1989 to October 1996; Director,
GT Global since 1987 and President, GT Global from 1987 to 1995; Director, GT Services
since 1990; President, GT Services from 1990 to 1995; Director, G.T. Global Insurance
Agency, Inc. ("G.T. Insurance") since 1992; and President, G.T. Insurance from 1992 to
1995. Mr. Minella also is a director or trustee of each of the other investment companies
registered under the 1940 Act that is managed or administered by the Manager.
C. Derek Anderson, 54 Chief Executive Officer, Anderson Capital Management, Inc.; Chairman and Chief Executive
Director Officer, Plantagenet Holdings, Ltd. from 1991 to present; Director, Munsingwear, Inc.; and
220 Sansome Street Director, American Heritage Group Inc. and various other companies. Mr. Anderson also is a
Suite 400 director or trustee of each of the other investment companies registered under the 1940
San Francisco, CA 94104 Act that is managed or administered by the Manager.
Frank S. Bayley, 55 Partner with Baker & McKenzie (a law firm); Director and Chairman, C.D. Stimson Company (a
Director private investment company); and Trustee, Seattle Art Museum. Mr. Bayley also is a
Two Embarcadero Center director or trustee or each of the other investment companies registered under the 1940
Suite 2400 Act that is managed or administered by the Manager.
San Francisco, CA 94111
Arthur C. Patterson, 52 Managing Partner, Accel Partners (a venture capital firm). He also serves as a director of
Director various computing and software companies. Mr. Patterson also is a director or trustee of
One Embarcadero Center each of the other investment companies registered under the 1940 Act that is managed or
Suite 3820 administered by the Manager.
San Francisco, CA 94111
Ruth H. Quigley, 59 Private investor; and President, Quigley Friedlander & Co., Inc. (a financial advisory
Director services firm) from 1984 to 1986. Ms. Quigley also is a director or trustee or each of the
1055 California Street other investment companies registered under the 1940 Act that is managed or administered
San Francisco, CA 94108 by the Manager.
James R. Tufts, 37 Chief Information Officer for the Manager since October 1996; President, GT Services since
Vice President and Chief 1995; Senior Vice President -- Finance and Administration, GT Global, GT Services and G.T.
Financial Officer Insurance, from 1994 to 1995; Senior Vice President -- Finance and Administration, LGT
50 California Street Asset Management and the Manager from 1994 to October 1996; Vice President of Finance, LGT
San Francisco, CA 94111 Asset Management, the Manager, GT Global and GT Services from 1990 to 1994; Vice President
-- Finance, G.T. Insurance from 1992 to 1994; and a Director of the Manager, GT Global and
GT Services since 1991.
</TABLE>
- --------------
* Mr. Minella is an "interested person" of the Company as defined by the 1940
Act due to his affiliation with the LGT companies.
Statement of Additional Information Page 24
<PAGE>
GT GLOBAL THEME FUNDS
<TABLE>
<CAPTION>
NAME, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- --------------------------------------- ------------------------------------------------------------------------------------------
<S> <C>
Kenneth W. Chancey, 50 Vice President of Mutual Fund Accounting, the Manager since 1992; and
Vice President and Vice President, Putnam Fiduciary Trust Company from 1989 to 1992.
Principal Accounting Officer
50 California Street
San Francisco, CA 94111
Helge K. Lee, 49 Executive Vice President, Asset Management Division, Liechtenstein
Vice President and Secretary Global Trust since October 1996; Senior Vice President, LGT Asset
50 California Street Management, the Manager, GT Global, GT Services and G.T. Insurance from
San Francisco, CA 94111 February 1996 to October 1996; Vice President, LGT Asset Management, the
Manager, GT Global, GT Services and G.T. Insurance from May 1994 to
February 1996; General Counsel, LGT Asset Management, the Manager, GT
Global, GT Services and G.T. Insurance from May 1994 to October 1996;
Secretary, the Manager, since May 1994; Secretary, LGT Asset Management,
GT Global, GT Services and G.T. Insurance from May 1994 to October 1996;
Senior Vice President, General Counsel and Secretary, Strong/Corneliuson
Management, Inc.; and Secretary, each of the Strong Funds from October
1991 to May 1994.
</TABLE>
------------------------
The Board of Directors has a Nominating and Audit Committee, comprised of Ms.
Quigley and Messrs. Anderson, Bayley and Patterson, which is responsible for
nominating persons to serve as Directors, reviewing audits of the Company and
its funds and recommending firms to serve as independent auditors of the
Company. Each of the Directors and Officers of the Company is also a Director
and Officer of G.T. Global Developing Markets Fund, Inc. and G.T. Global
Floating Rate Fund, Inc., and a Trustee and Officer of G.T. Global Growth
Series, G.T. Greater Europe Fund, G.T. Global Variable Investment Trust, G.T.
Global Variable Investment Series, Global Investment Portfolio (of which the
Portfolios are subtrusts), and Global High Income Portfolio, which also are
registered investment companies managed by the Manager, and ______ Portfolio,
administered by the Manager. Each Director and Officer serves in total as a
Director and or Trustee and officer, respectively of 10 registered investment
companies with 40 series managed or administrated by the Manager. The Company
pays each Director who is not a director, officer or employee of the Manager or
any affiliated company $5,000 a year, plus $300 per Fund for each meeting of the
Board attended by the Director, and reimburses travel and other expenses
incurred in connection with attending Board meetings. Other Directors and
Officers receive no compensation or expense reimbursement from the Company. For
the fiscal year ended October 31, 1996, Mr. Anderson, Mr. Bayley, Mr. Patterson
and Ms. Quigley, who are not directors, officers or employees of the Manager or
any affiliated company, received total compensation of $______, $______, $______
and $______, respectively, from the Company for their services as Directors. For
the fiscal year ended October 31, 1996, Mr. Anderson, Mr. Bayley, Mr. Patterson
and Ms. Quigley who are not directors, officers or employees of the Manager or
any affiliated company, received total compensation of $______, $______, $______
and $______, respectively, from the 40 investment companies managed or
administered by the Manager for which he or she serves as a Director or Trustee.
Fees and expenses disbursed to the Directors contained no exercised or payable
pension or retirement benefits. As of ______________, the Officers and Directors
and their families as a group owned in the aggregate beneficially or of record
less than 1% of the outstanding shares of each Fund or of all the Company's
funds in the aggregate, with the exception of the Financial Services Fund and
the Consumer Products and Services Fund. As of ______________, the Officers and
Directors and their families or a group owned in the aggregate beneficially or
of record ___% of the outstanding shares of the Financial Services Fund and ___%
of the Consumer Products and Services Fund.
Statement of Additional Information Page 25
<PAGE>
GT GLOBAL THEME FUNDS
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES RELATING TO THE FEEDER FUNDS
AND THE PORTFOLIOS
Chancellor LGT Asset Management, Inc. (the "Manager") serves as each Portfolio's
investment manager and administrator under an Investment Management and
Administration Contract between each Portfolio and the Manager ("Portfolio
Management Contract") the Manager serves as administrator to each Feeder Fund
under an administration contract between the Company and the Manager
("Administration Contract"). The Administration Contract will not be deemed an
advisory contract, as defined under the 1940 Act. As investment manager and
administrator, the Manager makes all investment decisions for each Portfolio
and, as administrator, administers each Portfolio's and each Feeder Fund's
affairs. Among other things, the Manager furnishes the services and pays the
compensation and travel expenses of persons who perform the executive,
administrative, clerical and bookkeeping functions of each Portfolio and each
Feeder Fund and provides suitable office space, necessary small office equipment
and utilities. For these services, each Feeder Fund pays administration fees,
computed daily and paid monthly, to the Manager at the annualized rate of 0.25%
of the Fund's average daily net assets. In addition, each Feeder Fund bears a
pro rata portion of the investment management and administration fee paid by its
corresponding Portfolio to the Manager. Each Portfolio pays such fees based on
its average daily net assets, also computed daily and paid monthly, at the
annualized rate of 0.725% on the first $500 million, .70% on the next $500
million, .675% on the next $500 million, and .65% on all amounts thereafter.
The Portfolio Management Contract may be renewed with respect to Portfolio for
additional one-year terms, provided that any such renewal has been specifically
approved at least annually by (i) the Portfolios' Board of Trustees or the vote
of a majority of the Portfolio's outstanding voting securities (as defined in
the 1940 Act) and (ii) a majority of Trustees who are not parties to the
Portfolio Management Contract or "interested persons" of any such party (as
defined in the 1940 Act), cast in person at a meeting called for the specific
purpose of voting on such approval. The Portfolio Management Contract provides
that with respect to each Portfolio, and the Administration Contract provides
that with respect to each Feeder Fund, either the Company, each Portfolio or the
Manager may terminate the Contract without penalty upon sixty days' written
notice to the other party. The Portfolio Management Contract terminates
automatically in the event of its assignment (as defined in the 1940 Act).
The Manager and GT Global have voluntarily undertaken to limit each Feeder
Fund's expenses (exclusive of brokerage commissions, interest, taxes and
extraordinary expenses) to the maximum annual level of 1.90% of the average
daily net assets of the Fund's Advisor Class shares during each fiscal year, and
the Manager has agreed to reimburse each Feeder Fund if its expenses exceed that
amount.
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES RELATING TO THE HEALTH CARE
FUND AND TELECOMMUNICATIONS FUND
The Manager serves as the investment manager and administrator to the Health
Care Fund and Telecommunications Fund under an Investment Management and
Administration Contract ("Management Contract") between the Company and the
Manager. As investment manager and administrator, the Manager makes all
investment decisions for the Health Care Fund and Telecommunications Fund and
administers the Health Care Fund and Telecommunications Fund's affairs. Among
other things, the Manager furnishes the services and pays the compensation and
travel expenses of persons who perform the executive, administrative, clerical
and bookkeeping functions of the Company and the Health Care Fund and
Telecommunications Fund, and provides suitable office space, necessary small
office equipment and utilities. For these services, the Health Care Fund and
Telecommunications Fund each pays the Manager investment management and
administration fees, based on the Health Care Fund's and Telecommunications
Fund's average daily net assets, computed daily and paid monthly, at the
annualized rate of .975% on the first $500 million, .95% on the next $500
million, .925% on the next $500 million, and .90% on all amounts thereafter.
The Management Contract may be renewed for additional one-year terms with
respect to the Health Care Fund and Telecommunications Fund, provided that any
such renewal has been specifically approved at least annually by: (i) the
Company's Board of Directors, or by the vote of a majority of the Health Care
Fund and Telecommunications Fund's outstanding voting securities (as defined in
the 1940 Act), and (ii) a majority of Directors who are not parties to the
Management Contract or "interested persons" of any such party (as defined in the
1940 Act), cast in person at a meeting
Statement of Additional Information Page 26
<PAGE>
GT GLOBAL THEME FUNDS
called for the specific purpose of voting on such approval. The Management
Contract provides that with respect to the Health Care Fund and
Telecommunications Fund either the Company or the Manager may terminate the
Contract without penalty upon sixty (60) days' written notice to the other
party. The Management Contract terminates automatically in the event of its
assignment (as defined in the 1940 Act).
GT Global and the Manager have voluntarily undertaken to limit the Health Care
Fund's and Telecommunications Fund's Advisor Class expenses (exclusive of
brokerage commissions, taxes, interest and extraordinary expenses) to the annual
level of 1.90% of the average daily net assets of each Fund's Advisor Class
shares, respectively, during each fiscal year, and the Manager has agreed to
reimburse the Health Care Fund and Telecommunications Fund if the Health Care
Fund's and Telecommunications Fund's expenses exceed that amount.
The following table discloses the amount of investment management and
administration fees paid by the Theme Portfolios to the Manager during the
periods shown:
HEALTH CARE FUND
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, AMOUNT PAID
- ---------------------------------------------------------------------------------------------------------- --------------
<S> <C>
1996...................................................................................................... $
1995...................................................................................................... 4,453,857
1994...................................................................................................... 4,353,688
</TABLE>
TELECOMMUNICATIONS FUND
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, AMOUNT PAID
- ---------------------------------------------------------------------------------------------------------- --------------
<S> <C>
1996...................................................................................................... $
1995...................................................................................................... 23,861,460
1994...................................................................................................... 21,926,187
</TABLE>
FINANCIAL SERVICES PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, AMOUNT PAID
- ---------------------------------------------------------------------------------------------------------- --------------
<S> <C>
1996...................................................................................................... $
1995...................................................................................................... 51,353
1994 (since Fund inception on May 31, 1994)............................................................... 8,249
</TABLE>
INFRASTRUCTURE PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, AMOUNT PAID
- ---------------------------------------------------------------------------------------------------------- --------------
<S> <C>
1996...................................................................................................... $
1995...................................................................................................... 601,421
1994 (since Fund inception on May 31, 1994)............................................................... 51,922
</TABLE>
NATURAL RESOURCES PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, AMOUNT PAID
- ---------------------------------------------------------------------------------------------------------- --------------
<S> <C>
1996...................................................................................................... $
1995...................................................................................................... 213,856
1994 (since Fund inception on May 31, 1994)............................................................... 28,500
</TABLE>
CONSUMER PRODUCTS AND SERVICES PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, AMOUNT PAID
- ---------------------------------------------------------------------------------------------------------- --------------
<S> <C>
1994 (since Fund inception on December 30, 1994).......................................................... $ 16,284
</TABLE>
For the fiscal period May 31, 1994 (commencement of operations) to October 31,
1994, and for the fiscal years ended October 31, 1995, 1996, and the Manager
reimbursed the Financial Services Portfolio, Infrastructure Portfolio and
Natural Resources Portfolio for their respective investment management and
administration fees in the amounts of $______, $8,249 and $51,353; $______,
$48,901 and $0; and $______, $28,500 and $213,856, respectively. For the same
periods, the Financial Services Fund, Infrastructure Fund and Natural Resources
Fund paid administration fees of $______, $3,029 and $18,756; $______, $19,370
and $______, $208,892; and $______, $10,436 and $74,485, respectively. However,
the Manager reimbursed those Funds for such fees in the amounts of $______,
$3,029 and $18,756; $______, $19,370 and $______, $177,376; and $______, $10,436
and $74,485, respectively. (Accordingly, the Manager reimbursed the Financial
Services Fund, Infrastructure Fund and Natural Resources Fund and their
respective Portfolios investment management and administration fees in the
aggregate amounts of $______, $11,278 and $70,109; $______, $68,271 and
Statement of Additional Information Page 27
<PAGE>
GT GLOBAL THEME FUNDS
$177,376; and $______, $38,936 and $288,341, respectively.) For the fiscal
period December 30, 1994 (commencement of operations) to October 31, 1995, and
for the fiscal year ended October 31, 1996, the Manager reimbursed the Consumer
Products and Services Portfolio for investment management and administration
fees in the amount of $16,284 and $______, respectively. For the same period,
the Consumer Products and Services Fund paid $5,933 and $____, respectively, in
administration fees; however, the Manager reimbursed the Fund in the amounts of
$5,933 and $____, respectively. Accordingly, the Manager reimbursed the Consumer
Products and Services Fund and its Portfolio investment management and
administration fees in the aggregate amounts of $22,217 and $______,
respectively.
For the fiscal year ended October 31, 1996, the Manager, pursuant to a voluntary
expense undertaking to limit expenses to the maximum annual level of 1.90%,
respectively, of average daily net assets of the Advisor Class shares of the
Funds, reimbursed the Financial Services Fund, Natural Resources Fund, and
Consumer Products and Services Fund for expenses in the additional amounts of
$______, $______, and $_______, respectively.
DISTRIBUTION SERVICES RELATING TO EACH FUND
Each Fund's Advisor Class shares are offered continuously through each Fund's
principal underwriter and distributor, GT Global, on a "best efforts" basis
without a sales charge or a contingent deferred sales charge.
TRANSFER AGENCY AND ACCOUNTING AGENCY SERVICES
GT Services, the Funds' Transfer Agent, has been retained by the Funds to
perform shareholder servicing, reporting and general transfer agent functions
for the Funds. 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 Funds for
its out-of-pocket expenses for such items as postage, forms, telephone charges,
stationery and office supplies.
As of October 31, 1996, the Health Care Fund, Telecommunications Fund, Financial
Services Fund, Infrastructure Fund, Natural Resources Fund and Consumer Products
and Services Fund paid the Manager fees of $______, $______, $______, $______,
$______ and $______, respectively, for accounting services.
EXPENSES OF THE FUNDS AND OF THE PORTFOLIOS
Each Fund and each Portfolio pays all expenses not assumed by the Manager, GT
Global and other agents. These expenses include, in addition to the advisory,
administration, distribution, transfer agency, pricing and accounting agency and
brokerage fees described above, legal and audit expenses, custodian fees,
trustees' fees, organizational fees, fidelity bond and other insurance premiums,
taxes, extraordinary expenses and expenses of reports and prospectuses sent to
existing investors. The allocation of general Company expenses and expenses
shared among the Funds and other funds organized as series of the Company are
allocated on a basis deemed fair and equitable, which may be based on the
relative net assets of the Funds or the nature of the service performed and
relative applicability to the Funds. Expenditures, including costs incurred in
connection with the purchase or sale of portfolio securities, which are
capitalized in accordance with generally accepted accounting principles
applicable to investment companies, are accounted for as capital items and not
as expenses. The ratio of each Fund's expenses to its relative net assets can be
expected to be higher than the expense ratios of funds investing solely in
domestic securities, since the cost of maintaining the custody of foreign
securities and the rate of investment management fees paid by the Funds or the
Portfolios generally are higher than the comparable expenses of such other
funds.
- --------------------------------------------------------------------------------
VALUATION OF FUND SHARES
- --------------------------------------------------------------------------------
As described in the Prospectus, each 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.
Statement of Additional Information Page 28
<PAGE>
GT GLOBAL THEME FUNDS
Each Theme Portfolio's securities and other assets are valued as follows:
Equity securities, including ADRs, ADSs and EDRs, which are traded on stock
exchanges, are valued at the last sale price on the exchange on which such
securities are traded, as of the close of business on the day the securities are
being valued or, lacking any sales, at the last available bid price. In cases
where securities are traded on more than one exchange, the securities are valued
on the exchange determined by the Manager to be the primary market. Securities
traded in the OTC market are valued at the last available sale price prior to
the time of valuation.
Long-term debt obligations are valued at the mean of representative quoted bid
or asked prices for such securities or, if such prices are not available, at
prices for securities of comparable maturity, quality and type; however, when
the Manager deems it appropriate, prices obtained for the day of valuation from
a bond pricing service will be used. Short-term debt investments are amortized
to maturity based on their cost, adjusted for foreign exchange translation.
Options on indices, securities and currencies purchased by the Theme Portfolios
are valued at their last bid price in the case of listed options or at the
average of the last bid prices obtained from dealers, unless a quotation from
only one dealer is available, in which case only that dealers price will be
used, in the case of OTC options. When market quotations for futures and options
on futures held by a Theme Portfolio are readily available, those positions will
be valued based upon such quotations.
Securities and other assets for which market quotations are not readily
available (including restricted securities that are subject to limitations as to
their sale) are valued at fair value as determined in good faith by or under the
direction of the Portfolios' Board of Trustees or the Company's Board of
Directors, as applicable. The valuation procedures applied in any specific
instance are likely to vary from case to case. However, consideration is
generally given to the financial position of the issuer and other fundamental
analytical data relating to the investment and to the nature of the restrictions
on disposition of the securities (including any registration expenses that might
be borne by the Theme Portfolios in connection with such disposition). In
addition, other factors, such as the cost of the investment, the market value of
any unrestricted securities of the same class (both at the time of purchase and
at the time of valuation), the size of the holding, the prices of any recent
transactions or offers with respect to such securities and any available
analysts' reports regarding the issuer, generally are considered.
The fair value of any other assets is added to the value of all securities
positions to arrive at the value of each Fund's total assets (which, for each
Feeder Fund is the value of its investment in its corresponding Portfolio). Each
Fund's liabilities, including accruals for expenses, are deducted from its total
assets. Once the total value of a Fund's net assets is so determined, that value
is then divided by the total number of shares outstanding (excluding treasury
shares), and the result, rounded to the nearer cent, is the net asset value per
share.
Any assets or liabilities initially expressed in terms of foreign currencies are
translated into U.S. dollars at the official exchange rate or, alternatively, at
the mean of the current bid and asked prices of such currencies against the U.S.
dollar last quoted by a major bank that is a regular participant in the foreign
exchange market or on the basis of a pricing service that takes into account the
quotes provided by a number of such major banks. If none of these alternatives
are available or none are deemed to provide a suitable methodology for
converting a foreign currency into U.S. dollars, the Portfolios' Board of
Trustees or the Company's Board of Directors, as applicable, in good faith, will
establish a conversion rate for such currency.
European, Far Eastern, or Latin American securities trading may not take place
on all days on which the NYSE is open. Further, trading takes place in various
foreign markets on days on which the NYSE is not open. Trading in securities on
European and Far Eastern securities exchanges and OTC markets generally is
completed well before the close of business in New York. Consequently, the
calculation of each Fund's net asset value may not always take place
contemporaneously with the determination of the prices of securities held by
each Fund. Events affecting the values of securities held by the Theme
Portfolios that occur between the time their prices are determined and the close
of normal trading on the NYSE will not be reflected in a Fund's net asset value
unless the Manager, under the supervision of the Company's Board of Directors or
the Portfolios' Board of Trustees, as applicable, determines that the particular
event would materially affect net asset value. As a result, a Fund's net asset
value may be significantly affected by such trading on days when a shareholder
has no access to that Fund.
Statement of Additional Information Page 29
<PAGE>
GT GLOBAL THEME FUNDS
INFORMATION RELATING TO SALES
AND REDEMPTIONS
- --------------------------------------------------------------------------------
PAYMENT AND TERMS OF OFFERING
Payment for Advisor Class shares of a 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 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.
Each 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 a 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, each 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.
EXCHANGES BETWEEN FUNDS
Shares of a 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 a 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 that Fund. Proceeds of less than $1,000 will be mailed to
the shareholder's registered address of record. The Funds and the Transfer Agent
reserve the right to refuse any telephone instructions and may discontinue the
aforementioned redemption options upon thirty days' written notice.
SUSPENSION OF REDEMPTION PRIVILEGES
Each 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 Funds or the 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.
Statement of Additional Information Page 30
<PAGE>
GT GLOBAL THEME FUNDS
REDEMPTIONS IN KIND
It is possible that conditions may arise in the future which would, in the
opinion of the Company's Board of Directors, make it undesirable for a 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 a 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 Company has filed
with the SEC an election pursuant to Rule 18f-1 under the 1940 Act. This means
that each 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
a 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 FUNDS
Each Fund is treated as a separate corporation for federal income tax purposes.
In order to continue to qualify for treatment as a regulated investment company
("RIC") under the Internal Revenue Code of 1986, as amended ("Code"), each 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, net short-term capital gain and net gains from certain foreign currency
transactions) ("Distribution Requirement") and must meet several additional
requirements. With respect to each 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 foreign
currencies, or other income (including gains from options, Futures or Forward
Contracts) derived with respect to its business of investing in securities or
those currencies ("Income Requirement"); (2) 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
- -- options or Futures (other than those on foreign currencies), or foreign
currencies (or options, Futures or Forward Contracts thereon) that are not
directly related to the Fund's principal business of investing in securities (or
options and Futures with respect to securities) ("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. Each
Feeder Fund, as an investor in its corresponding Portfolio, is deemed to own a
proportionate share of the Portfolio's assets, and to earn a proportionate share
of the Portfolio's income, for purposes of determining whether the Fund
satisfies all the requirements described above to qualify as a RIC.
Each 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.
See the next section for a discussion of the tax consequences to each Feeder
Fund of hedging transactions engaged in, and investments in passive foreign
investment companies ("PFICs") and other foreign securities by its corresponding
Portfolio and to the Health Care Fund and Telecommunications Fund of those
transactions and investments.
TAXATION OF THE THEME PORTFOLIOS
THE PORTFOLIOS AND THEIR RELATIONSHIP TO THE FEEDER FUNDS. Each Portfolio is
treated as a separate partnership for federal income tax purposes and is not a
"publicly traded partnership." As a result, each Portfolio is not subject to
federal income tax; instead, each Feeder Fund, as an investor in its
corresponding Portfolio, is required to take into account in determining its
federal income tax liability its share of the Portfolio's income, gains, losses,
deductions and credits, without regard
Statement of Additional Information Page 31
<PAGE>
GT GLOBAL THEME FUNDS
to whether it has received any cash distributions from the Portfolio. Each
Portfolio also is not subject to New York income or franchise tax.
Because, as noted above, each Feeder Fund is deemed to own a proportionate share
of its corresponding Portfolio's assets, and to earn a proportionate share of
its corresponding Portfolio's income, for purposes of determining whether the
Fund satisfies the requirements to qualify as a RIC, each Portfolio intends to
conduct its operations so that its corresponding Fund will be able to satisfy
all those requirements.
Distributions to each Feeder Fund from its corresponding Portfolio (whether
pursuant to a partial or complete withdrawal or otherwise) will not result in
the Fund's recognition of any gain or loss for federal income tax purposes,
except that (1) gain will be recognized to the extent any cash that is
distributed exceeds the Fund's basis for its interest in the Portfolio before
the distribution, (2) income or gain will be recognized if the distribution is
in liquidation of the Fund's entire interest in its Portfolio and includes a
disproportionate share of any unrealized receivables held by the Portfolio, and
(3) loss will be recognized if a liquidation distribution consists solely of
cash and/or unrealized receivables. Each Feeder Fund's basis for its interest in
its corresponding Portfolio generally will equal the amount of cash and the
basis of any property the Fund invests in the Portfolio, increased by the Fund's
share of the Portfolio's net income and gains and decreased by (a) the amount of
cash and the basis of any property the Portfolio distributes to the Fund and (b)
the Fund's share of the Portfolio's losses.
FOREIGN TAXES. Dividends and interest received by a Theme Portfolio may be
subject to income, withholding or other taxes imposed by foreign countries and
U.S. possessions that would reduce the yield on its securities. Tax conventions
between certain countries and the United States may reduce or eliminate these
foreign taxes, however, and many foreign countries do not impose taxes on
capital gains in respect of investments by foreign investors. If more than 50%
of the value of a Fund's total assets (taking into account, in the case of a
Feeder Fund, its proportionate share of its corresponding Portfolio's assets) at
the close of its taxable year consists of securities of foreign corporations,
the Fund will be eligible to, and may, file an election with the Internal
Revenue Service that will enable its shareholders, in effect, to receive the
benefit of the foreign tax credit with respect to any foreign income taxes paid
by it (taking into account, in the case of a Feeder Fund, its proportionate
share of those taxes paid by its corresponding Portfolio). Pursuant to the
election, a Fund will treat those taxes as dividends paid to its shareholders
and each shareholder will be required to (1) include in gross income, and treat
as paid by him, his proportionate share of those taxes, (2) treat his share of
those taxes and of any dividend paid by the Fund that represents income from
foreign sources as his own income from those sources, and (3) either deduct the
taxes deemed paid by him in computing his taxable income or, alternatively, use
the foregoing information in calculating the foreign tax credit against his
federal income tax. Each Fund will report to its shareholders shortly after each
taxable year their respective shares of the Fund's income (taking into account,
in the case of a Feeder Fund, its proportionate share of its corresponding
Portfolio's income) from sources within, and taxes paid to, foreign countries
and U.S. possessions if it makes this election.
PASSIVE FOREIGN INVESTMENT COMPANIES. Each Theme Portfolio may invest in the
stock of PFICs. A PFIC is a foreign corporation that, in general, meets either
of the following tests: (1) at least 75% of its gross income is passive or (2)
an average of at least 50% of its assets produce, or are held for the production
of, passive income. Under certain circumstances, a Fund will be subject to
federal income tax on a part (or, in the case of a Feeder Fund, its
proportionate share of a part) of any "excess distribution" received by it (or,
in the case of a Feeder Fund, by its corresponding Portfolio) on the stock of a
PFIC or of any gain on the Fund's (or, in the case of a Feeder Fund, its
corresponding Portfolio's) disposition of that stock (collectively, "PFIC
income"), plus interest thereon, even if the Fund distributes the PFIC income as
a taxable dividend to its shareholders. The balance of the PFIC income will be
included in the Fund's investment company taxable income and, accordingly, will
not be taxable to it to the extent that income is distributed to its
shareholders.
If a Theme Portfolio invests in a PFIC and elects to treat the PFIC as a
"qualified electing fund" ("QEF"), then in lieu of the foregoing tax and
interest obligation, the Theme Portfolio (or, in the case of a Portfolio, its
corresponding Feeder Fund) will be required to include in income each year its
pro rata share of the QEF's annual ordinary earnings and net capital gain (the
excess of net long-term capital gain over net short-term capital loss) -- which
most likely would have to be distributed by that Theme Portfolio (or, in the
case of a Portfolio, its corresponding Feeder Fund) to satisfy the Distribution
Requirement and to avoid imposition of the Excise Tax -- even if those earnings
and gain were not received thereby. In most instances it will be very difficult,
if not impossible, to make this election because of certain requirements
thereof.
Pursuant to proposed regulations, open-end RICs, such as the Funds, would be
entitled to elect to "mark-to-market" their stock in certain PFICs.
"Marking-to-market," in this context, means recognizing as gain for each taxable
year the excess, as of the end of that year, of the fair market value of each
such PFIC's stock over the adjusted basis in that stock (including
mark-to-market gain for each prior year for which an election was in effect).
Statement of Additional Information Page 32
<PAGE>
GT GLOBAL THEME FUNDS
OPTIONS, FUTURES AND FOREIGN CURRENCY TRANSACTIONS. The Theme Portfolios'
use of hedging transactions, such as selling (writing) and purchasing options
and Futures and entering into Forward Contracts, involves complex rules that
will determine, for federal income tax purposes, the character and timing of
recognition of the gains and losses a Theme Portfolio realizes in connection
therewith. Gains from foreign currencies (except certain gains that may be
excluded by future regulations), and gains from the disposition of options,
Futures and Forward Contracts derived by a Theme Portfolio with respect to its
business of investing in securities or foreign currencies, will qualify as
permissible income under the Income Requirement for that Theme Portfolio (or, in
the case of a Portfolio, its corresponding Feeder Fund). However, income from
the disposition by a Theme Portfolio of options and Futures (other than those on
foreign currencies) will be subject to the Short-Short Limitation for that Theme
Portfolio (or, in the case of a Portfolio, its corresponding Feeder Fund) if
they are held for less than three months. Income from the disposition by a Theme
Portfolio of foreign currencies, and options, Futures and Forward Contracts on
foreign currencies, that are not directly related to its principal business of
investing in securities (or options and Futures with respect thereto) also will
be subject to the Short-Short Limitation for that Theme Portfolio (or, in the
case of a Portfolio, its corresponding Feeder Fund) if they are held for less
than three months.
If a Theme Portfolio satisfies certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any decrease in
value (whether realized or not) of the offsetting hedging position during the
period of the hedge for purposes of determining whether that Theme Portfolio
(or, in the case of a Portfolio, its corresponding Feeder Fund) satisfies the
Short-Short Limitation. Thus, only the net gain (if any) from the designated
hedge will be included in gross income for purposes of that limitation. Each
Theme Portfolio intends that, when it engages in hedging transactions, it will
qualify for this treatment, but at the present time it is not clear whether this
treatment will be available for all of those transactions. To the extent this
treatment is not available, a Theme Portfolio may be forced to defer the closing
out of certain options, Futures, Forward Contracts or foreign currency positions
beyond the time when it otherwise would be advantageous to do so, in order for
that Theme Portfolio (or, in the case of a Portfolio, its corresponding Feeder
Fund) to continue to qualify as a RIC.
Futures and Forward Contracts that are subject to Section 1256 of the Code
(other than those that are part of a "mixed straddle") ("Section 1256
Contracts") and that are held by a Theme Portfolio at the end of its taxable
year generally will be deemed to have been sold at market value for federal
income tax purposes. Sixty percent of any net gain or loss recognized on these
deemed sales, and 60% of any net gain or loss realized from any actual sales of
Section 1256 Contracts, will be treated as long-term capital gain or loss, and
the balance will be treated as short-term capital gain or loss. Section 988 of
the Code also may apply to gains and losses from transactions in foreign
currencies, foreign-currency-denominated debt securities and options, Futures
and Forward Contracts on foreign currencies ("Section 988 gains or losses").
Each Section 988 gain or loss generally is computed separately and treated as
ordinary income or loss. In the case of overlap between sections 1256 and 988,
special provisions determine the character and timing of any income, gain or
loss. Each Theme Portfolio attempts to monitor section 988 transactions to
minimize any adverse tax impact.
TAXATION OF THE FUNDS' SHAREHOLDERS
Dividends and other distributions declared by a 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 a 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 a Fund (directly or through a
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 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 a 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 a Fund to a foreign shareholder
is "effectively connected with the conduct of a 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
Statement of Additional Information Page 33
<PAGE>
GT GLOBAL THEME FUNDS
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 income tax
considerations affecting the Funds, their shareholders and the Portfolios.
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 a 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, located 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. located in
Singapore; LGT Asset Management Ltd., formerly G.T. Management (Australia) Ltd.,
located in Sydney; and LGT Asset Management GmbH, formerly BIL Asset Management
GmbH, located in Frankfurt, Germany.
THE COMPANY
The Company was organized as a Maryland corporation on October 29, 1987. Until
April 28, 1989, the name of the Company was GT Global Income Series, Inc. From
time to time, the Company may establish other funds, each corresponding to a
distinct investment portfolio and a distinct series of the Company's common
stock.
CUSTODIAN
State Street Bank and Trust Company ("State Street"), 225 Franklin Street,
Boston, Massachusetts 02110, acts as custodian of the Theme Portfolios' assets.
State Street is authorized to establish and has established separate accounts in
foreign currencies and to cause securities of the Theme Portfolios to be held in
separate accounts outside the United States in the custody of non-U.S. banks.
INDEPENDENT ACCOUNTANTS
The Company's and Global Investment Theme Portfolio'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 Portfolios' and
the Funds' financial statements, assists in the preparation of each Portfolio's
and each Fund's federal and state income tax returns and consults with the
Company and Global Investment Portfolio as to matters of accounting, regulatory
filings, and federal and state income taxation.
The audited financial statements of the Company 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 said firm as experts in accounting and
auditing.
USE OF NAME
The Manager has granted the Company the right to use the "GT" and "GT Global"
name and has reserved the right to withdraw its consent to the use of such names
by the Company at any time, or to grant the use of such names to any other
company.
Statement of Additional Information Page 34
<PAGE>
GT GLOBAL THEME FUNDS
INVESTMENT RESULTS
- --------------------------------------------------------------------------------
Each Fund's "Standardized Return," 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 each Fund, as
follows: Standardized Return ("T") is computed by using the value at the end of
the period ("EV") 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)(n) = EV. 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 Board and (4) a complete redemption at the end of any period
illustrated.
The Standardized Returns for Advisor Class shares of the Health Care Fund and
Telecommunications Fund, stated as aggregate total returns for the periods
shown, were:
<TABLE>
<CAPTION>
HEALTH CARE TELECOMMUNI-
PERIOD FUND CATIONS FUND
- -------------------------------------------------- ----------- ------------
<S> <C> <C>
Year ended October 31, 1996....................... % %
June 1, 1995 through October 31, 1996............. % %
</TABLE>
As discussed in the Prospectus, each Fund may quote Non-Standardized Total
Returns that do not reflect the effect of sales charges. Non-Standardized
Returns may be quoted for the same or different time periods for which
Standardized Returns are quoted. The Non-Standardized Returns for the Advisor
Class shares of the Health Care Fund and Telecommunications Fund, stated as
aggregate total returns for the periods shown, were:
<TABLE>
<CAPTION>
TELECOMMUNI-
HEALTH CARE CATIONS
PERIOD FUND FUND
- -------------------------------------------------- ----------- -----------
<S> <C> <C>
Year ended October 31, 1996....................... % %
June 1, 1995 through October 31, 1996............. % %
</TABLE>
The Financial Services Fund, Infrastructure Fund and Natural Resources Fund
Standardized Returns for Advisor Class shares, stated as aggregate total returns
for the periods shown, were:
<TABLE>
<CAPTION>
FINANCIAL SERVICES INFRASTRUCTURE NATURAL RESOURCES
PERIOD FUND FUND FUND
- ----------------------------------------------------------------- ------------------ -------------- -----------------
<S> <C> <C> <C>
Year ended October 31, 1996...................................... % % %
June 1, 1995 through October 31, 1996............................ % % %
</TABLE>
The Non-Standardized Returns for Advisor Class shares of Financial Services
Fund, Infrastructure Fund and Natural Resources Fund, stated as aggregate total
returns for the periods shown, were:
<TABLE>
<CAPTION>
FINANCIAL SERVICES INFRASTRUCTURE NATURAL RESOURCES
PERIOD FUND FUND FUND
- ----------------------------------------------------------------- ------------------ -------------- -----------------
<S> <C> <C> <C>
Year ended October 31, 1996...................................... % % %
June 1, 1995 through October 31, 1996............................ % % %
</TABLE>
The Standardized Return for the Advisor Class shares of Consumer Products and
Services Fund stated as aggregate total return for the year ended October 31,
1996 and for the period June 1, 1995 (commencement of operations) to October 31,
1995 was % and 23.65%, respectively.
The Non-Standardized Return for Advisor Class shares of Consumer Products and
Services Fund stated as aggregate total return for the year ended October 31,
1996 and for the period June 1, 1995 through October 31, 1995 was % and
23.65%, respectively.
Statement of Additional Information Page 35
<PAGE>
GT GLOBAL THEME FUNDS
The Standardized Returns for the Class A shares of Health Care Fund and
Telecommunications Fund, stated as average annualized total returns for the
periods shown, were:
<TABLE>
<CAPTION>
HEALTH CARE TELECOMMUNI-
PERIOD FUND CATIONS FUND
- -------------------------------------------------- ----------- ------------
Fiscal year ended October 31, 1996................ % %
<S> <C> <C>
January 27, 1993 through October 31, 1996......... % %
November 1, 1991 through October 31, 1996......... % %
August 7, 1989 through October 31, 1996........... % %
</TABLE>
The Standardized Returns for the Class B Shares of the Health Care Fund and
Telecommunications Fund, which were first offered April 1, 1993, stated as
aggregate returns for the periods shown, were:
<TABLE>
<CAPTION>
HEALTH CARE TELECOMMUNI-
PERIOD FUND CATIONS FUND
- -------------------------------------------------- ----------- ------------
Fiscal year ended October 31, 1996................ % %
<S> <C> <C>
April 1, 1993 through October 31, 1996............ % %
</TABLE>
The Standardized Returns for the Class B Shares of the Health Care Fund and
Telecommunications Fund, which were first offered April 1, 1993, stated as
average annualized total returns for the periods shown, were:
<TABLE>
<CAPTION>
HEALTH CARE TELECOMMUNI-
PERIOD FUND CATIONS FUND
- -------------------------------------------------- ----------- ------------
Fiscal year ended October 31, 1996................ % %
<S> <C> <C>
April 1, 1993 through October 31, 1996............ % %
</TABLE>
As discussed in the Prospectus, each Fund may quote Non-Standardized Total
Returns that do not reflect the effect of sales charges. Non-Standardized
Returns may be quoted for the same or different time periods for which
Standardized Returns are quoted. The Non-Standardized Returns for the Class A
shares of the Health Care Fund and Telecommunications Fund, stated as aggregate
total returns for the periods shown, were:
<TABLE>
<CAPTION>
HEALTH CARE TELECOMMUNI-
PERIOD FUND CATIONS FUND
- -------------------------------------------------- ----------- ------------
Fiscal year ended October 31, 1996................ % %
<S> <C> <C>
January 27, 1993 through October 31, 1996......... % %
August 7, 1989 through October 31, 1996........... % %
</TABLE>
The Non-Standardized Returns for the Class B shares of the Health Care Fund and
Telecommunications Fund, which were first offered on April 1, 1993, stated as
aggregate total returns for the periods shown, were:
<TABLE>
<CAPTION>
HEALTH CARE TELECOMMUNI-
PERIOD FUND CATIONS FUND
- -------------------------------------------------- ----------- ------------
Fiscal year ended October 31, 1996................ % %
<S> <C> <C>
April 1, 1993 through October 31, 1996............ % %
</TABLE>
The Non-Standardized Returns for the Class A shares of the Health Care Fund and
Telecommunications Fund, stated as average annualized total returns for the
periods shown, were:
<TABLE>
<CAPTION>
HEALTH CARE TELECOMMUNI-
PERIOD FUND CATIONS FUND
- -------------------------------------------------- ----------- ------------
Fiscal year ended October 31, 1996................ % %
<S> <C> <C>
January 27, 1992 through October 31, 1996......... % %
November 1, 1991 through October 31, 1996......... % %
August 7, 1989 through October 31, 1996........... % %
</TABLE>
The Non-Standardized Returns for the Class B shares of the Health Care Fund and
Telecommunications Fund, stated as average annualized total returns for the
periods shown, were:
<TABLE>
<CAPTION>
HEALTH CARE TELECOMMUNI-
PERIOD FUND CATIONS FUND
- -------------------------------------------------- ----------- ------------
Fiscal year ended October 31, 1996................ % %
<S> <C> <C>
April 1, 1993 through October 31, 1996............ % %
</TABLE>
Statement of Additional Information Page 36
<PAGE>
GT GLOBAL THEME FUNDS
The Financial Services Fund, Infrastructure Fund and Natural Resources Fund
Standardized Returns for their Class A shares, stated as average annualized
total returns for the periods shown, were:
<TABLE>
<CAPTION>
FINANCIAL SERVICES INFRASTRUCTURE NATURAL RESOURCES
PERIOD FUND FUND FUND
- -------------------------------------------------- ------------------ -------------- -----------------
Year ended October 31, 1996....................... % % %
<S> <C> <C> <C>
May 31, 1994 through October 31, 1996............. % % %
</TABLE>
The Financial Services Fund, Infrastructure Fund and Natural Resources Fund
Standardized Returns for their Class A shares, stated as aggregate total returns
for the periods shown, were:
<TABLE>
<CAPTION>
FINANCIAL SERVICES INFRASTRUCTURE NATURAL RESOURCES
PERIOD FUND FUND FUND
- -------------------------------------------------- ------------------ -------------- -----------------
Year ended October 31, 1996....................... % % %
<S> <C> <C> <C>
May 31, 1994 through October 31, 1996............. % % %
</TABLE>
The Financial Services Fund, Infrastructure Fund and Natural Resources Fund
Standardized Returns for their Class B shares, stated as aggregate total returns
for the periods shown, were:
<TABLE>
<CAPTION>
FINANCIAL SERVICES INFRASTRUCTURE NATURAL RESOURCES
PERIOD FUND FUND FUND
- -------------------------------------------------- ------------------ -------------- -----------------
Year ended October 31, 1996....................... % % %
<S> <C> <C> <C>
May 31, 1994 through October 31, 1996............. % % %
</TABLE>
The Standardized Returns for the Class B shares of Financial Services Fund,
Infrastructure Fund and Natural Resources Fund, stated as average annualized
total returns for the periods shown, were:
<TABLE>
<CAPTION>
FINANCIAL SERVICES INFRASTRUCTURE NATURAL RESOURCES
PERIOD FUND FUND FUND
- -------------------------------------------------- ------------------ -------------- -----------------
Year ended October 31, 1996....................... % % %
<S> <C> <C> <C>
May 31, 1994 through October 31, 1996............. % % %
</TABLE>
The Non-Standardized Returns for the Class A shares of Financial Services Fund,
Infrastructure Fund and Natural Resources Fund, stated as aggregate total
returns for the periods shown, were:
<TABLE>
<CAPTION>
FINANCIAL SERVICES INFRASTRUCTURE NATURAL RESOURCES
PERIOD FUND FUND FUND
- -------------------------------------------------- ------------------ -------------- -----------------
Year ended October 31, 1996....................... % % %
<S> <C> <C> <C>
May 31, 1994 through October 31, 1996............. % % %
</TABLE>
The Non-Standardized Returns for the Class B shares of Financial Services Fund,
Infrastructure Fund and Natural Resources Fund, stated as aggregate total
returns for the periods shown, were:
<TABLE>
<CAPTION>
FINANCIAL SERVICES INFRASTRUCTURE NATURAL RESOURCES
PERIOD FUND FUND FUND
- -------------------------------------------------- ------------------ -------------- -----------------
Year ended October 31, 1996....................... % % %
<S> <C> <C> <C>
May 31, 1994 through October 31, 1996............. % % %
</TABLE>
The Non-Standardized Returns for the Class A shares of Financial Services Fund,
Infrastructure Fund and Natural Resources Fund, stated as average annualized
total returns for the periods shown, were:
<TABLE>
<CAPTION>
FINANCIAL SERVICES INFRASTRUCTURE NATURAL RESOURCES
PERIOD FUND FUND FUND
- -------------------------------------------------- ------------------ -------------- -----------------
Year ended October 31, 1996....................... % % %
<S> <C> <C> <C>
May 31, 1994 through October 31, 1996............. % % %
</TABLE>
The Non-Standardized Returns for the Class B shares of Financial Services Fund,
Infrastructure Fund and Natural Resources Fund, stated as average annualized
total returns for the periods shown, were:
<TABLE>
<CAPTION>
FINANCIAL SERVICES INFRASTRUCTURE NATURAL RESOURCES
PERIOD FUND FUND FUND
- -------------------------------------------------- ------------------ -------------- -----------------
Year ended October 31, 1996....................... % % %
<S> <C> <C> <C>
May 31, 1994 through October 31, 1996............. % % %
</TABLE>
Statement of Additional Information Page 37
<PAGE>
GT GLOBAL THEME FUNDS
The Standardized Return for the Class A shares of Consumer Products and Services
Fund stated as aggregate total return for the year ended October 31, 1996 and
for the period December 30, 1994 (commencement of operations) to October 31,
1996 was % and 21.58%, respectively. Standardized Return for Consumer
Products and Service Fund's Class B shares, stated as aggregate total return,
for the same periods was % and 22.12%, respectively.
The Non-Standardized Return for the Class A shares of Consumer Products and
Services Fund stated as aggregate total return for the year ended October 31,
1996 and for the period December 30, 1994 (commencement of operations) to
October 31, 1995 was % and 27.65%, respectively. Non-Standardized Return for
such Fund's Class B shares for the same period, stated as aggregate return, was
% and 27.12%, respectively.
Each Fund's investment results will vary from time to time depending upon market
conditions, the composition of each Fund's portfolio and operating expenses of
each Fund, so that current or past yield or total return should not be
considered representative of what an investment in each 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 each Fund's
investment results with those published for other investment companies and other
investment vehicles. Each Fund's results also should be considered relative to
the risks associated with such Fund's investment objective and policies.
IMPORTANT POINTS TO NOTE ABOUT DATA RELATING TO WORLD EQUITY AND BOND MARKETS
Each Fund and GT Global may from time to time in advertisements, sales
literature and reports furnished to present or prospective shareholders compare
a 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 Hutton 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. or BBB by Standard and Poor's, or, in the case of nonrated bonds, BBB
by Fitch Investors Service (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 Fund may be compared to the 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
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 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 U.S.
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GT GLOBAL THEME FUNDS
(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 of 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
telecommunication 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 Investors Service, Inc., Fitch Investor's Service, Inc.,
Standard & Poor's.
(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, Barings
Securities, 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, 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. Each 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 Company
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.
Statement of Additional Information Page 39
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GT GLOBAL THEME FUNDS
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 any of these Funds, nor is it a
prediction of such performance. The performance of the Funds will differ from
the historical performance of relevant indices. The performance of indices does
not take expenses into account, while each Fund incurs expenses in its
operations, which will reduce performance. Each Fund is actively managed, I.E.,
the Manager, as each Fund's investment manager, actively purchases and sells
securities in seeking each Fund's investment objective. Moreover, each Fund may
invest a portion of its assets in corporate bonds, while certain indices relate
only to government bonds. Each of these factors will cause the performance of
each Fund to differ from the relevant indices.
From time to time, each Fund and GT Global may refer to the number of
shareholders in the Funds or the aggregate number of shareholders in all GT
Global Mutual Funds or the dollar amount of each Fund's assets under management
or rankings by DALBAR Surveys, Inc. in advertising materials.
GT Global believes each 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. Each Fund does not
represent a complete investment program and the investors should consider each
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.
Each Fund may quote various measures of volatility and benchmark correlation
such as beta, standard deviation and R(2) in advertising. In addition, each Fund
may compare these measures to those of other funds. Measures of volatility seek
to compare each 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.
Each 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.
Each 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.
Each 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
Statement of Additional Information Page 40
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GT GLOBAL THEME FUNDS
investor to make pre-tax contributions. Because of their advantages, these
retirement plans may produce returns superior to comparable non-retirement
investments. In sales material and advertisements, the Funds may also discuss
these accounts and plans, which include:
INDIVIDUAL RETIREMENT ACCOUNTS (IRAS): Any individual who receives earned income
from employment (including self-employment) can contribute up to $2,000 (or if
less, 100% of compensation) each year to an IRA. If your spouse is not employed,
a total of $2,250 may be contributed each year to IRAs set up for you and your
spouse (subject to the maximum of $2,000 to either IRA). 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 rollover (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 roll-over 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 AND SALARY REDUCTION SEP-IRAS: Simplified employee pension plans
("SEPs" or "SEP-IRAs") and salary-reduction SEPs 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.
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 CODE SECTION 401(K)) AND MONEY PURCHASE PENSION
PLANS: Corporations can sponsor these qualified defined contribution plans for
their employees. A Code 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).
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 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 Funds and GT Global will quote certain data regarding
industries, individual countries, regions, world stock exchanges, and economic
and demographic statistics from sources GT Global deems reliable, including, but
not limited to, the economic and financial data of such financial organizations
as:
1) Stock market capitalization: Morgan Stanley Capital International World
Indices, International Finance Corporation and Datastream.
2) Stock market trading volume: Morgan Stanley Capital International World
Indices, International Finance Corporation.
3) The number of listed companies: International Finance Corporation, 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, International Finance Corporation and Datastream.
7) The Consumer Price Index and inflation rate: The World Bank, Datastream and
International Finance Corporation.
8) Gross Domestic Product (GDP): Datastream and The World Bank.
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GT GLOBAL THEME FUNDS
9) GDP growth rate: International Finance Corporation, 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: International Finance Corporation, The
World Bank and Datastream.
14) Top three companies by country, industry or market: International Finance
Corporation, 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
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.
THE GT ADVANTAGE
The Manager has developed a unique team approach to its global money management
which we call the GT Advantage. The Manager's money management style combines
the best of the "top-down" and "bottom-up" investment manager strategies. The
top-down approach is implemented by the Manager's Investment Policy Committee,
which sets broad guidelines for asset allocation and currency management, based
on the Manager's own macroeconomic forecasts and research from our worldwide
offices. The bottom-up approach utilizes regional teams of individual portfolio
managers to implement the committee's guidelines by selecting local securities
that offer strong growth and income potential.
GENERAL INFORMATION ABOUT THE THEME FUNDS AND THEME PORTFOLIOS
Each Theme Portfolio may invest worldwide across industries within the Portfolio
area of concentration without national or regional restrictions. The ability of
each Theme Portfolio to invest worldwide may allow the portfolio managers to
select industries in different economic cycles and varying stages of
development, though there is no assurance that the managers will be successful
in this selection.
Each Theme Portfolio's area of concentration reflects the underlying theme of
the Portfolio. GT Global believes that there are certain social, political and
economic trends that may benefit one or more industries within a Theme
Portfolio's area of concentration. Of course, there is no assurance that any of
the Funds will benefit as a result.
Statement of Additional Information Page 42
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GT GLOBAL THEME FUNDS
HEALTH CARE FUND
From time to time the Fund and GT Global will quote information including, but
not limited to, data regarding:
/ / Trading volume, number of listed companies and the largest companies of
the global health care industry
/ / Expenditures by various countries, regions and age groups on health care
/ / Population of countries, regions and age groups
/ / Natality and mortality rates in various regions, countries and age
groups
/ / Life expectancy rates in various regions, countries and age groups
/ / New health care products and products seeking approval
/ / Health maintenance organizations (HMOs) and its enrollment growth
/ / Studies from, but not limited to, the American Medical Association
showing the effectiveness of using drugs to cure illness
/ / Medical technology and devices in use or in development
/ / Regulatory environment of health care industries
/ / Consolidation in the health care industries
The information quoted has not been independently verified by a Fund or GT
Global and will be based on data provided that is believed to be reliable and
accurate from, but not limited to, the following sources:
/ / Research firms such as Mehta and Isaly which publishes PHARMACEUTICAL
PORTFOLIO RECOMMENDATIONS
/ / OECD and its publications such as the OECD HEALTH DATA, as supplemented
annually
/ / Morgan Stanley Capital International stock market industry indices such
as Health & Personal Care
/ / The World Bank and its publications such as THE WORLD DEVELOPMENT
REPORT, as supplemented annually
/ / International Finance Corporation (IFC) and publications such as the
EMERGING STOCK MARKETS FACTBOOK
INFORMATION ABOUT THE GLOBAL HEALTH CARE INDUSTRIES
The Health Care Fund and the Manager believe that certain market and demographic
factors merit an investor's consideration of making a health care investment.
Worldwide standards of living and life expectancy have increased at a
substantial rate during the past twenty years (based on the most recent data
available at December 31, 1992, as compiled by the OECD). The Manager expects
this growth, which works to the general benefit of the global health care
industry, to continue at a roughly comparable rate in the future, although no
assurances can be given in this regard. Moreover, according to the Manager, the
health care industry historically has proven to be a relatively non-cyclical
industry that continues to provide goods and services to the public in periods
of economic weakness as well as economic strength.
The Manager believes that the anticipated increase in the world's elderly
population could increase demand for health care products and services. For
example, according to data compiled by the Manager, in Japan the number of
people age 65 and older is expected to grow over 100% by the year 2025; in
Germany, France and the U.S., the same age group should grow 40%. Similarly, the
U.S. Census Bureau predicts the number of Americans 85 and older to double in
the next 30 years. From time to time, the Fund and GT Global will quote
information including, but not limited to, international data regarding
populations, birth rates, mortality rates, life expectancy, health care
expenditures, and gross domestic product vs. life expectancy. The information
quoted has not been independently verified by the Fund or GT Global and will be
based on data that is believed to be reliable and accurate.
TELECOMMUNICATIONS FUND
From time to time the Fund and GT Global will quote information including, but
not limited to, data regarding:
/ / Increased usage of new technologies such as, but not limited to,
cellular and wireless communications in emerging and established
countries around the world
/ / Supply and demand of telephone equipment and services
/ / Regulatory environment of telecommunications industries
/ / Revenue, price and usage of telecommunications products and services
/ / Privatization of telecommunications companies
Statement of Additional Information Page 43
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GT GLOBAL THEME FUNDS
The information quoted has not been independently verified by the Fund or GT
Global and will be based on data provided that is believed to be reliable and
accurate from but not limited to the following sources:
/ / Salomon Brothers World Equity Telecommunications Index, which includes
stock market data about the telecommunications industry in established
and developing markets
/ / OECD and other publications from its subsidiaries such as the
International Telecommunications Union
/ / Morgan Stanley Capital International stock market industry indices such
as Telecommunications, Broadcasting & Publishing and Data Processing &
Reproduction
/ / International Technology Consultants (ITC), a Washington D.C. based firm
which publishes reports such as EASTERN EUROPEAN & SOVIET TELECOM REPORT
and LATIN AMERICAN TELECOM REPORT
DEREGULATION IN THE UNITED STATES
The United States has been the bellwether for deregulation of the telephone
industry. The divestiture of the Bell System from American Telephone and
Telegraph has produced new competing companies in the United States. Such U.S.
market-driven competition has, for example, led to lower costs for consumers
which in turn led to greater consumer usage and to higher industrywide revenues.
The Manager expects this scenario to continue to benefit such companies in the
U.S. and similarly to be realized by the established telecommunications
companies in established economies, although no assurances can be made in this
regard.
GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
From time to time the Fund and GT Global will quote information including, but
not limited to, data regarding:
/ / Trading volume, number of listed companies and the largest companies
located around the world in the consumer products and services
industries
/ / Expenditures, demand and consumption by various countries, regions,
income classes and age groups of consumer products and services
/ / Population of countries, regions and age groups
/ / Life expectancy rates in various regions, countries and age groups
/ / New consumer products and services in the development or manufacturing
stages
/ / Income of various regions, countries and age groups
/ / Sales and sales growth of consumer products and services companies in
their own country and abroad
/ / Sales, supply and demand of consumer products and services
/ / Parent Companies and the products and services they distribute
/ / Regulatory environment of consumer products industries
The information quoted will not be independently verified by the Fund or GT
Global and will be based on data provided that is believed to be reliable and
accurate from, but not limited to, the following sources:
/ / Consumer and trade groups
/ / Fortune magazine and other periodicals
/ / The World Bank and its publications
/ / The International Monetary Fund (IMF) and its publications
/ / The International Finance Corporation (IFC) and its publications
/ / The Organization for Economic Cooperation and Development (OECD) and its
publications
INFRASTRUCTURE FUND
From time to time the Fund and GT Global may quote information including, but
not limited to:
/ / Supply and demand of telephone equipment and services, electricity,
water, transportation, construction materials and other infrastructure
related products and services
/ / Regulatory environment of infrastructure industries
/ / Quantity and costs of current and projected infrastructure projects
/ / Privatization of industries and companies
/ / New technologies, products and services used in infrastructure
industries
Statement of Additional Information Page 44
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GT GLOBAL THEME FUNDS
FINANCIAL SERVICES FUND
From time to time the Fund and GT Global may quote information including, but
not limited to:
/ / Supply and demand of financial services
/ / Regulatory environment of financial service industries
/ / Credit ratings of U.S. and non-U.S. banks
/ / New technologies, products and services used in the financial services
industries
/ / Consolidation in the financial services industries
NATURAL RESOURCES FUND
From time to time the Fund and GT Global may quote information including, but
not limited to:
/ / Supply, demand and prices of natural resources
/ / Regulatory environment of natural resources
/ / Supply, demand and prices of products manufactured from natural
resources
/ / New technologies, products and services used in the natural resources
industries
- --------------------------------------------------------------------------------
DESCRIPTION OF DEBT RATINGS
- --------------------------------------------------------------------------------
DESCRIPTION OF COMMERCIAL PAPER RATINGS
MOODY'S INVESTORS SERVICE, INC. ("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 short-term debt obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics: leading
market positions in well-established industries; high rates of return on funds
employed; conservative capitalization structures 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 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, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
STANDARD & POOR'S RATINGS GROUP ("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. If, 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.
Statement of Additional Information Page 45
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GT GLOBAL THEME FUNDS
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
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 opertaining 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.
Statement of Additional Information Page 46
<PAGE>
GT GLOBAL THEME FUNDS
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.
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.
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FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The audited financial statements of each Theme Fund at October 31, 1996, and for
the year then ended, appear on the following pages.
Statement of Additional Information Page 47
<PAGE>
GT GLOBAL THEME FUNDS
NOTES
- --------------------------------------------------------------------------------
Statement of Additional Information Page 48
<PAGE>
GT GLOBAL THEME FUNDS
NOTES
- --------------------------------------------------------------------------------
Statement of Additional Information Page 49
<PAGE>
GT GLOBAL THEME FUNDS
NOTES
- --------------------------------------------------------------------------------
Statement of Additional Information Page 50
<PAGE>
GT GLOBAL THEME FUNDS
GT GLOBAL MUTUAL FUNDS
GT GLOBAL OFFERS A BROAD RANGE OF MUTUAL FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY OF THE GT GLOBAL
MUTUAL FUNDS, PLEASE CONTACT YOUR INVESTMENT COUNSELOR OR CALL GT GLOBAL
DIRECTLY AT 1-800-824-1580.
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL WORLDWIDE GROWTH FUND
Invests around the world, including the U.S.
GT GLOBAL INTERNATIONAL GROWTH FUND
Provides portfolio diversity by investing outside the U.S.
GT GLOBAL EMERGING MARKETS FUND
Gives access to the growth potential of developing economies
/ / GLOBAL THEME FUNDS
GT GLOBAL CONSUMER PRODUCTS AND SERVICES FUND
Invests in companies that manufacture, market, retail, or distribute consumer
products or services
GT GLOBAL FINANCIAL SERVICES FUND
Focuses on the worldwide opportunities from the demand for financial services
and products
GT GLOBAL HEALTH CARE FUND
Invests in the growing health care industries worldwide
GT GLOBAL INFRASTRUCTURE FUND
Seeks companies that build, improve or maintain a country's infrastructure
GT GLOBAL NATURAL RESOURCES FUND
Concentrates on companies that own, explore or develop natural resources
GT GLOBAL TELECOMMUNICATIONS FUND
Invests in companies worldwide that develop, manufacture or sell
telecommunications services or equipment
/ / REGIONALLY DIVERSIFIED FUNDS
GT GLOBAL NEW PACIFIC GROWTH FUND
Offers access to the emerging and established markets of the Pacific Rim,
excluding Japan
GT GLOBAL EUROPE GROWTH FUND
Focuses on investment opportunities in the new, unified Europe
GT GLOBAL LATIN AMERICA GROWTH FUND
Invests in the emerging markets of Latin America
/ / SINGLE COUNTRY FUNDS
G.T. GLOBAL AMERICA SMALL CAP GROWTH FUND
Invests in equity securities of small U.S. companies
GT GLOBAL AMERICA MID CAP GROWTH FUND
Concentrates on medium-sized companies in the U.S.
G.T. GLOBAL AMERICA VALUE FUND
Concentrates of equity securities of large cap companies believed to be
undervalued
GT GLOBAL JAPAN GROWTH FUND
Provides U.S. investors with direct access to the Japanese market
GROWTH AND INCOME FUNDS
GT GLOBAL GROWTH & INCOME FUND
Invests in blue-chip stocks and government bonds from around the world
FIXED INCOME FUNDS
GT GLOBAL GOVERNMENT INCOME FUND
Earns monthly income from global government securities
GT GLOBAL STRATEGIC INCOME FUND
Allocates its assets among debt securities from the U.S., developed foreign
countries and emerging markets
GT GLOBAL HIGH INCOME FUND
Invests in debt securities in emerging markets
MONEY MARKET FUND
GT GLOBAL DOLLAR FUND
Invests in high quality, U.S. dollar-denominated money market securities
worldwide for stability and preservation of capital
[LOGO]
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY G.T. INVESTMENT FUNDS, INC.,
GT GLOBAL FINANCIAL SERVICES FUND, GLOBAL FINANCIAL SERVICES PORTFOLIO, GT
GLOBAL INFRASTRUCTURE FUND, GLOBAL INFRASTRUCTURE PORTFOLIO, GT GLOBAL
NATURAL RESOURCES FUND, GLOBAL NATURAL RESOURCES PORTFOLIO, GT GLOBAL
CONSUMER PRODUCTS AND SERVICES FUND, GLOBAL CONSUMER PRODUCTS AND SERVICES
PORTFOLIO, GT GLOBAL HEALTH CARE FUND, GT GLOBAL TELECOMMUNICATIONS FUND,
CHANCELLOR LGT ASSET MANAGEMENT, INC. OR GT GLOBAL, INC. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF ANY OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON IN SUCH
JURISDICTION TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER.
THESX610MC
<PAGE>
GT GLOBAL INCOME FUNDS:
ADVISOR CLASS
50 California Street, 27th Floor
San Francisco, California 94111
(415) 392-6181
Toll Free: (800) 824-1580
Statement of Additional Information
March 1, 1997
- --------------------------------------------------------------------------------
This Statement of Additional Information relates to the Advisor Class shares of
the GT Global Government Income Fund ("Government Income Fund"), GT Global
Strategic Income Fund ("Strategic Income Fund") and GT Global High Income Fund
("High Income Fund") (individually, a "Fund," collectively, "Funds"). Each Fund
is a mutual fund organized as a separate non-diversified series of G.T.
Investment Funds, Inc. ("Company"), a registered open-end management investment
company. This Statement of Additional Information, which is not a Prospectus,
supplements and should be read in conjunction with the Funds' current Advisor
Class Prospectus dated March 1, 1997, a copy of which is available without
charge by writing to the above address or by calling the Funds at the toll-free
telephone number listed above.
Chancellor LGT Asset Management, Inc. (the "Manager") serves as the investment
manager and administrator for the Government Income Fund, the Strategic Income
Fund and the Global High Income Portfolio ("Portfolio") and also serves as the
administrator of the High Income Fund. The distributor of the shares of each
Fund is GT Global, Inc. ("GT Global"). The Funds' transfer agent is GT Global
Investor Services, Inc. ("GT Services" or "Transfer Agent").
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Investment Objectives and Policies....................................................................................... 2
Options, Futures and Currency Strategies................................................................................. 6
Risk Factors............................................................................................................. 15
Investment Limitations................................................................................................... 18
Execution of Portfolio Transactions...................................................................................... 23
Directors, Trustees and Executive Officers............................................................................... 25
Management............................................................................................................... 27
Valuation of Fund Shares................................................................................................. 29
Information Relating to Sales and Redemptions............................................................................ 30
Taxes.................................................................................................................... 31
Additional Information................................................................................................... 34
Investment Results....................................................................................................... 35
Description of Debt Ratings.............................................................................................. 42
Financial Statements..................................................................................................... 45
</TABLE>
[LOGO]
Statement of Additional Information Page 1
<PAGE>
GT GLOBAL INCOME FUNDS
INVESTMENT OBJECTIVES AND POLICIES
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES
The Government Income Fund primarily seeks high current income and secondarily
seeks capital appreciation and protection of principal through active management
of the maturity structure and currency exposure of its portfolio. The Strategic
Income Fund and the High Income Fund primarily seek high current income and
secondarily seek capital appreciation. The High Income Fund seeks to achieve its
investment objectives by investing all of its investable assets in the
Portfolio, which, like the High Income Fund, is a non-diversified open-end
management investment company with investment objectives identical to those of
the High Income Fund. Whenever the phrase "all of the Fund's investable assets"
is used herein and in the Prospectus, it means that the only investment
securities that will be held by the High Income Fund will be its interest in the
Portfolio. The High Income Fund may withdraw its investment in the Portfolio at
any time, if the Board of Directors of the Company determines that it is in the
best interests of the Fund and its shareholders to do so. Upon any such
withdrawal, the High Income Fund's assets would be invested in accordance with
the investment policies described below with respect to the Portfolio.
INVESTMENT IN EMERGING MARKETS
The Portfolio seeks its objectives by investing, under normal circumstances, at
least 65% of its total assets in debt securities of issuers in emerging markets.
The Strategic Income Fund may invest up to 50% of its assets in debt securities
of issuers in emerging markets. The Strategic Income Fund and the Portfolio do
not consider the following countries to be emerging markets: Australia, Austria,
Belgium, Canada, Denmark, France, Germany, Ireland, Italy, Japan, the
Netherlands, New Zealand, Norway, Spain, Sweden, Switzerland, United Kingdom,
and United States.
In addition to the factors set forth in the Prospectus, the Manager will also
consider, when determining what contracts constitute emerging markets, data,
analysis, and classification of countries published or disseminated by the
International Bank for Reconstruction and Development (commonly known as the
World Bank) and the International Finance Corporation.
SELECTION OF DEBT INVESTMENTS
Chancellor LGT Asset Management, Inc. (the "Manager") is the investment manager
of the Government Income Fund, the Strategic Income Fund and the Portfolio. In
determining the appropriate distribution of investments among various countries
and geographic regions for the Government Income Fund, the Strategic Income Fund
and the Portfolio, the Manager ordinarily considers the following factors:
prospects for relative economic growth among the different countries in which
the Government Income Fund, the Strategic Income Fund and the Portfolio may
invest; expected levels of inflation; government policies influencing business
conditions; the outlook for currency relationships; and the range of the
individual investment opportunities available to international investors.
The Government Income Fund, the Strategic Income Fund and the Portfolio may
invest in the following types of money market instruments (i.e., debt
instruments with less than 12 months remaining until maturity) denominated in
U.S. dollars or other currencies: (a) obligations issued or guaranteed by the
U.S. or foreign governments, their agencies, instrumentalities or
municipalities; (b) obligations of international organizations designed or
supported by multiple foreign governmental entities to promote economic
reconstruction or development; (c) finance company obligations, corporate
commercial paper and other short-term commercial obligations; (d) bank
obligations (including certificates of deposit, time deposits, demand deposits
and bankers' acceptances), subject to the restriction that the Government Income
Fund, the Strategic Income Fund and the Portfolio may not invest more than 25%
of their respective total assets in bank securities; (e) repurchase agreements
with respect to the foregoing; and (f) other substantially similar short-term
debt securities with comparable characteristics.
INVESTMENTS IN OTHER INVESTMENT COMPANIES
With respect to certain countries, investments by the Government Income Fund,
the Strategic Income Fund and the Portfolio presently may be made only by
acquiring shares of other investment companies with local governmental approval
to invest in those countries. At such time as direct investment in these
countries is allowed, the Government Income Fund, the Strategic Income Fund and
the Portfolio anticipate investing directly in these markets. The Government
Statement of Additional Information Page 2
<PAGE>
GT GLOBAL INCOME FUNDS
Income Fund, the Strategic Income Fund and the Portfolio may also invest in the
securities of closed-end investment companies within the limits of the
Investment Company Act of 1940, as amended ("1940 Act"). These limitations
currently provide that, in part, a Fund or the Portfolio may purchase shares of
another investment company unless (a) such a purchase would cause the Government
Income Fund, the Strategic Income Fund or the Portfolio to own in the aggregate
more than 3% of the total outstanding voting securities of the investment
company or (b) such a purchase would cause the Government Income Fund, the
Strategic Income Fund or the Portfolio to have more than 5% of its total assets
invested in the investment company or more than 10% of its aggregate assets
invested in an aggregate of all such investment companies. The foregoing
limitations do not apply to the investment by the High Income Fund in the
Portfolio. Investment in investment companies may involve the payment of
substantial premiums above the value of such companies' portfolio securities.
The Government Income Fund, the Strategic Income Fund and the Portfolio do 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.
SAMURAI AND YANKEE BONDS
The Government Income Fund, the Strategic Income Fund and the Portfolio may
invest in yen-denominated bonds sold in Japan by non-Japanese issuers ("Samurai
bonds"), and may invest in dollar-denominated bonds sold in the United States by
non-U.S. issuers ("Yankee bonds"). It is the policy of the Government Income
Fund, the Strategic Income Fund and the Portfolio to invest in Samurai or Yankee
bond issues only after taking into account considerations of quality and
liquidity, as well as yield.
WARRANTS OR RIGHTS
Warrants or rights may be acquired by the Government Income Fund, the Strategic
Income Fund or the Portfolio in connection with other securities or separately
and provide a Fund or the Portfolio with the right to purchase at a later date
other securities of the issuer.
LENDING OF PORTFOLIO SECURITIES
For the purpose of realizing additional income, the Strategic Income Fund or the
Portfolio may make secured loans of portfolio securities 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
continuously be 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. While the securities loan is outstanding, the Strategic Income Fund and
the 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. The Strategic Income
Fund and the Portfolio each will have a right to call each loan and obtain the
securities on five business days' notice. The Government Income Fund, the
Strategic Income Fund and the Portfolio will not have the right to vote equity
securities while they are lent, but each may call in a loan in anticipation of
any important vote. The risks in lending portfolio securities, as with other
extensions of secured credit, consist of possible delay in receiving additional
collateral or in recovery of the securities or possible loss of rights in the
collateral should the borrower fail financially. Loans will be made only 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.
COMMERCIAL BANK OBLIGATIONS
For the purposes of the Strategic Income Fund's and the 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, however, may be
limited by the terms of a specific obligation and by government regulation. As
with investment in non-U.S. securities in general, investments in the
obligations of foreign branches of U.S. banks and of foreign banks may subject
the the Strategic Income Fund and the Portfolio to investment risks that are
different in some respects from those of investments in obligations of domestic
issuers. Although the Strategic Income Fund and the Portfolio typically will
acquire obligations issued and supported by the credit of U.S. or foreign banks
having total assets at the time of purchase in excess of $1 billion, this $1
billion figure is not an investment policy or restriction of either Fund or the
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
The Government Income Fund, the Strategic Income Fund and the Portfolio may
enter into repurchase agreements. Repurchase agreements are transactions in
which the Fund or Portfolio buys 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
Statement of Additional Information Page 3
<PAGE>
GT GLOBAL INCOME FUNDS
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 Funds
or Portfolio if the other party to the repurchase agreement becomes bankrupt,
the Government Income Fund, the Strategic Income Fund and the Portfolio intend
to enter into repurchase agreements only with banks and broker/dealers believed
by the Manager to present minimal credit risks in accordance with guidelines
approved by the Company's Board of Directors. The term "Company's Board of
Directors" as used herein shall refer to the Board of Directors of the Company
and the Board of Trustees of the Portfolio, as applicable. The Manager reviews
and monitors the creditworthiness of such institutions under the Board's general
supervision.
The Government Income Fund, the Strategic Income Fund and the 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, the Government Income Fund,
the Strategic Income Fund or the 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 the Government Income Fund, the Strategic Income
Fund's or the Portfolio's ability to sell the collateral and the Government
Income Fund, the Strategic Income Fund or the Portfolio could suffer a loss.
However, with respect to financial institutions whose bankruptcy or liquidation
proceedings are subject to the U.S. Bankruptcy Code, the Government Income Fund,
the Strategic Income Fund and the Portfolio intend to comply with provisions
under such Code that would allow the immediate resale of such collateral. The
Government Income Fund will not enter into a repurchase agreement with a
maturity of more than seven days if, as a result, more than 10% of the value of
its total assets would be invested in such repurchase agreements and other
illiquid investments and securities for which no readily available market
exists.
BORROWING, REVERSE REPURCHASE AGREEMENTS AND "ROLL" TRANSACTIONS
The Government Income Fund's borrowings will not exceed 30% of the Fund's total
assets, i.e., the Fund's total assets at all times will equal at least 300% of
the amount of outstanding borrowings. If market fluctuations in the value of the
Fund's portfolio holdings or other factors cause the ratio of the Fund's total
assets to outstanding borrowings to fall below 300%, within three days
(excluding Sundays and holidays) of such event the Fund may be required to sell
portfolio securities to restore the 300% asset coverage, even though from an
investment standpoint such sales might be disadvantageous. The Strategic Income
Fund's and the Portfolio's borrowings will not exceed 33 1/3% of the Strategic
Income Fund's or the Portfolio's, respective total assets. The Government Income
Fund, the Strategic Income Fund and the Portfolio each may borrow up to 5% of
its respective total assets for temporary or emergency purposes other than to
meet redemptions. Any borrowing by a Fund or the Portfolio may cause greater
fluctuation in the value of its shares than would be the case if the Fund or the
Portfolio did not borrow.
The Government Income Fund's, the Strategic Income Fund's and the Portfolio's
fundamental investment limitations permit it to borrow money for leveraging
purposes. The Government Income Fund, however, currently is 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 a
vote of a majority of the Company's Board of Directors. The Strategic Income
Fund and Portfolio may borrow for leveraging purposes. In the event that the
Strategic Income Fund or the Portfolio employs leverage, 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 Fund's
or the Portfolio's net asset value. When the income and gains on securities
purchased with the proceeds of borrowings exceed the costs of such borrowings,
the Government Income Fund's, the Strategic Income Fund's or the Portfolio's
earnings or net asset value will increase faster than otherwise would be the
case; conversely, if such income and gains fail to exceed such costs, the Fund's
or the Portfolio's earnings or net asset value would decline faster than would
otherwise be the case.
The Government Income Fund, the Strategic Income Fund and the Portfolio may
enter into reverse repurchase agreements. A reverse repurchase agreement is a
borrowing transaction in which a Fund or the 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. The Government Income Fund, the Strategic
Income Fund and the Portfolio also may engage in "roll" borrowing transactions
which involve a Fund's or the Portfolio's sale of Government National Mortgage
Association certificates or other securities together with a commitment (for
which a Fund or the Portfolio may receive a fee) to purchase similar, but not
identical, securities at a future date. The Government Income Fund, the
Strategic Income Fund and the 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.
Statement of Additional Information Page 4
<PAGE>
GT GLOBAL INCOME FUNDS
SHORT SALES
The Government Income Fund, the Strategic Income Fund and the Portfolio are
authorized to make short sales of securities, although they have no current
intention of doing so. A short sale is a transaction in which a Fund or the
Portfolio sells a security in anticipation that the market price of that
security will decline. The Government Income Fund, the Strategic Income Fund and
the Portfolio may make short sales as a form of hedging to offset potential
declines in long positions in securities it owns, or anticipates acquiring, and
in order to maintain portfolio flexibility. The Government Income Fund, the
Strategic Income Fund and the Portfolio only may make short sales "against the
box." In this type of short sale, at the time of the sale, the Fund or the
Portfolio owns the security it has sold short or has the immediate and
unconditional right to acquire the identical security at no additional cost.
In a short sale, the seller does not immediately deliver the securities sold and
does not receive the proceeds from the sale. To make delivery to the purchaser,
the executing broker borrows the securities being sold short on behalf of the
seller. The seller is said to have a short position in the securities sold until
it delivers the securities sold, at which time it receives the proceeds of the
sale. To secure its obligation to deliver securities sold short, the Government
Income Fund, the Strategic Income Fund or the Portfolio will deposit in a
separate account with its custodian an equal amount of the securities sold short
or securities convertible into or exchangeable for such securities at no cost.
The Government Income Fund, the Strategic Income Fund or the Portfolio could
close out a short position by purchasing and delivering an equal amount of the
securities sold short, rather than by delivering securities already held by the
Fund or the Portfolio, because the Fund or the Portfolio might want to continue
to receive interest and dividend payments on securities in its portfolio that
are convertible into the securities sold short.
The Government Income Fund, the Strategic Income Fund and the Portfolio might
make a short sale "against the box" in order to hedge against market risks when
the Manager believes that the price of a security may decline, causing a decline
in the value of a security owned by the Government Income Fund, the Strategic
Income Fund or the Portfolio or a security convertible into or exchangeable for
such security, or when the Manager wants to sell the security the Fund or the
Portfolio owns at a current attractive price, but also wishes to defer
recognition of gain or loss for federal income tax purposes and for purposes of
satisfying certain tests applicable to regulated investment companies under the
Internal Revenue Code of 1986, as amended (the "Code"). In such case, any future
losses in the Government Income Fund's, the Strategic Income Fund's Fund or the
Portfolio's long position should be reduced by a gain in the short position.
Conversely, any gain in the long position should be reduced by a loss in the
short position. The extent to which such gains or losses in the long position
are reduced will depend upon the amount of the securities sold short relative to
the amount of the securities the Fund or the Portfolio owns, either directly or
indirectly, and, in the case where a Fund or the Portfolio owns convertible
securities, changes in the investment values or conversion premiums of such
securities. There will be certain additional transaction costs associated with
short sales "against the box," but a Fund or the Portfolio will endeavor to
offset these costs with income from the investment of the cash proceeds of short
sales.
Statement of Additional Information Page 5
<PAGE>
GT GLOBAL INCOME FUNDS
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 a Fund or the Portfolio
entered into a short hedge because the Manager projected a decline in the
price of a security in the Fund's or the 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 Fund or the
Portfolio could suffer a loss. In either such case, the Fund or the
Portfolio would have been in a better position had it not hedged at all.
(4) As described below, a Fund or the 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 a Fund or
the 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 Fund's or the 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 Fund or the Portfolio sell a portfolio security at a
disadvantageous time. The Fund's or the 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 Fund or the Portfolio.
WRITING CALL OPTIONS
The Government Income Fund, the Strategic Income Fund and the 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
Government Income Fund, the Strategic Income Fund and the Portfolio.
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 may be assigned an
exercise notice, requiring him 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
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earlier time at which the writer effects a closing purchase transaction by
purchasing an option identical to that previously sold.
Portfolio securities or currencies on which call options may be written will be
purchased solely on the basis of investment considerations consistent with a
Fund's or the Portfolio's investment objectives. When writing a call option, the
Government Income Fund, the Strategic Income Fund or the 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, a Fund or the
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 a Fund or the Portfolio has
written expires, the Fund or the 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 Fund or the 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. The Government Income Fund, the Strategic Income
Fund and the Portfolio do not consider a security or currency covered by a call
option to be "pledged" as that term is used in the Government Income Fund's, the
Strategic Income Fund's and the Portfolio's fundamental investment 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 a Fund or the Portfolio will
be obligated to sell the security or currency at less than its market value.
The premium that the Government Income Fund, the Strategic Income Fund or the
Portfolio receives for writing a call option is deemed to constitute the market
value of an option. The premium a Fund or the 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 the Government Income
Fund, the Strategic Income Fund or the Portfolio to write another call option on
the underlying security or currency with either a different exercise price,
expiration date or both.
The Government Income Fund, the Strategic Income Fund and the 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
normally are 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 or currencies at the time the options
are written. From time to time, a Fund or the 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.
A Fund or the 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 a Fund or the Portfolio.
WRITING PUT OPTIONS
The Government Income Fund, the Strategic Income Fund and the 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.
A Fund or the Portfolio generally would write put options in circumstances where
the Manager wishes to purchase the underlying security or currency for the
Fund's or the Portfolio's portfolio at a price lower than the current market
price of
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the security or currency. In such event, the Fund or the 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 Fund or the
Portfolio also would 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 premiums 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 a Fund or the Portfolio
will be obligated to purchase the security or currency at greater than its
market value.
PURCHASING PUT OPTIONS
The Government Income Fund, the Strategic Income Fund and the Portfolio may
purchase put options on securities, indices and currencies. As the holder of a
put option, the Government Income Fund, the Strategic Income Fund or the
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. The Government Income Fund, the Strategic Income Fund or the
Portfolio may enter into closing sale transactions with respect to such options,
exercise them or permit them to expire.
A Fund or the Portfolio may purchase a put option on an underlying security or
currency ("protective put") owned by the Fund or the Portfolio as a hedging
technique 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 Fund or the 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 eventually is sold.
The Government Income Fund, the Strategic Income Fund and the Portfolio also may
purchase put options at a time when that Fund or the Portfolio does not own the
underlying security or currency. By purchasing put options on a security or
currency it does not own, a Fund or the 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 Fund or the 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
The Government Income Fund, the Strategic Income Fund or the Portfolio may
purchase call options on securities, indices and currencies. As the holder of a
call option, a Fund or the 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. A Fund or the
Portfolio may enter into closing sale transactions with respect to such options,
exercise them or permit them to expire.
Call options may be purchased by a Fund or the 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 the Fund or the
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 also may be useful to a Fund or the
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, a Fund or the 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.
The Government Income Fund, the Strategic Income Fund and the Portfolio also may
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 also
may be purchased at times to avoid realizing losses that would result in a
reduction of a Fund's or the Portfolio's current return. For example, where a
Fund or the Portfolio has written a call option on an
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underlying security or currency having a current market value below the price at
which such security or currency was purchased by the Fund or the Portfolio, an
increase in the market price could result in the exercise of the call option
written by the Fund or the Portfolio and the realization of a loss on the
underlying security or currency. Accordingly, the Fund or the Portfolio could
purchase a call option on the same underlying security or currency, which could
be exercised to fulfill the Fund's or the Portfolio's delivery obligations under
its written call (if it is exercised). This strategy could allow the Fund or the
Portfolio to avoid selling the portfolio security or currency at a time when it
has an unrealized loss; however, the Fund or the 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 a Fund's
or the Portfolio's total assets at the time of purchase.
The Government Income Fund, the Strategic Income Fund or the 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 a
Fund or the 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 of the option. A call option gives
a Fund or the 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 of the option. A Fund or
the 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 the Fund or the 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 the Fund or the Portfolio
anticipates purchasing securities.
Options may be either listed on an exchange or traded over-the-counter ("OTC
options"). 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. The Funds and the Portfolio will not purchase an OTC option unless the
Fund or the Portfolio 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. A Fund or the Portfolio may also sell OTC
options and, in connection therewith, segregate assets or cover its obligations
with respect to OTC options written by the Fund or the Portfolio. The assets
used as cover for OTC options written by a Fund or the Portfolio will be
considered illiquid unless the OTC options are sold to qualified dealers who
agree that the Fund or the 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.
A Fund's or the Portfolio's ability to establish and close out positions in
exchange-listed options depends on the existence of a liquid market. Each Fund
and the 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 each Fund and the Portfolio will enter into OTC options
only with contra parties that are expected to be capable of entering into
closing transactions with the Fund or the Portfolio, there is no assurance that
the Fund or the 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 Fund or the 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 a Fund or the 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 Fund or the Portfolio an amount of cash if the closing
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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 a Fund or the Portfolio buys a call on an index,
it pays a premium and has the same rights as to such calls as are indicated
above. When a Fund or the 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 Fund's or the Portfolio's exercise of the put, to deliver to the
Fund or the 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 a
Fund or the 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 Fund or
the 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 a Fund or the
Portfolio writes a call on an index it cannot provide in advance for its
potential settlement obligations by acquiring and holding the underlying
securities. A Fund or the 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, a Fund or the
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 a Fund or the 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 Fund or the 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 a Fund or the 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 Fund or the 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 AND CURRENCY FUTURES CONTRACTS
The Government Income Fund, the Strategic Income Fund or the Portfolio may enter
into interest rate or currency futures contracts, including futures contracts on
indices of debt securities, ("Futures" or "Futures Contracts"), as a hedge
against changes in prevailing levels of interest rates or currency exchange
rates in order to establish more definitely the effective return on securities
or currencies held or intended to be acquired by the Fund or the Portfolio. The
Government Income Fund, the Strategic Income Fund's or the Portfolio's hedging
may include sales of Futures as an offset against the effect of expected
increases in interest rates or decreases in currency exchange rates, and
purchases of Futures as an offset against the effect of expected declines in
interest rates or increases in currency exchange rates.
The Government Income Fund's, the Strategic Income Fund and the Portfolio only
will enter into Futures Contracts which 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 a Fund's or the Portfolio's exposure to interest rate and
currency exchange rate fluctuations, a Fund or the Portfolio may be able to
hedge exposure more effectively and at a lower cost through using Futures
Contracts.
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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 (debt
security or currency) for a specified price at a designated date, time and
place. An 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 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 the securities 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 Government Income Fund, the
Strategic Income Fund or the Portfolio realizes a gain; if it is more, the
Government Income Fund, the Strategic Income Fund or the Portfolio realizes a
loss. Conversely, if the offsetting sale price is more than the original
purchase price, the Government Income Fund, the Strategic Income Fund or the
Portfolio realizes a gain; if it is less, the Government Income Fund, the
Strategic Income Fund or the Portfolio realizes a loss. The transaction costs
also must be included in these calculations. There can be no assurance, however,
that a Fund or the Portfolio will be able to enter into an offsetting
transaction with respect to a particular Futures Contract at a particular time.
If a Fund or the Portfolio is not able to enter into an offsetting transaction,
the Fund or the 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 Government
Income Fund, the Strategic Income Fund or the Portfolio.
The Government Income Fund, the Strategic Income Fund's and the 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 the Fund or the Portfolio owns, or Futures Contracts will be
purchased to protect the Fund or the 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 the Government Income Fund, the Strategic Income Fund or the
Portfolio in order to initiate Futures trading and to maintain the Fund's or the
Portfolio's open positions in Futures Contracts. A margin deposit made when the
Futures Contract is entered into ("initial margin") is intended to assure a
Fund's or the 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 modified significantly 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 Fund or the 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, among other things, by actual and anticipated
changes in interest and currency rates, 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 a Fund's or the
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
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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 Contract 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 occasionally have 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 a Fund or the 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 Fund or the
Portfolio would continue to be subject to market risk with respect to the
position. In addition, except in the case of purchased options, the Fund or the
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 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 a Fund or the 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.
A Fund or the 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 a Fund or the 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 Fund's or the
Portfolio's
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portfolio, after taking into account unrealized profits and unrealized losses on
any contracts the Fund or the 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 or the Portfolio's Board of
Trustees, as applicable, without a shareholder vote. This limitation does not
limit the percentage of the Fund's or the Portfolio's assets at risk to 5%.
FORWARD CURRENCY CONTRACTS
A Forward Contract is an obligation, generally 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. The
Government Income Fund, the Strategic Income Fund and the Portfolio either may
accept or make delivery of the currency at the maturity of the Forward Contract.
A Fund or the 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.
A Fund or the Portfolio engages in forward currency transactions in anticipation
of, or to protect itself against, fluctuations in exchange rates. A Fund or the
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,
a Fund or the 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, the Funds or
the 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. The Government Income Fund, the Strategic Income Fund or
the 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 Company's Board of Directors or the Portfolio's Board of Trustees, as
applicable.
The Government Income Fund, the Strategic Income Fund or the Portfolio may enter
into Forward Contracts either with respect to specific transactions or with
respect to the overall investment of the Fund or the 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 the Fund or the
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 Fund or the 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 Fund or the 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 the Fund or the Portfolio to
sustain losses on these contracts and transaction costs.
At or before the maturity of a Forward Contract requiring the Fund or the
Portfolio to sell a currency, the Fund or the Portfolio either may sell a
portfolio 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 Fund or the
Portfolio will obtain, on the same maturity date, the same amount of the
currency that it is obligated to deliver. Similarly, the Fund or the 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. The Fund or the 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 a Fund or the 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 usually are
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 the Fund or the Portfolio owns or intends to acquire, but
it does establish a rate of exchange in advance. In addition, while Forward
Contracts 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.
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GT GLOBAL INCOME FUNDS
FOREIGN CURRENCY STRATEGIES -- SPECIAL CONSIDERATIONS
A Fund or the 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 Fund's or the Portfolio's securities are denominated. Such currency
hedges can protect against price movements in a security that the Fund or the
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.
A Fund or the 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 Fund or the 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, a Fund or the 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, a Fund or the 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 a Fund or the Portfolio has purchased) expose the Fund or the
Portfolio to an obligation to another party. A Fund or the 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 Fund and the 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 a Fund's or the Portfolio's assets are used for cover or segregated accounts,
it could affect portfolio management or the Fund's or the Portfolio's ability to
meet redemption requests or other current obligations.
INTEREST RATE AND CURRENCY SWAPS
The Strategic Income Fund and the Portfolio usually will enter into interest
rate swaps on a net basis, that is, the two payment streams are netted out in a
cash settlement on the payment date or dates specified in the instrument, with
the Strategic Income Fund or the Portfolio receiving or paying, as the case may
be, only the net amount of the two payments. The net amount of the excess, if
any, of each of the Strategic Income Fund's and the Portfolio's obligations over
its entitlements with respect to each swap will be accrued on a daily basis and
an amount of cash, U.S. government securities or other liquid high grade debt
obligations having an aggregate net asset value at least equal to the accrued
excess will be maintained in an account by a custodian that satisfies the
requirements of the 1940 Act. The Strategic Income Fund and the Portfolio will
also establish and maintain such segregated accounts with respect to its total
obligations under any swaps that are not entered into on a net basis and with
respect to any caps or floors that are written by that Fund or the Portfolio.
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GT GLOBAL INCOME FUNDS
The Manager, the Strategic Income Fund and the Portfolio believe that swaps,
caps and floors do not constitute senior securities under the 1940 Act and,
accordingly, will not treat them as being subject to the Fund's and the
Portfolio's borrowing restrictions. The Strategic Income Fund and the Portfolio
will not enter into any swap, cap, floor, collar or other derivative transaction
unless, at the time of entering into the transaction, the unsecured long-term
debt rating of the counterparty combined with any credit enhancements is rated
at least A by Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's
Ratings Group ("S&P") or has an equivalent rating from a nationally recognized
statistical rating organization or is determined to be of equivalent credit
quality by the Manager. If a counterparty defaults, the Strategic Income Fund or
the Portfolio may have contractual remedies pursuant to the agreements related
to the transactions. The swap market has grown substantially in recent years,
with a large number of banks and investment banking firms acting both as
principals and as agents utilizing standardized swap documentation. As a result,
the swap market has become relatively liquid. Caps, floors and collars are more
recent innovations for which standardized documentation has not yet been fully
developed and, for that reason, they are less liquid than swaps.
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RISK FACTORS
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SPECIAL CONSIDERATIONS AFFECTING EMERGING MARKETS. The Strategic Income Fund
and the Portfolio may invest in debt securities in emerging markets. Investing
in securities in emerging countries may entail greater risks than investing in
debt securities in developed countries. These risks include (i) less social,
political and economic stability; (ii) the small current size of the markets for
such securities and the currently low or nonexistent volume of trading, which
result in a lack of liquidity and in greater price volatility; (iii) certain
national policies which may restrict the Strategic Income Fund's and the
Portfolio's investment opportunities, including restrictions on investment in
issuers or industries deemed sensitive to national interests; (iv) foreign
taxation; and (v) the absence of developed structures governing private or
foreign investment or allowing for judicial redress for injury to private
property.
Settlement mechanisms in emerging securities markets may be less efficient and
reliable than in more developed markets. In such emerging securities markets
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.
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 and on repatriation of capital invested. In the event of such
expropriation, nationalization or other confiscation by any country, either a
Fund or the Portfolio could lose its entire investment in any such country.
An investment in the Strategic Income Fund and the Portfolio is subject to the
political and economic risks associated with investments in emerging markets.
Even though opportunities for investment may exist in emerging markets, any
change in the leadership or policies of the governments of those countries or in
the leadership or policies of any other government which exercises a significant
influence over those countries, may halt the expansion of or reverse the
liberalization of foreign investment policies now occurring and thereby
eliminate any investment opportunities which may currently exist.
Investors should note that upon the accession to power of authoritarian regimes,
the governments of a number of emerging market countries previously expropriated
large quantities of real and personal property similar to the property which
will be represented by the securities purchased by the Fund and the Portfolio.
The claims of property owners against those governments were never finally
settled. There can be no assurance that any property represented by securities
purchased by the Fund or the Portfolio will not also be expropriated,
nationalized, or otherwise confiscated. If such confiscation were to occur, the
Fund or the Portfolio could lose a substantial portion of its investments in
such countries. The Fund's and the Portfolio's investments would similarly be
adversely affected by exchange control regulation in any of those countries.
Statement of Additional Information Page 15
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GT GLOBAL INCOME FUNDS
RELIGIOUS, POLITICAL AND ETHNIC INSTABILITY. Certain countries in which a
Fund or the 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 the Fund's or the
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 a Fund or the
Portfolio invests and adversely affect the value of the Fund's or the
Portfolio's assets.
ILLIQUID SECURITIES. The Government Income Fund may invest up to 10% of its
total assets in securities the disposition of which may be subject to legal or
contractual restrictions or the markets for which may be illiquid. The Strategic
Income Fund and the Portfolio each may invest up to 15% of total assets in
illiquid securities. Securities may be considered illiquid if a Fund or the
Portfolio cannot reasonably expect within seven days to sell the security for
approximately the amount at which the Fund or the Portfolio values such
securities. 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 the over-the-counter 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, a 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 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 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 purchsaing Rule 144A-eligible restricted securities held by
a Theme Portfolio, however, could affect adversely the marketability of such
portfolio securities and the Theme Portfolio might be unable to dispose of such
securities promptly or at favorable prices.
With respect to liquidity determinations generally, the Company's Board of
Directors has the ultimate responsibility for determining whether specific
securities, including restricted securities eligible for resale to qualified
institutional buyers pursuant to Rule 144A under the 1933 Act, are liquid or
illiquid. The Board has delegated the function of making day-to-day
determinations of liquidity to the Manager in accordance with procedures
approved by the Company's Board of Directors. 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 will monitor the liquidity of securities
held by each Fund and the Portfolio and report periodically on such decisions to
the Board of Directors. Moreover, as noted in the Prospectus, certain
securities, such as those subject to registration restrictions of more than
seven days, will generally be treated as illiquid.
Statement of Additional Information Page 16
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GT GLOBAL INCOME FUNDS
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 the Government Income Fund,
the Strategic Income Fund or the Portfolio. These restrictions or controls may
at times limit or preclude investment in certain securities and may increase the
cost and expenses of a Fund or 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 may 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. The Government Income Fund, the Strategic Income Fund or the 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 the Government
Income Fund, the Strategic Income Fund or the 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 the
Government Income Fund, the Strategic Income Fund and the 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 the Funds and the Portfolio, under normal
circumstances, will invest substantial portions of their 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 each Fund's and the 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 each Fund's and the Portfolio's
holdings of securities and cash denominated in such currency and, therefore,
will cause an overall decline in the Fund's and the Portfolio's net asset value
and any net investment income and capital gains to be distributed in U.S.
dollars to shareholders of the Fund and the Portfolio. Moreover, if the value of
the foreign currencies in which a Fund receives its income declines relative to
the U.S. dollar between the receipt of the income and the making of Fund
distributions, the Fund may be required to liquidate securities in order to make
distributions if the Fund 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 the Funds and the Portfolio value their assets daily in terms of U.S.
dollars, the Funds and the Portfolio do not intend to convert holdings of
foreign currencies into U.S. dollars on a daily basis. The Funds 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 are buying and selling various currencies. Thus, a dealer may offer to sell
a foreign currency to a Fund at one rate, while offering a lesser rate of
exchange should the Fund 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
Statement of Additional Information Page 17
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GT GLOBAL INCOME FUNDS
governmental supervision and regulation than in the U.S., 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 a Fund or the Portfolio are uninvested and no return is
earned thereon. The inability of a Fund or the Portfolio to make intended
security purchases due to settlement problems could cause it to miss attractive
opportunities. Inability to dispose of a portfolio security due to settlement
problems either could result in losses to a Fund or the Portfolio due to
subsequent declines in value of the portfolio security or, if the Fund or the
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 each Fund's or the Portfolio's assets,
although the Manager does not believe that such difficulties will have a
material adverse effect on the Funds' or the Portfolio's portfolio trading
activities.
The Funds and the Portfolio may use foreign custodians, which may involve risks
in addition to those related to the use of U.S. custodians. Such risks include
uncertainties relating to: (i) determining and monitoring the financial
strength, reputation and standing of the foreign custodian; (ii) maintaining
appropriate safeguards to protect the Funds' and the Portfolio's investments;
and (iii) possible difficulties in obtaining and enforcing judgments against
such custodians.
WITHHOLDING TAXES. Each Fund's and the Portfolio's net investment income
from foreign issuers may be subject to withholding taxes by the foreign issuer's
country, thereby reducing the Fund's and the Portfolio's net investment income
or delaying the receipt of income where those taxes may be recaptured. See
"Taxes."
SPECIAL CONSIDERATIONS AFFECTING EUROPE. 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 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 at this time
what the exact form or effect of these Common Market reforms will be on business
in Western Europe or the emerging European markets, it is impossible to predict
the long-term impact of the implementation of these program on the securities
owned by the Funds or the Portfolio.
SPECIAL CONSIDERATIONS AFFECTING JAPAN AND HONG KONG. The concentration of
investments by a Fund or the Portfolio in Japan means that the Fund or the
Portfolio may be more volatile than a fund that is broadly diversified
geographically. Overseas trade is important to Japan's economy. Japan has few
natural resources and must export to pay for its imports of these basic
requirements. Because of the concentration of Japanese exports in highly visible
products, 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 or other protectionist measures could impact Japan
adversely in both the short and the long term. 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.
Hong Kong is a British colony which will transfer sovereignty to the Peoples
Republic of China in 1997. China has espoused policies antagonistic to free
enterprise capitalism and democracy. There can be no guarantee that property
rights will continue to be safeguarded in Hong Kong after 1997, although
recently China has moved toward free enterprise, and has established stock
exchanges of its own.
- --------------------------------------------------------------------------------
INVESTMENT LIMITATIONS
- --------------------------------------------------------------------------------
Each Fund and the Portfolio has adopted the following investment limitations as
fundamental policies which may not be changed without approval by the holders of
the lesser of (i) 67% of that Fund's shares or the total beneficial interests of
the Portfolio represented at a meeting at which more than 50% of the outstanding
shares of the Fund or the total beneficial interests of the Portfolio are
represented, or (ii) more than 50% of the outstanding shares of the Fund or the
total beneficial
Statement of Additional Information Page 18
<PAGE>
GT GLOBAL INCOME FUNDS
interests of the Portfolio. Whenever the High Income Fund is requested to vote
on a change in the investment limitations of the Portfolio, the Fund will hold a
meeting of its shareholders and will cast its votes as instructed by its
shareholders.
GOVERNMENT INCOME FUND
The Government Income Fund may not:
(1) Invest 25% or more of the value of its total assets in the
securities of issuers conducting their principal business activities in the
same industry, except that this limitation shall not apply to securities
issued or guaranteed as to principal and interest by the U.S. Government or
any of its agencies or instrumentalities;
(2) Invest in companies for the purpose of exercising control or
management;
(3) Buy or sell real estate (including real estate limited partnerships)
or commodities or commodity contracts; however, the 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 ("REITs"), and may purchase or sell currencies
(including forward currency exchange contracts), futures contracts and
related options generally as described in the Prospectus and Statement of
Additional Information and subject to (14) below;
(4) Acquire securities subject to restrictions on disposition of
securities for which there is no readily available market, or enter into
repurchase agreements or purchase time deposits maturing in more than seven
days, or purchase over-the-counter options or hold assets set aside to cover
over-the-counter options written by a Fund, if, immediately after and as a
result, the value of such securities would exceed, in the aggregate, 10% of
the Fund's total assets;
(5) Engage in the business of underwriting securities of other issuers,
except to the extent that the disposal of an investment position may
technically cause it to be considered an underwriter as that term is defined
under the Securities Act of 1933;
(6) Make loans, except that the Fund may purchase debt securities and
enter into repurchase agreements and make loans of portfolio securities;
(7) Sell securities short, except to the extent that the Fund
contemporaneously owns or has the right to acquire at no additional cost
securities identical to those sold short;
(8) Purchase securities on margin, provided that the 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 subject to (14) below;
(9) Borrow money, except from banks for temporary or emergency purposes
not in excess of 30% of the value of the Fund's total assets. The Fund will
not purchase securities while such borrowings are outstanding. This
restriction shall not prevent the Fund from entering into reverse repurchase
agreements and engaging in "roll" transactions, provided that reverse
repurchase agreements, "roll" transactions and any other transactions
constituting borrowing by the Fund may not exceed one-third of the Fund's
total assets. In the event that the asset coverage for the Fund's borrowings
falls below 300%, the Fund will reduce, within three days (excluding Sundays
and holidays), the amount of its borrowings in order to provide for the 300%
asset coverage;
(10) 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;
(11) Invest in interests in oil, gas, or other mineral exploration or
development programs;
(12) 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;
(13) Purchase or retain the securities of any issuer, if those individual
officers and Directors of the Company, the 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;
or
(14) Enter into a futures contract, if, as a result thereof, more than 5%
of the Fund's total assets (taken at market value at the time of entering
into the contract) would be committed to margin on such futures contracts.
For purposes of the Fund's concentration policy contained in limitation (1)
above, the Fund and the Portfolio intend to comply with the SEC staff positions
that securities issued or guaranteed as to principal and interest by any single
foreign
Statement of Additional Information Page 19
<PAGE>
GT GLOBAL INCOME FUNDS
government or any supranational organizations in the aggregate are considered to
be securities of issuers in the same industry.
The following investment policies of the Government Income Fund are not
fundamental policies and may be changed by vote of a majority of the Company's
Board of Directors without shareholder approval. The Fund may not: (i) borrow
money to purchase securities; and (ii) invest in securities of an issuer if the
investment would cause the Fund to own more than 10% of any class of securities
of any one issuer.
STRATEGIC INCOME FUND
The Strategic Income Fund may not:
(1) Invest 25% or more of the value of its total assets in the
securities of issuers conducting their principal business activities in the
same industry, (provided, however, that the Fund may invest all of its
investable assets in an open-end management investment company with
substantially the same investment objectives, policies and limitations as
the Fund) except that this limitation shall not apply to securities issued
or guaranteed as to principal and interest by the U.S. Government or any of
its agencies or instrumentalities;
(2) Invest in companies for the purpose of exercising control or
management (provided, however, that the Fund may invest all of its
investable assets in an open-end management investment company with
substantially the same investment objectives, policies and limitations as
the Fund);
(3) Buy or sell real estate (including real estate limited partnerships)
or commodities or commodity contracts; however, the 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 (REITs), and may purchase or sell currencies
(including forward currency exchange contracts), futures contracts and
related options generally as described in the Prospectus and Statement of
Additional Information and subject to (13) below;
(4) Engage in the business of underwriting securities of other issuers,
except to the extent that the disposal of an investment position may
technically cause it to be considered an underwriter as that term is defined
under the Securities Act of 1933;
(5) Make loans, except that the Fund may invest in loans and
participations, purchase debt securities and enter into repurchase
agreements and make loans of portfolio securities;
(6) Sell securities short, except to the extent that the Fund
contemporaneously owns or has the right to acquire at no additional cost
securities identical to those sold short;
(7) Purchase securities on margin, provided that the 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 subject to (13) below;
(8) Borrow money in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed), less all liabilities and indebtedness
(other than borrowing). This restriction shall not prevent the Fund from
entering into reverse repurchase agreements and engaging in "roll"
transactions, provided that reverse repurchase agreements, "roll"
transactions and any other transactions constituting borrowing by the Fund
may not exceed one-third of the Fund's total assets. In the event that the
asset coverage for the Fund's borrowings falls below 300%, the Fund will
reduce, within three days (excluding Sundays and holidays), the amount of
its borrowings in order to provide for 300% asset coverage. Transactions
involving options, futures contracts, options on futures contracts and
forward currency contracts, and collateral arrangements relating thereto
will not be deemed to be borrowings;
(9) 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;
(10) Invest in interests in oil, gas, or other mineral exploration or
development programs;
(11) 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 (provided, however, that the Fund may invest all of
its investable assets in an open-end management investment company with
substantially the same investment objectives, policies, and limitations as
the Fund);
Statement of Additional Information Page 20
<PAGE>
GT GLOBAL INCOME FUNDS
(12) Purchase or retain the securities of any issuer, if those individual
officers and Directors of the Company, the 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;
or
(13) Enter into a futures contract, if, as a result thereof, more than 5%
of the Fund's total assets (taken at market value at the time of entering
into the contract) would be committed to margin on such futures contracts.
For purposes of the Fund's concentration policy contained in limitation (1)
above, the Fund intends to comply with the SEC staff positions that securities
issued or guaranteed as to principal and interest by any single foreign
government or any supranational organizations in the aggregate are considered to
be securities of issuers in the same industry.
The following investment policies are not fundamental policies and may be
changed by vote of a majority of the Company's Board of Directors without
shareholder approval. The Fund may not:
(1) Invest more than 15% of its total assets in illiquid securities;
(2) Borrow money to purchase securities and will not invest in
securities of an issuer if the investment would cause the Fund to own more
than 10% of any class of securities of any one issuer (provided, however,
that the Fund may invest all of its investable assets in an open-end
management investment company with substantially the same investment
objectives, policies, and limitations as the Fund.); and
(3) Invest more than 10% of its total assets in shares of other
investment companies and 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 (provided, however, that the Fund
may invest all of its investable assets in an open-end management investment
company with substantially the same investment objectives, policies, and
limitations as the Fund).
HIGH INCOME FUND AND GLOBAL HIGH INCOME PORTFOLIO
The High Income Fund and the Global High Income Portfolio each may not:
(1) Invest 25% or more of the value of its total assets in the
securities of issuers conducting their principal business activities in the
same industry, (provided, however, that the Fund may invest all of its
investable assets in an open-end management investment company with
substantially the same investment objectives as the Fund) except that this
limitation shall not apply to securities issued or guaranteed as to
principal and interest by the U.S. Government or any of its agencies or
instrumentalities;
(2) Purchase or sell real estate, including real estate limited
partnerships, provided that the Fund and the Portfolio may invest in
securities secured by real estate or interests therein or issued by
companies that invest in real estate or interests therein;
(3) Purchase or sell commodities or commodity contracts, except that the
Fund and the 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
transactions in foreign currencies;
(4) Underwrite securities of other issuers, except to the extent that,
in connection with the disposition of portfolio securities, the Fund and the
Portfolio may be deemed an underwriter under federal or state securities
laws;
(5) Make loans, except that the Fund and the Portfolio may invest in
loans and participations, purchase debt securities and enter into repurchase
agreements and make loans of portfolio securities;
(6) Purchase securities on margin, provided that the Fund and the
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 the use of options, futures contracts,
options thereon or forward currency contracts. The Fund and the Portfolio
may make deposits of margin in connection with futures and forward contracts
and options thereon;
(7) Borrow money in excess of 33 1/3% of the Fund's or the Portfolio's
total assets (including the amount borrowed), less all liabilities and
indebtedness (other than borrowing). This restriction shall not prevent the
Fund or the Portfolio from entering into reverse repurchase agreements and
engaging in "roll" transactions, provided that reverse repurchase
agreements, "roll" transactions and any other transactions constituting
borrowing by the Fund or the Portfolio may not exceed one-third of the
Fund's or the Portfolio's respective total assets. In the event that the
asset coverage for the Fund's or the Portfolio's borrowings falls below
300%, the Fund or the Portfolio will reduce, within three days (excluding
Sundays and holidays), the amount of its borrowings in order to provide for
300% asset
Statement of Additional Information Page 21
<PAGE>
GT GLOBAL INCOME FUNDS
coverage. Transactions involving options, futures contracts, options on
futures contracts and forward currency contracts, and collateral
arrangements relating thereto will not be deemed to be borrowings;
(8) Mortgage, pledge, or in any other manner transfer as security for
any indebtedness any of its assets, except to secure permitted borrowings.
Collateral arrangements with respect to initial or variation margin for
futures contracts will not be deemed to be a pledge of the Fund's or the
Portfolio's assets;
(9) Invest in direct interests or leases in oil, gas, or other mineral
exploration or development programs, however, the Fund or the Portfolio may
invest in securities of companies that engage in these activities; or
(10) With respect to 50% of its total assets, invest more than 5% of its
assets in the securities of any one issuer or purchase more than 10% of the
outstanding voting securities of any one issuer (provided, however, that the
Fund may invest all of its investable assets in an open-end management
investment company with substantially the same investment objectives as the
Fund).
For purposes of the Fund's and the Portfolio's concentration policy contained in
limitation (1) above, the Fund and the Portfolio intend to comply with the SEC
staff positions that securities issued or guaranteed as to principal and
interest by any single foreign government or any supranational organizations in
the aggregate are considered to be securities of issuers in the same industry.
The following investment policies of the Fund and the Portfolio are not
fundamental policies and may be changed by vote of a majority of the Company's
Board of Directors or the Portfolio's Board of Trustees without shareholder
approval. The Fund and the Portfolio may not:
(1) Invest in securities of an issuer if the investment would cause the
Fund or the Portfolio to own more than 10% of any class of securities of any
one issuer (provided, however, that the Fund may invest all of its
investable assets in an open-end management investment company with
substantially the same investment objectives as the Fund);
(2) Invest in companies for the purpose of exercising control or
management (provided, however, that the Fund may invest all of its
investable assets in an open-end management investment company with
substantially the same investment objectives as the Fund);
(3) Purchase or retain the securities of any issuer, if, to the Fund's
or the Portfolio's knowledge, one or more of the officers or Directors of
the Company, the Fund's or the Portfolio's investment adviser, or
distributor, each own beneficially more than 1/2 of 1% of the securities of
such issuer and together own beneficially more than 5% of the securities of
such issuer;
(4) 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 Fund's or the Portfolio's portfolio,
after taking into account unrealized profits and unrealized losses on any
contracts the Fund or the Portfolio has entered into;
(5) 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 (provided, however, that the Fund may invest all of
its investable assets in an open-end management investment company with
substantially the same investment objectives as the Fund); or
(6) Invest more than 10% of its total assets in shares of other
investment companies and 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 (provided, however, that the Fund
may invest all of its investable assets in an open-end management investment
company with substantially the same investment objectives as the Fund).
Investors should refer to the Prospectus for further information with respect to
each Fund's investment objectives, which may not be changed without the approval
of the shareholders and the Portfolio's investment objectives, which may be
changed without the approval of investors in the Portfolio, and other investment
policies and techniques, which may be changed without shareholder approval.
Statement of Additional Information Page 22
<PAGE>
GT GLOBAL INCOME FUNDS
EXECUTION OF PORTFOLIO TRANSACTIONS
- --------------------------------------------------------------------------------
Subject to policies established by the Company's Board of Directors, the Manager
is responsible for the execution of the Government Income and Strategic Income
Funds' and the Portfolio's portfolio transactions and the selection of broker/
dealers that execute such transactions on behalf of these Funds and the
Portfolio. In executing portfolio transactions, the Manager seeks the best net
results for the Government Income and Strategic Income Funds and the 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 the Funds and the Portfolio may engage in soft dollar
arrangements for research services, as described below, neither the Funds nor
the Portfolio has any obligation to deal with any broker/dealer or group of
broker/ dealers in the execution of portfolio transactions.
Debt securities generally are traded on a "net" basis with a dealer acting as
principal for its own account without a stated commission, although the price of
the security usually includes a profit to the dealer. U.S. and foreign
government securities and money market instruments generally are traded in the
OTC markets. In underwritten offerings, securities usually are purchased at a
fixed price which includes an amount of compensation to the underwriter. On
occasion, securities may be purchased directly from an issuer, in which case no
commissions or discounts are paid. Broker/dealers may receive commissions on
futures, currency and options transactions.
Consistent with the interests of the Funds and the Portfolio, the Manager may
select brokers to execute the Funds' and the Portfolio's portfolio transactions
on the basis of the research and brokerage services they provide to the Manager
for its use in managing the Funds and the 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
brokers are in addition to, and not in lieu of, the services required to be
performed by the Manager under the Management Contract (defined below). A
commission paid to such brokers 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 the Funds and the Portfolio and its other clients and that the total
commissions paid by the Funds and the Portfolio will be reasonable in relation
to the benefits received by the Funds and the Portfolio over the long term.
Research services may also be received from dealers who execute Fund
transactions in over-the-counter 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 the Funds or the Portfolio toward payment of the Funds'
or the Portfolio's expenses, such as transfer agent and custodian fees.
Investment decisions for each Fund and the 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 one or both Funds and the
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 the Funds
and the Portfolio are concerned, in other cases the Manager believes that
coordination and the ability to participate in volume transactions will be
beneficial to the Funds and the Portfolio.
Under a policy adopted by the Company's Board of Directors and the Portfolio's
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 Funds and
the other funds for which the Manager serves as investment manager in selecting
brokers and 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 Funds and such other funds.
Statement of Additional Information Page 23
<PAGE>
GT GLOBAL INCOME FUNDS
Each Fund and the Portfolio contemplates purchasing most foreign equity
securities in over-the-counter 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 United States 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 a Fund and the Portfolio in the form of
American Depository Receipts ("ADRs"), American Depository Shares ("ADSs"),
Continental Depository Receipts ("CDRs") or European Depository Receipts
("EDRs") or securities convertible into foreign equity securities. ADRs, ADSs,
CDRs and EDRs may be listed on stock exchanges, or traded in the
over-the-counter 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 the Funds and the Portfolio may invest generally are
traded in the over-the-counter markets.
The Funds and the Portfolio contemplate that, consistent with the policy of
obtaining the best net results, brokerage transactions may be conducted through
certain companies that are members of the Liechtenstein Global Trust. The
Company's Board of Directors 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. For the fiscal years
ended October 31, 1996, 1995 and 1994, the Portfolio paid aggregate brokerage
commissions of $
- ------, $0 and $24,000, respectively. For the fiscal years ended October 31,
1996, 1995 and 1994, the Government Income Fund paid aggregate brokerage
commissions of $
- ------, $0 and $92,397, respectively. For the fiscal years ended October 31,
1996, 1995 and 1994, the Strategic Income Fund paid aggregate brokerage
commissions of $
- ------, $0 and $134,876, respectively.
PORTFOLIO TRADING AND TURNOVER
Each Fund and the Portfolio engages in portfolio trading when the Manager
concludes that the sale of a security owned by a Fund and the Portfolio and/or
the purchase of another security of better value can enhance principal and/or
increase income. A security may be sold to avoid any prospective decline in
market value, or a security may be purchased in anticipation of a market rise.
Consistent with each Fund's and the Portfolio's investment objectives, a
security also may be sold and a comparable security purchased coincidentally in
order to take advantage of what is believed to be a disparity in the normal
yield and price relationship between the two securities. Although the Funds and
the Portfolio generally do not intend to trade for short-term profits, the
securities in each Fund's and the Portfolio's portfolio will be sold whenever
the Manager believes it is appropriate to do so, without regard to the length of
time a particular security may have been held. Higher portfolio turnover
involves correspondingly greater brokerage commissions and other transaction
costs that a Fund or the Portfolio will bear directly, and may result in the
realization of net capital gains that are taxable when distributed to each
Fund's shareholders. The portfolio turnover rates for the Government Income
Fund, Strategic Income Fund and the Portfolio the last two fiscal years were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1996 OCTOBER 31, 1995
----------------- -----------------
<S> <C> <C> <C>
Government Income Fund............................................ % 385%
Strategic Income Fund............................................. % 238%
High Income Portfolio............................................. % 213%
</TABLE>
Statement of Additional Information Page 24
<PAGE>
GT GLOBAL INCOME FUNDS
DIRECTORS, TRUSTEES AND
EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
The term "Directors" as used below refers to the Company's Directors and the
Portfolio's Trustees collectively. The Company's Directors and executive
officers and the Portfolio's Trustees and executive officers are listed below.
<TABLE>
<CAPTION>
NAMES, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY/PORTFOLIO AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- --------------------------------------- ------------------------------------------------------------------------------------------
<S> <C>
David A. Minella*, 43 Chairman, the Manager since October 1996; Director, Liechtenstein Global Trust (holding
Director, Chairman of the Board and company of the various international LGT companies) since 1990; President, Asset
President Management Division, Liechtenstein Global Trust since 1995; Director and President, LGT
50 California, Street Asset Management, Inc. ("LGT Asset Management"), formerly LGT Asset Management Holdings,
San Francisco CA 94111 Inc. since 1988; Director and President, the Manager from 1989 to October 1996; Director,
GT Global since 1987 and President, GT Global from 1987 to 1995; Director, GT Services
since 1990; President, GT Services from 1990 to 1995; Director, G.T. Global Insurance
Agency, Inc. ("G.T. Insurance") since 1992; and President, G.T. Insurance from 1992 to
1995. Mr. Minella also is a director or trustee of each of the other investment companies
registered under the 1940 Act that is managed or administered by the Manager.
C. Derek Anderson, 54 Chief Executive Officer, Anderson Capital Management, Inc.; Chairman and Chief Executive
Director Officer, Plantagenet Holdings, Ltd. from 1991 to present; Director, Munsingwear, Inc.; and
220 Sansome Street Director, American Heritage Group Inc. and various other companies. Mr. Anderson also is a
Suite 400 director or trustee of each of the other investment companies registered under the 1940
San Francisco, CA 94104 Act that is managed or administered by the Manager.
Frank S. Bayley, 55 Partner with Baker & McKenzie (a law firm); Director and Chairman, C.D. Stimson Company (a
Director private investment company); and Trustee, Seattle Art Museum. Mr. Bayley also is a
Two Embarcadero Center director or trustee or each of the other investment companies registered under the 1940
Suite 2400 Act that is managed or administered by the Manager.
San Francisco, CA 94111
Arthur C. Patterson, 52 Managing Partner, Accel Partners (a venture capital firm). He also serves as a director of
Director various computing and software companies. Mr. Patterson also is a director or trustee of
One Embarcadero Center each of the other investment companies registered under the 1940 Act that is managed or
Suite 3820 administered by the Manager.
San Francisco, CA 94111
Ruth H. Quigley, 59 Private investor; and President, Quigley Friedlander & Co., Inc. (a financial advisory
Director services firm) from 1984 to 1986. Ms. Quigley also is a director or trustee or each of the
1055 California Street other investment companies registered under the 1940 Act that is managed or administered
San Francisco, CA 94108 by the Manager.
James R. Tufts, 37 Chief Information Officer for the Manager since October 1996; President, GT Services since
Vice President and Chief 1995; Senior Vice President -- Finance and Administration, GT Global, GT Services and G.T.
Financial Officer Insurance, from 1994 to 1995; Senior Vice President -- Finance and Administration, LGT
50 California Street Asset Management and the Manager from 1994 to October 1996; Vice President -- Finance, LGT
San Francisco, CA 94111 Asset Management, the Manager, GT Global and GT Services from 1990 to 1994; Vice President
-- Finance, G.T. Insurance from 1992 to 1994; and a Director of the Manager, GT Global and
GT Services since 1991.
</TABLE>
- --------------
* Mr. Minella is an "interested person" of the Company as defined by the 1940
Act due to his affiliation with the LGT companies.
Statement of Additional Information Page 25
<PAGE>
GT GLOBAL INCOME FUNDS
<TABLE>
<CAPTION>
NAMES, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY/PORTFOLIO AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- --------------------------------------- ------------------------------------------------------------------------------------------
<S> <C>
Kenneth W. Chancey, 50 Vice President -- Mutual Fund Accounting, the Manager since 1992; and
Vice President and Vice President, Putnam Fiduciary Trust Company from 1989 to 1992.
Principal Accounting Officer
50 California Street
San Francisco, CA 94111
Helge K. Lee, 49 Executive Vice President, Asset Management Division, Liechtenstein
Vice President and Secretary Global Trust since October 1996; Senior Vice President, LGT Asset
50 California Street Management, the Manager, GT Global, GT Services and G.T. Insurance from
San Francisco, CA 94111 February 1996 to October 1996; Vice President, LGT Asset Management, the
Manager, GT Global, GT Services and G.T. Insurance from May 1994 to
February 1996; General Counsel, LGT Asset Management, the Manager, GT
Global, GT Services and G.T. Insurance from May 1994 to October 1996;
Secretary, the Manager, since May 1994; Secretary, LGT Asset Management,
GT Global, GT Services and G.T. Insurance from May 1994 to October 1996;
Senior Vice President, General Counsel and Secretary, Strong/Corneliuson
Management, Inc.; and Secretary, each of the Strong Funds from October
1991 to May 1994.
</TABLE>
------------------------------
The Board has a Nominating and Audit Committee, composed of Miss Quigley and
Messrs. Anderson, Bayley and Patterson, which is responsible for nominating
persons to serve as Directors, reviewing audits of the Company and its funds and
recommending firms to serve as independent auditors of the Company. Each of the
Directors and officers of the Company is also a Director and officer of G.T.
Investment Portfolios, Inc., G.T. Global Developing Markets Fund, Inc. and G.T.
Global Floating Rate Fund, Inc., and a Trustee and officer of G.T. Global Growth
Series, G.T. Greater Europe Fund, G.T. Global Variable Investment Trust, G.T.
Global Variable Investment Series, Global Investment Portfolio and Growth
Portfolio, which also are registered investment companies managed by the
Manager. Each of the individuals listed above serves as a Director or officer of
the Company as well as a Trustee or officer of the Portfolio. Each Director and
Officer serves in total as a Director and or Trustee and Officer, respectively,
of
- -- registered investment companies with
- -- series managed or administered by the Manager. Each Director or Trustee who
is not a director, officer or employee of the Manager or any affiliated company
is paid aggregate fees of $5,000 per annum, plus $300 per Fund for each meeting
of the Board attended, and reimburses travel and other expenses incurred in
connection with attendance at such meetings. Other Directors and officers
receive no compensation or expense reimbursement from the Company. For the
fiscal year October 31, 1996, Mr. Anderson, Mr. Bayley, Mr. Patterson and Mr.
Quigley, received total compensation of $
- --------, $
- --------, $
- -------- and $
- --------, respectively, from the Company's series Funds for their services as
Directors. For the fiscal year ended October 31, 1996, Mr. Anderson, Mr. Bayley,
Mr. Patterson and Ms. Quigley received total compensation of $
- --------, $
- --------, $
- -------- and $
- --------, respectively, from the
- -- GT Global Mutual Funds for which he or she serves as a Director or Trustee.
Fees and expenses disbursed to the Directors contained no accrued or payable
pension or retirement benefits. As of
- ------------, 1997, the officers and Directors and their families as a group
owned in the aggregate beneficially or of record less than 1% of the outstanding
shares of the Funds or of all the Company's Funds in the aggregate.
Statement of Additional Information Page 26
<PAGE>
GT GLOBAL INCOME FUNDS
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
Chancellor LGT Asset Management, Inc. (the "Manager") serves as the Government
Income Fund's and the Strategic Income Fund's investment manager and
administrator under an Investment Management and Administration Contract between
the Company and the Manager ("Company Management Contract") and as the
Portfolio's investment manager and administrator under an Investment Management
and Administration Contract between the Portfolio and the Manager ("Portfolio
Management Contract") (collectively, "Management Contracts"). The Manager serves
as the High Income Fund's administrator under an Administration Contract
("Administration Contract") between the Company and the Manager. The
Administration Contract will not be deemed an advisory contract, as defined
under the 1940 Act. As investment manager and administrator, the Manager makes
all investment decisions for the Government Income Fund, the Strategic Income
Fund and the Portfolio and as administrator, the Manager administers each Fund's
and the Portfolio's affairs. Among other things, the Manager furnishes the
services and pays the compensation and travel expenses of persons who perform
the executive, administrative, clerical and bookkeeping functions of the
Company, the Funds, and the Portfolio and provides suitable office space,
necessary small office equipment and utilities. For these services, the
Government Income Fund and the Strategic Income Fund each pay the Manager
investment management and administration fees, based on the Funds' average daily
net assets computed daily and paid monthly, at the annualized rate of .725% on
the first $500 million, .70% on the next 1 billion, .675% on the next $1
billion, and .65% on amounts thereafter. The High Income Fund pays
administration fees, computed daily and paid monthly, to the Manager at the
annualized rate of 0.25% of the Fund's average daily net assets. In addition,
the Fund bears a pro rata portion of the investment management and
administration fee paid by the Portfolio to the Manager. The Portfolio pays such
fees also computed daily and paid monthly at the annualized rate of .475% on the
first $500 million, .45% on the next $1 billion, .425% on the next $1 billion,
and .40% on amounts thereafter of its average daily net assets, plus 2% of the
Portfolio's total investment income as stated in the Portfolio's Statement of
Operations, calculated in accordance with generally accepted accounting
principles, adjusted daily for currency revaluations, on a marked to market
basis, of the Portfolio's assets; provided, however, that during any fiscal year
this amount shall not exceed 2% of the Portfolio's total investment income
calculated in accordance with generally accepted accounting principles.
The Management Contracts may be renewed for one-year terms, provided that any
such renewal has been specifically approved at least annually by: (i) the
Company's Board of Directors or the Portfolio's Board of Trustees, as
applicable, or by the vote of a majority of the Fund's or the Portfolio's
outstanding voting securities (as defined in the 1940 Act), and (ii) a majority
of Directors or Trustees who are not parties to the Management Contract or the
Administration Contract, as applicable or "interested persons" of any such party
(as defined in the 1940 Act), cast in person at a meeting called for the
specific purpose of voting on such approval. The Management Contracts provide
that with respect to the Government Income Fund, the Strategic Income Fund and
the Portfolio and the Administration Contract provides that with respect to the
High Income Fund either the Company, the Portfolio or the Manager may terminate
the Contract without penalty upon sixty days' written notice to the other party.
The Management Contract and the Administration Contract terminate automatically
in the event of their assignment (as defined in the 1940 Act).
The Manager and GT Global voluntarily have undertaken to limit the expenses of
the Advisor Class shares of the Government Income Fund and the Strategic Income
Fund (exclusive of brokerage commissions, taxes, interest and extraordinary
expenses) to the maximum annual level of 1.50% of the average daily net assets
of Fund's Advisor Class during each fiscal year. The expenses of the Advisor
Class shares of the High Income Fund (and such Fund's pro rata portion of the
Portfolio's expenses) would be limited to the annual level of 1.85% of the
average daily net assets of that Fund's Advisor Class share. The Manager has
agreed to reimburse a Fund if the Fund's annual ordinary expenses exceed those
respective levels.
Statement of Additional Information Page 27
<PAGE>
GT GLOBAL INCOME FUNDS
In each of the last three fiscal years the Government Income Fund paid
investment management and administration fees to the Manager in the following
amounts:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, AMOUNT PAID
- ----------------------------------------------------------------------------------------------------------- -------------
<S> <C>
1996....................................................................................................... $
1995....................................................................................................... 4,946,971
1994....................................................................................................... 6,390,750
</TABLE>
In each of the last three fiscal years the Strategic Income Fund paid investment
management and administration fees to the Manager in the following amounts:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, AMOUNT PAID
- ----------------------------------------------------------------------------------------------------------- -------------
<S> <C>
1996....................................................................................................... $
1995....................................................................................................... 4,293,053
1994....................................................................................................... 5,392,542
</TABLE>
For the fiscal years ended October 31, 1996, 1995 and 1994, the Portfolio paid
investment management and administrative fees of $
- --------, $2,411,786 and $2,266,420, respectively, to the Manager. For these
same periods, the High Income Fund paid administration fees of $
- --------, $860,884 and $886,795, respectively, to the Manager.
DISTRIBUTION SERVICES
Each Fund's Advisor Class shares are offered continuously through each Fund's
principal underwriter and distributor, GT Global on a "best efforts" basis
without a sales charge or a contingent deferred sales charge.
TRANSFER AGENCY AND ACCOUNTING AGENT SERVICES
GT Global Investor Services, Inc. ("Transfer Agent") has been retained by each
Fund, to perform shareholder servicing, reporting and general transfer agent
functions for each Fund. 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 also is reimbursed
by each Fund for its out-of-pocket expenses for such items as postage, forms,
telephone charges, stationery and office supplies.
The Manager serves as each Fund's pricing and accounting agent. As of October
31, 1996, the Government Income Fund, Strategic Income Fund, and High Income
Fund paid the Manager fees of $
- ------, $
- ------ and $
- ------, respectively, for such accounting services.
EXPENSES OF THE FUNDS AND THE PORTFOLIO
The Fund pays all expenses not assumed by the Manager, GT Global and other
agents. These expenses include, in addition to the advisory, distribution,
transfer agency, pricing and accounting agent and brokerage fees discussed
above, legal and audit expenses, custodian fees, directors' fees, organizational
fees, fidelity bond and other insurance premiums, taxes, extraordinary expenses
and the expenses of reports and prospectuses sent to existing investors. The
allocation of general Company expenses and expenses shared by the Funds and
other funds organized as series of the Company are allocated on a basis deemed
fair and equitable, which may be based on the relative net assets of the Funds
or the nature of the services performed and relative applicability to each Fund.
Expenditures, including costs incurred in connection with the purchase or sale
of portfolio securities, which are capitalized in accordance with generally
accepted accounting principles applicable to investment companies, are accounted
for as capital items and not as expenses. The ratio of each Fund's expenses to
its relative net assets can be expected to be higher than the expense ratios of
funds investing solely in domestic securities, since the cost of maintaining the
custody of foreign securities and the rate of investment management fees paid by
each Fund and the Portfolio generally are higher than the comparable expenses of
such other funds.
Statement of Additional Information Page 28
<PAGE>
GT GLOBAL INCOME FUNDS
VALUATION OF FUND SHARES
- --------------------------------------------------------------------------------
As described in the Prospectus, each Fund's net asset value per share for each
class of shares is determined at 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 business
time) on each business day the NYSE is open for business. 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.
Each Fund's and the Portfolio's portfolio securities and other assets are valued
as follows:
Equity securities, including ADRs, ADSs and EDRs, which are traded on stock
exchanges are valued at the last sale price on the exchange or in the principal
over-the-counter market in which such securities are traded, as of the close of
business on the day the securities are being valued or, lacking any sales, at
the last available bid price. In cases where securities are traded on more than
one exchange, the securities are valued on the exchange determined by the
Manager to be the primary market.
Long-term debt obligations are valued at the mean of representative quoted bid
or asked prices for such securities or, if such prices are not available, at
prices for securities of comparable maturity, quality and type; however, when
the Manager deems it appropriate, prices obtained for the day of valuation from
a bond pricing service will be used. Short-term debt investments are amortized
to maturity based on their cost, adjusted for foreign exchange translation,
provided such valuations represent fair value.
Options on indices, securities and currencies purchased by a Fund or the
Portfolio are valued at their last bid price in the case of listed options or,
in the case of OTC options at the 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. When market quotations for futures and
options on futures held by a Fund or the Portfolio are readily available, those
positions will be valued based upon such quotations.
Securities and other assets for which market quotations are not readily
available (including restricted securities which are subject to limitations as
to their sale) are valued at fair value as determined in good faith by or under
the direction of the Company's Board of Directors. The valuation procedures
applied in any specific instance are likely to vary from case to case. However,
consideration is generally given to the financial position of the issuer and
other fundamental analytical data relating to the investment and to the nature
of the restrictions on disposition of the securities (including any registration
expenses that might be borne by the Fund in connection with such disposition).
In addition, specific factors also are generally considered, such as the cost of
the investment, the market value of any unrestricted securities of the same
class (both at the time of purchase and at the time of valuation), the size of
the holding, the prices of any recent transactions or offers with respect to
such securities and any available analysts' reports regarding the issuer.
The fair value of any other assets is added to the value of all securities
positions to arrive at the value of a Fund's or the Portfolio's total assets.
The Fund's or the Portfolio's liabilities, including accruals for expenses, are
deducted from its total assets. Once the total value of a Fund's or the
Portfolio's net assets is so determined, that value is then divided by the total
number of shares outstanding (excluding treasury shares), and the result,
rounded to the nearest cent, is the net asset value per share.
Any assets or liabilities initially denominated in terms of foreign currencies
are translated into U.S. dollars at the official exchange rate or at the mean of
the current bid and asked prices of such currencies against the U.S. dollar last
quoted by a major bank that is a regular participant in the foreign exchange
market or on the basis of a pricing service that takes into account the quotes
provided by a number of such major banks. If none of these alternatives are
available or none are deemed to provide a suitable methodology for converting a
foreign currency into U.S. dollars, the Board of Directors, in good faith, will
establish a conversion rate for such currency.
European, Far Eastern or Latin American securities trading may not take place on
all days on which the NYSE is open. Further, trading takes place in Japanese
markets on certain Saturdays and in various foreign markets on days on which the
NYSE is not open. Consequently, the calculation of the Funds' respective net
asset values therefore may not take place
Statement of Additional Information Page 29
<PAGE>
GT GLOBAL INCOME FUNDS
contemporaneously with the determination of the prices of securities held by the
Funds. Events affecting the values of portfolio securities that occur between
the time their prices are determined and the close of regular trading on the
NYSE will not be reflected in the Funds' net asset values unless the Manager,
under the supervision of the Company's Board of Directors, determines that the
particular event would materially affect net asset value. As a result, a Fund's
net asset value may be significantly affected by such trading on days when a
shareholder cannot purchase or redeem shares of the Fund.
- --------------------------------------------------------------------------------
INFORMATION RELATING TO SALES AND
REDEMPTIONS
- --------------------------------------------------------------------------------
PAYMENT AND TERMS OF OFFERING
Payment for Advisor Class shares 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 cancelled 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 a Fund by reason of such cancellation, and if such
purchaser is a shareholder, that 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 that Fund for the loss incurred. Investors
whose purchase orders have been cancelled due to nonpayment may be prohibited
from placing future orders.
The Funds reserve 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 a 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 Funds reserve 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.
EXCHANGES BETWEEN FUNDS
Shares of each 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 a 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 60 days' prior 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, telex or telegram
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
affixed. All shareholders may request that redemption proceeds be transmitted by
bank wire 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 appropriate Fund. Proceeds of less than $1,000 will be mailed to
the shareholder's registered address of record. The Funds and the Transfer Agent
reserve the right to refuse any telephone instructions and may discontinue the
aforementioned redemption options upon 30 days written notice.
Statement of Additional Information Page 30
<PAGE>
GT GLOBAL INCOME FUNDS
SUSPENSION OF REDEMPTION PRIVILEGES
The Funds 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 Funds from disposing of
their portfolio securities or in fairly determining the value of their 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 Company's Board of Directors, make it undesirable for a 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 a 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 Company has filed
with the SEC an election pursuant to Rule 18f-1 under the 1940 Act. This means
that each 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 value of the net
assets of the Fund at the beginning of such period. This election is 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 FUNDS
Each Fund is treated as a separate corporation for federal income tax purposes.
In order to continue to qualify for treatment as a regulated investment company
("RIC") under the Internal Revenue Code of 1986, as amended ("Code"), each 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, net short-term capital gain and net gains from certain foreign currency
transactions) ("Distribution Requirement") and must meet several additional
requirements. With respect to each 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 foreign
currencies, or other income (including gains from options, Futures or Forward
Contracts) derived with respect to its business of investing in securities or
those currencies ("Income Requirement"); (2) 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
- -- options or Futures (other than those on foreign currencies), or foreign
currencies (or options, Futures or Forward Contracts thereon) that are not
directly related to the Fund's principal business of investing in securities (or
options and Futures with respect to securities) ("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 outstanding voting securities of the issuer; 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
High Income Fund, as an investor in the Portfolio, will be deemed to own a
proportionate share of the Portfolio's assets, and to earn a proportionate share
of the Portfolio's income, for purposes of determining whether that Fund
satisfies all the requirements described above to qualify as a RIC.
Each 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.
See the next section for a discussion of the tax consequences to the High Income
Fund of hedging transactions engaged in, and investments in passive foreign
investment companies ("PFICS") and other foreign securities by, the Portfolio.
Statement of Additional Information Page 31
<PAGE>
GT GLOBAL INCOME FUNDS
TAXATION OF THE PORTFOLIO -- GENERAL
The Portfolio will be treated as a partnership for federal income tax purposes
and will not be a "publicly traded partnership." As a result, the Portfolio will
not be subject to federal income tax; instead, the High Income Fund, as an
investor in the Portfolio, will be required to take into account in determining
its federal income tax liability its share of the Portfolio's income, gains,
losses, deductions and credits, without regard to whether it has received any
cash distributions from the Portfolio. The Portfolio also will not be subject to
New York income or franchise tax.
Because, as noted above, the High Income Fund will be deemed to own a
proportionate share of the Portfolio's assets, and to earn a proportionate share
of the Portfolio's income, for purposes of determining whether that Fund
satisfies the requirements to qualify as a RIC, the Portfolio intends to conduct
its operations so that the High Income Fund will be able to satisfy all those
requirements.
Distributions to the High Income Fund from the Portfolio (whether pursuant to a
partial or complete withdrawal or otherwise) will not result in that Fund's
recognition of any gain or loss for federal income tax purposes, except that (1)
gain will be recognized to the extent any cash that is distributed exceeds that
Fund's basis for its interest in the Portfolio before the distribution, (2)
income or gain will be recognized if the distribution is in liquidation of that
Fund's entire interest in the Portfolio and includes a disproportionate share of
any unrealized receivables held by the Portfolio, and (3) loss will be
recognized if a liquidation distribution consists solely of cash and/or
unrealized receivables. The High Income Fund's basis for its interest in the
Portfolio generally will equal the amount of cash and the basis of any property
that Fund invests in the Portfolio, increased by that Fund's share of the
Portfolio's net income and gains and decreased by (a) the amount of cash and the
basis of any property the Portfolio distributes to that Fund and (b) that Fund's
share of the Portfolio's losses.
TAXATION OF CERTAIN INVESTMENT ACTIVITIES
For purposes of the following discussion, "Investor Fund" means the Government
Income Fund, the Strategic Income Fund or the Portfolio.
FOREIGN TAXES. Dividends and interest received by an Investor Fund may be
subject to income, withholding, or other taxes imposed by foreign countries and
U.S. possessions that would reduce the yield on its securities. Tax conventions
between certain countries and the United States may reduce or eliminate these
foreign taxes, however, and many foreign countries do not impose taxes on
capital gains in respect of investments by foreign investors. If more than 50%
of the value of a Fund's total assets (taking into account, in the case of the
High Income Fund, its proportionate share of the Portfolio's assets) at the
close of its taxable year consists of securities of foreign corporations, the
Fund will be eligible to, and may, file an election with the Internal Revenue
Service that will enable its shareholders, in effect, to receive the benefit of
the foreign tax credit with respect to any foreign income taxes paid by it
(taking into account, in the case of the High Income Fund, its proportionate
share of the Portfolio's taxes paid). Pursuant to the election, a Fund will
treat those taxes as dividends paid to its shareholders and each shareholder
will be required to (1) include in gross income, and treat as paid by him, his
proportionate share of those taxes, (2) treat his share of those taxes and of
any dividend paid by the Fund that represents income from foreign sources as his
own income from those sources, and (3) either deduct the taxes deemed paid by
him in computing his taxable income or, alternatively, use the foregoing
information in calculating the foreign tax credit against his federal income
tax. Each Fund will report to its shareholders shortly after each taxable year
their respective shares of the Fund's income (or, in the case of the High Income
Fund, the Portfolio's income) from sources within, and taxes paid to, foreign
countries if it makes this election.
PASSIVE FOREIGN INVESTMENT COMPANIES. Each Investor Fund may invest in the
stock of PFICs part (or, in the case of the High Income Fund, its proportionate
share of a part). A PFIC is a foreign corporation that, in general, meets either
of the following tests: (1) at least 75% of its gross income is passive or (2)
an average of at least 50% of its assets produce, or are held for the production
of, passive income. Under certain circumstances, a Fund will be subject to
federal income tax on a part (or, in the case of the High Income Fund, its
proportionate share of a part) of any "excess distribution" received by it (or,
in the case of the High Income Fund, by the Portfolio) on the stock of a PFIC or
of any gain from its (or, in the case of the High Income Fund, by the
Portfolio's) disposition of the stock (collectively "PFIC income"), plus
interest thereon, even if the Fund distributes the PFIC income as a taxable
dividend to its shareholders. The balance of the PFIC income will be included in
the Fund's investment company taxable income and, accordingly, will not be
taxable to the Fund to the extent that income is distributed to its
shareholders.
If an Investor Fund invests in a PFIC and elects to treat the PFIC as a
"qualified electing fund" ("QEF"), then in lieu of the foregoing tax and
interest obligation, the Investor Fund (or, in the case of the Portfolio, the
High Income Fund) will be required to include in income each taxable year its
pro rata share of the QEF's ordinary earnings and net capital gain (the excess
of net long-term capital gain over net short-term capital loss) -- which most
likely would have to be distributed to satisfy the Distribution Requirement and
to avoid imposition of the Excise Tax -- even if those earnings and gain were
not
Statement of Additional Information Page 32
<PAGE>
GT GLOBAL INCOME FUNDS
received by the Fund. In most instances it will be very difficult, if not
impossible, to make this election because of certain requirements thereof.
Pursuant to proposed regulations, open-end RICs such as the Fund would be
entitled to elect to "mark-to-market" their stock in certain PFICs.
"Marking-to-market," in this context, means recognizing as gain for each taxable
year the excess, as of the end of that year, of the fair market value of each
such PFIC's stock over the adjusted basis in that stock (including
mark-to-market gain for each prior year for which an election was in effect).
OPTIONS, FUTURES AND FOREIGN CURRENCY TRANSACTIONS. The Investor Fund's use
of hedging transactions, such as selling (writing) and purchasing options and
Futures Contracts and entering into Forward Contracts, involves complex rules
that will determine, for federal income tax purposes, the character and timing
of recognition of the gains and losses an Investor Fund realizes in connection
therewith. Income from foreign currencies (except certain gains therefrom that
may be excluded by future regulations), and income from transactions in options,
Futures and Forward Contracts derived by an Investor Fund with respect to its
business of investing in securities or foreign currencies, will qualify as
permissible income under the Income Requirement for that Investor Fund (or, in
the case of the Portfolio, the High Income Fund). However, income from the
disposition by an Investor Fund of options and Futures (other than those on
foreign currencies) will be subject to the Short-Short Limitation for that
Investor Fund (or, in the case of the Portfolio, the High Income Fund) if they
are held for less than three months. Income from the disposition by an Investor
Fund of foreign currencies, and options, Futures and Forward Contracts on
foreign currencies, that are not directly related to its principal business of
investing in securities (or options and Futures with respect thereto) also will
be subject to the Short-Short Limitation for that Investor Fund (or, in the case
of the Portfolio, the High Income Fund) if they are held for less than three
months.
If an Investor Fund satisfies certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any decrease in
value (whether realized or not) of the offsetting hedging position during the
period of the hedge for purposes of determining whether the Investor Fund (or,
in the case of the Portfolio, the High Income Fund) satisfies the Short-Short
Limitation. Thus, only the net gain (if any) from the designated hedge will be
included in gross income for purposes of that limitation. Each Investor Fund
intends that, when it engages in hedging transactions, it will qualify for this
treatment, but at the present time it is not clear whether this treatment will
be available for all those transactions listed. To the extent this treatment is
not available, an Investor Fund may be forced to defer the closing out of
certain options, Futures, Forward Contract or foreign currency positions beyond
the time when it otherwise would be advantageous to do so, in order for that
Investor Fund (or, in the case of the Portfolio, the High Income Fund) to
continue to qualify as a RIC.
Futures and Forward Contracts that are subject to Section 1256 of the Code
(other than those that are part of a "mixed straddle") ("Section 1256
Contracts") and that are held by an Investor Fund at the end of its taxable year
generally will be deemed to have been sold at market value for federal income
tax purposes. Sixty percent of any net gain or loss recognized on these deemed
sales, and 60% of any net gain or loss realized from any actual sales of Section
1256 Contracts, will be treated as long-term capital gain or loss, and the
balance will be treated as short-term capital gain or loss. Section 988 of the
Code also may apply to gains and losses from transactions in foreign currencies,
foreign-currency-denominated debt securities and options, Futures and Forward
Contracts and options on foreign currencies ("Section 988 gains or losses").
Under Section 988, each foreign currency gain or loss generally is computed
separately and treated as ordinary income or loss. In the case of overlap
between Sections 1256 and 988, special provisions determine the character and
timing of any income, gain or loss. Each Investor Fund attempts to monitor
Section 988 transactions to minimize any adverse tax impact.
TAXATION OF THE FUND'S SHAREHOLDERS
Dividends and other distributions declared by a 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 a 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 from U.S.
corporations. However, dividends received by a corporate shareholder and
deducted by it pursuant to the dividends-received deduction are subject
indirectly to the alternative minimum tax.
If 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
Statement of Additional Information Page 33
<PAGE>
GT GLOBAL INCOME FUNDS
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.
Distributions of net investment income by a Fund to a shareholder who, as to the
United States, is a nonresident alien individual, 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 a Fund to a
foreign shareholder is "effectively connected with the conduct of a U.S. trade
or business," in which case the reporting and withholding requirements
applicable to domestic taxpayers 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 income tax
considerations affecting the Fund's, their shareholders and the Portfolio.
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, located 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. located in
Singapore; LGT Asset Management Ltd., formerly G.T. Management (Australia) Ltd.,
located in Sydney; and LGT Asset Management GmbH, formerly BIL Asset Management
GmbH, located in Frankfurt, Germany.
CUSTODIAN
State Street Bank and Trust Company ("State Street"), 225 Franklin Street,
Boston, Massachusetts 02110, acts as custodian of each Fund's and the
Portfolio's assets. State Street is authorized to establish and has established
separate accounts in foreign currencies and to cause securities of the Funds and
the Portfolio to be held in separate accounts outside the United States in the
custody of non-U.S. banks.
INDEPENDENT ACCOUNTANTS
The Funds' and the Portfolio's independent accountants are Coopers & Lybrand
L.L.P., One Post Office Square, Boston Massachusetts 02109. Coopers & Lybrand
L.L.P., conducts audits of each Fund's and the Portfolio's financial statements,
assists in the preparation of the Funds' and the Portfolio's federal and state
income tax returns and consults with the Company, the Funds and the Portfolio as
to matters of accounting, regulatory filings, and federal and state income
taxation.
The audited financial statements of the Funds and the Portfolio 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 said firm as experts in accounting
and auditing.
Statement of Additional Information Page 34
<PAGE>
GT GLOBAL INCOME FUNDS
USE OF NAME
The Manager has granted the Funds and the Portfolio the right to use the "GT"
name and "GT Global" and has reserved the right to withdraw its consent to the
use of such names by the Company, the Funds and/or the Portfolio at any time, or
to grant the use of such names to any other company.
- --------------------------------------------------------------------------------
INVESTMENT RESULTS
- --------------------------------------------------------------------------------
A Fund's "Standardized Return", as referred to in the Prospectuses (see "Other
Information -- Performance Information" in the Prospectus), is calculated
separately for Advisor Class shares of each Fund, as follows: Standardized
Return ("T") is computed by using the value at the end of the period ("EV") 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) to the (n)th
power = EV. The following assumptions will be reflected in computations made in
accordance with this formula: (1) reinvestment of dividends and other
distributions at net asset value on the reinvestment date determined by the
Board; and (2) a complete redemption at the end of any period illustrated.
The Funds' Standardized Returns for their Advisor Class shares, stated as
aggregate total returns, for the periods shown, were as follows:
<TABLE>
<CAPTION>
GOVERNMENT STRATEGIC HIGH INCOME
PERIOD INCOME FUND INCOME FUND FUND
- ---------------------------------------------------------------------------- --------------- --------------- ---------------
<S> <C> <C> <C>
Year ended October 31, 1996................................................. % % %
June 1, 1995 (commencement of operations) to October 31, 1996............... % % %
</TABLE>
"Non-Standardized Return," as referred to in the Prospectus, is calculated for a
specified period of time by assuming the investment of $1,000 in Fund shares and
further assuming the reinvestment of all dividends and other distributions made
to Fund shareholders in additional Fund shares at their net asset value.
Percentage rates of return are then calculated by comparing this assumed initial
investment to the value of the hypothetical account at the end of the period for
which the Non-Standardized Return is quoted. As discussed in the Prospectus, the
Funds may quote Non-Standardized Total Returns that do not reflect the effect of
sales charges. Non-Standardized Returns may be quoted for the same or different
time periods for which Standardized Returns are quoted. The Funds'
Non-Standardized Returns for their Advisor Class shares, stated as aggregate
total returns, for the periods shown, were as follows:
<TABLE>
<CAPTION>
GOVERNMENT STRATEGIC HIGH INCOME
PERIOD INCOME FUND INCOME FUND FUND
- ---------------------------------------------------------------------------- --------------- --------------- ---------------
<S> <C> <C> <C>
Year ended October 31, 1996................................................. % % %
June 1, 1995 (commencement of operations) to October 31, 1996............... % % %
</TABLE>
Current yield ("YIELD"), which is calculated separately for Advisor Class shares
of each fund, is computed by dividing the difference between dividends and
interest earned during a one-month period ("a") and expenses accrued for the
period (net of reimbursements) ("b") by the product of the average daily number
of shares outstanding during the period that were entitled to receive dividends
("c") and the maximum offering price per share on the last day of the period
("d") according to the following formula as required by the Securities and
Exchange Commission:
<TABLE>
<S> <C> <C> <C> <C> <C>
a-b
YIELD = 2 [( -- + 1 ) (6)-1]
cd
</TABLE>
As of October 22, 1992, the investment objectives and policies of the Strategic
Income Fund were changed to high current income, primarily, and capital
appreciation, secondarily. Prior to October 22, 1992, the Strategic Income Fund
operated as the GT Global Bond Fund and had investment objectives which sought
primarily, capital appreciation and moderate current income, secondarily. The
total returns and yield for the Strategic Income Fund were primarily achieved
under the Strategic Income Fund's prior investment objectives.
A Fund's "Standardized Return", as referred to in the Prospectuses (see "Other
Information -- Performance Information" in the Prospectus), is calculated
separately for Class A and Class B shares of each Fund, as follows: Standardized
Return ("T") is computed by using the value at the end of the period ("EV") of a
hypothetical initial investment of $1,000 ("P")
Statement of Additional Information Page 35
<PAGE>
GT GLOBAL INCOME FUNDS
over a period of years ("n") according to the following formula as required by
the SEC: P(1+T)(n) = EV. The following assumptions will be reflected in with
respect to Class A shares computations made in accordance with this formula: (1)
for Class A shares, deduction of the maximum sales charge with respect to Class
B shares 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 Board; and (4) a complete redemption at the end of any period
illustrated.
The Funds' Standardized Returns, for their Class A shares, stated as average
annual total returns, for the periods shown, were as follows:
<TABLE>
<CAPTION>
GOVERNMENT STRATEGIC HIGH INCOME
PERIOD INCOME FUND INCOME FUND FUND
- ---------------------------------------------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Year ended October 31, 1996................................................. % % %
October 31, 1990 through October 31, 1996................................... % % %
March 29, 1988 through October 31, 1996..................................... % % %
October 22, 1992 through October 31, 1996................................... % % %
</TABLE>
The Funds' Standardized Returns for their Class B shares, which were first
offered on October 22, 1992, stated as average annual total returns, for the
periods shown, were as follows:
<TABLE>
<CAPTION>
GOVERNMENT STRATEGIC HIGH INCOME
PERIOD INCOME FUND INCOME FUND FUND
- ---------------------------------------------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Year ended October 31, 1996................................................. % % %
October 22, 1992 through October 31, 1996................................... % % %
</TABLE>
"Non-Standardized Return," as referred to in the Prospectus, is calculated for a
specified period of time by assuming the investment of $1,000 in Fund shares and
further assuming the reinvestment of all dividends and other distributions made
to Fund shareholders in additional Fund shares at their net asset value.
Percentage rates of return are then calculated by comparing this assumed initial
investment to the value of the hypothetical account at the end of the period for
which the Non-Standardized Return is quoted. As discussed in the Prospectus, the
Funds may quote Non-Standardized Total Returns that do not reflect the effect of
sales charges. Non-Standardized Returns may be quoted for the same or different
time periods for which Standardized Returns are quoted. The Funds'
Non-Standardized Returns for their Class A shares, stated as aggregate total
returns, for the periods shown, were as follows:
<TABLE>
<CAPTION>
GOVERNMENT STRATEGIC HIGH INCOME
PERIOD INCOME FUND INCOME FUND FUND
- ---------------------------------------------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Year ended October 31, 1996................................................. % % %
October 31, 1990 through October 31, 1996................................... % % %
March 29, 1988 through October 31, 1996..................................... % % %
October 22, 1992 through October 31, 1996................................... % % %
</TABLE>
The Funds' Non-Standardized Returns for its Class B shares which were first
offered on October 22, 1992, stated as aggregate total returns, for the periods
shown, were as follows:
<TABLE>
<CAPTION>
GOVERNMENT STRATEGIC HIGH INCOME
PERIOD INCOME FUND INCOME FUND FUND
- ---------------------------------------------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Year ended October 31, 1996................................................. % % %
October 22, 1992 through October 31, 1996................................... % % %
</TABLE>
The Funds' Non-Standardized Returns for the Funds' Class A shares stated as
average annual total returns, for the periods shown, were as follows:
<TABLE>
<CAPTION>
GOVERNMENT STRATEGIC HIGH INCOME
PERIOD INCOME FUND INCOME FUND FUND
- ---------------------------------------------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Year ended October 31, 1996................................................. % % %
October 31, 1990 through October 31, 1996................................... % % %
March 29, 1988 through October 31, 1996..................................... % % %
October 22, 1992 through October 31, 1996................................... % % %
</TABLE>
The Funds' Non-Standardized Returns for its Class B shares which were first
offered on October 22, 1992, stated as average annual total returns, for the
periods shown, were as follows:
<TABLE>
<CAPTION>
GOVERNMENT STRATEGIC HIGH INCOME
PERIOD INCOME FUND INCOME FUND FUND
- ---------------------------------------------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
Year ended October 31, 1996................................................. % % %
October 22, 1992 through October 31, 1996................................... % % %
</TABLE>
Statement of Additional Information Page 36
<PAGE>
GT GLOBAL INCOME FUNDS
Current yield ("YIELD"), which is calculated separately for Class A and Class B
shares of each fund, is computed by dividing the difference between dividends
and interest earned during a one-month period ("a") and expenses accrued for the
period (net of reimbursements) ("b") by the product of the average daily number
of shares outstanding during the period that were entitled to receive dividends
("c") and the maximum offering price per share on the last day of the period
("d") according to the following formula as required by the Securities and
Exchange Commission:
<TABLE>
<S> <C> <C> <C> <C> <C>
a-b
YIELD = 2 [( -- + 1 ) (6)-1]
cd
</TABLE>
IMPORTANT POINTS TO NOTE ABOUT DATA RELATING TO WORLD EQUITY AND BOND MARKETS
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 Company
or GT Global. The authors and publishers of such material are not to be
considered as "experts" under the Securities Act of 1933, as amended, on account
of the inclusion of such information herein.
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 any of these Funds, nor is it a
prediction of such performance. The performance of the Funds will differ from
the historical performance of relevant indices. The performance of indices does
not take expenses into account, while each Fund incurs expenses in its
operations, which will reduce performance. Each Fund is actively managed, I.E.,
the Manager, as each Fund's investment manager, actively purchases and sells
securities in seeking each Fund's investment objective. Moreover, each Fund may
invest a portion of its assets in corporate bonds, while certain indices relate
only to government bonds. Each of these factors will cause the performance of
each Fund to differ from relevant indices.
Each Fund and GT Global, from time to time, may compare the Funds with the
following:
(1) Various Salomon Brothers World Bond Indices, which measure the total
return performance of high quality non-U.S. dollar denominated securities in
major sectors of the worldwide bond markets including the Salomon Brothers
World Government Bond Index, which is a widely used index of ten year
government bonds with remaining maturities greater than one year.
(2) The Shearson Lehman 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 or BBB by S&P, or, in
the case of nonrated bonds, BBB by Fitch Investors Service (excluding
Collateralized Mortgage Obligations).
(3) Average of Savings Accounts, which is a measure of all kinds of
savings deposits, including longer-term certificates (based on figures
supplied by the U.S. League of Savings Institutions). 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.
(4) 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).
(5) Data and mutual fund rankings and comparisons published or prepared
by Lipper Analytical Data Services, Inc. ("Lipper"), CDA/Wiesenberger
Investment Company Services ("CDA/Wiesenberger"), Morningstar, Inc.
("Morningstar") and/or other companies that rank or compare mutual funds by
overall performance, investment objectives, assets, expense levels, periods
of existence and/or other factors. In this regard, each Fund may be compared
to the 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 without such peer group. 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
Statement of Additional Information Page 37
<PAGE>
GT GLOBAL INCOME FUNDS
the funds in an investment category receive five stars and 22.5% receive
four stars. The ratings are subject to change each month.
(6) Bear Stearns Foreign Bond Index, which provides simple average
returns for individual countries and GNP-weighted index, beginning in 1975.
The returns are broken down by local market and currency.
(7) Ibbottson Associates International Bond Index, which provides a
detailed breakdown of local market and currency returns since 1960.
(8) 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 U.S.
(9) 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 and the Salomon Brothers Brady Bond Index which
measures the total return performance of Brady Bonds issued since March,
1990, and are issued in U.S. dollar denominated instruments.
(10) Dow Jones Industrial Average.
(11) CNBC/Financial News Composite Index.
(12) 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 of Europe, Australia and the Far East.
(13) International Finance Corporation ("IFC") Emerging Markets Data Base
which provides detailed statistics on bond and stock markets in developing
countries
(14) J.P. Morgan & Co. Bond Indices, including, among others, the J.P.
Morgan Traded Government Bond Index which is an index composed of liquid
non-U.S. fixed income securities based on market weightings and currency
since 1986.
(15) 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.
(16) The World Bank Publication of Trends in Developing Countries
("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.
(17) Salomon Brothers Global Telecommunications Index is composed of
telecommunications companies in the developing and emerging countries.
(18) Datastream and Worldscope, each is an on-line database retrieval
service for information including but not limited to international financial
and economic data.
(19) International Financial Statistics, which is produced by the
International Monetary Fund.
(20) Various publications and reports produced by the World Bank and its
affiliates.
(21) Various publications from the International Bank for Reconstruction
and Development/The World Bank.
(22) Various publications including but not limited to ratings agencies
such as Moody's Investors Service, Fitch Investors Service and Standard &
Poor's.
(23) Various publications from the Organization for Economic Cooperation
and Development ("OECD").
(24) Wilshire Associates which is an on-line database for international
financial and economic data including performance measure for a wide range
of securities.
Indices, economic and financial data prepared by the research departments of
such financial organizations as Salomon Brothers, Inc., Lehman Brothers, Merrill
Lynch, Pierce, Fenner & Smith, Inc. J. P. Morgan, Morgan Stanley, Smith Barney,
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, performance rankings, ratings and commentary
reported periodically in national financial publications, included but not
limited to Money Magazine, Smart Money, Global Finance, EuroMoney, Financial
World, Forbes, Fortune, Business Week, Latin Finance, the Wall Street Journal,
Emerging Markets Weekly, Kiplinger's
Statement of Additional Information Page 38
<PAGE>
GT GLOBAL INCOME FUNDS
Guide To Personal Finance, Barron's, The Financial Times, USA Today, The New
York Times and Investors Business Digest. Each 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.
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 Fund assets under management in
advertising materials.
GT Global believes the GT Global Income Funds can be an appropriate investment
for long-term investment goals including but not limited to funding retirement,
paying for education or purchasing a house. The GT Global Income Funds do not
represent a complete investment program and the investors should consider the
Funds as appropriate for a portion of their overall investment portfolio with
regard to their long-term investment goals.
GT Global believes that a growing number of consumer products, including but not
limited to home appliances, automobiles and clothing, purchased by Americans are
manufactured abroad. GT Global believes that investing globally in the companies
that produce products for U.S. consumers can help U.S. investors seek protection
of the value of their assets against the potentially increasing costs of foreign
manufactured goods. Of course, there can be no assurance that there will be any
correlation between global investing and the costs of such foreign goods unless
there is a corresponding change in value of the U.S. dollar to foreign
currencies. From time to time, GT Global may refer to or advertise the names of
such companies although there can be no assurance that any GT Global Mutual Fund
may own the securities of these companies.
The Funds may compare their performance to that of other compilations or indices
of comparable quality to those listed above which may be developed and made
available in the future. The Funds may be compared in advertising to
Certificates of Deposit (CDs), the Bank Rate Monitor National Index, an average
of the quoted rates for 100 leading banks and thrifts in ten U.S. cities chosen
to represent the ten largest Consumer Metropolitan statistical areas, or other
investments issued by banks. The Funds differ from bank investments in several
respects. The Funds may offer greater liquidity or higher potential returns than
CDs; but unlike CDs, the Funds will have a fluctuating share price and return
and is not FDIC insured.
The Funds' performance may be compared to the performance of other mutual funds
in general, or to the performance of particular types of mutual funds. These
comparisons may be expressed as mutual fund rankings prepared by Lipper
Analytical Services, Inc. (Lipper), an independent service which monitors the
performance of mutual funds. 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 Fund's performance
may be compared to mutual fund performance indices prepared by Lipper.
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.
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 is based on the returns of different indices.
GT Global 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.
In advertising materials, GT Global may reference or discuss its products and
services, which may include: retirement investing; the effects of dollar-cost
averaging and saving for college or a home. In addition, GT Global may quote
financial or business publications and periodicals, including model portfolios
or allocations, as they relate to fund management, investment philosophy, and
investment techniques.
The Fund may discuss its Quotron number, CUSIP number, and its current portfolio
management team.
From time to time, the Fund's performance also may be compared to other mutual
funds tracked by financial or business publications and periodicals. For
example, the fund may quote Morningstar, Inc. in its advertising materials.
Morningstar,
Statement of Additional Information Page 39
<PAGE>
GT GLOBAL INCOME FUNDS
Inc. is a mutual fund rating service that rates mutual funds on the basis of
risk-adjusted performance. In addition, the Fund may quote financial or business
publications and periodicals as they relate to fund management, investment
philosophy, and investment techniques. Rankings that compare the performance of
GT Global Funds to one another in appropriate categories over specific periods
of time may also be quoted in advertising.
The Fund may quote various measures of volatility and benchmark correlation,
such as beta, standard deviation and R2 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. 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.
Each 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 the 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 plans may produce returns superior to comparable non-retirement
investments. The Funds may also discuss these plans, which include:
INDIVIDUAL RETIREMENT ACCOUNTS (IRAS): Any individual who receives earned income
from employment (including self-employment) can contribute up to $2,000 each
year to an IRA (or if less, 100% of compensation). If your spouse is not
employed, a total of $2,250 may be contributed each year to IRAs set up for you
and your spouse (subject to the maximum of $2,000 to either IRA). 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 rollover (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 AND SALARY-REDUCTION SEP-IRAS: Simplified employee pension (SEP) plans
and salary-reduction SEPs provide self-employed individuals (and any eligible
employees) with benefits similar to Keogh-type plans or 401(k) plans, but with
fewer administrative requirements and therefore potential lower annual
administration expenses.
403(B)(7) CUSTODIAL ACCOUNTS: Employees of public schools and most other
not-for-profit corporations can make pre-tax salary reduction contributions to
these accounts.
PROFIT-SHARING (INCLUDING 401(K)) AND MONEY PURCHASE PENSION PLANS: Corporations
can sponsor these qualified defined contribution plans for their employees. A
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).
GT Global may from time to time in its sales methods and advertising discuss the
risks inherent in investing. 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.
Statement of Additional Information Page 40
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GT GLOBAL INCOME FUNDS
The major types of investment risk are market risk, industry risk, credit risk,
interest rate risk and inflation risk. Market risk entails a change in value of
a security due to market uncertainty. Industry risk can be described as the
market risk associated with companies engaged in a similar business.
The next two risks, credit and interest rate risk, more often are associated
with fixed income investing. Credit risk refers to the creditworthiness of an
issuer of debt securities and its ability to pay interest and repay the
principal value of the bond. Interest rate risk has two components. When
interest rates rise or fall the value of the security generally will move
correspondingly in the opposite direction. Further, the longer the maturity the
greater the impact on the bond's value.
Finally, 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.
From time to time, the Fund and GT Global will quote information including but
not limited to data regarding: individual countries, regions, world stock
exchanges, and economic and demographic statistics such as:
1) Stock market capitalization: Morgan Stanley Capital International World
Indices, International Finance Corporation and Datastream.
2) Stock market trading volume: Morgan Stanley Capital International World
Indices, International Finance Corporation.
3) The number of listed companies: International Finance Corporation, 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 Indices.
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, International Finance Corporation and Datastream.
7) The Consumer Price Index and inflation rate: The World Bank, Datastream and
International Finance Corporation.
8) Gross Domestic Product (GDP): Datastream and The World Bank.
9) GDP growth rate: International Finance Corporation, 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: Organization for Economic Cooperation
and Development and United Nations.
13) Total exports and imports by year: International Finance Corporation, The
World Bank and Datastream.
14) Top three companies by country, industry, or market: International Finance
Corporation, 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.
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
Statement of Additional Information Page 41
<PAGE>
GT GLOBAL INCOME FUNDS
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.
THE GT ADVANTAGE
The Manager has developed a unique team approach to its global money management
which we call the GT Advantage. The Manager's money management style combines
the best of the "top-down" and "bottom-up" investment manager strategies. The
top-down approach is implemented by the Manager's Investment Policy Committee
which sets broad guidelines for asset allocation and currency management based
on the Manager's own macroeconomic forecasts and research from its worldwide
offices. The bottom-up approach utilizes regional teams of individual portfolio
managers to implement the committee's quidelines by selecting local securities
that offer strong growth and income potential.
ECONOMIC DEVELOPMENT IN EMERGING MARKETS
The Manager has identified six phases to track the progress of developing
economies.
In addition, the Manager focuses on the transitions between each phase:
BETWEEN PHASES 1 & 2, STABILIZATION: Developing nations recognize the need
for economic reform and launch initiatives to stabilize their economies. Typical
measures might include initiating monetary reforms to contain inflation,
controlling government spending, and addressing external trade imbalances.
BETWEEN PHASES 2 & 3, RENOVATION: Economic development gathers momentum as
the governments of developing nations take further steps to increase
productivity and external competitiveness. Typical reforms include easing market
regulations, privatizing state-owned industries, lowering trade barriers and
reforming the national tax structure.
BETWEEN PHASES 3 & 4, NEW CONSTRUCTION: As economic reforms take hold,
infrastructure improvements are needed to facilitate and support long-term
growth. The construction and upgrading of highways and airports, communications
and utility systems generally require financing in the form of public debt.
Similarly, as the private sector develops, bolstered by new privatizations,
corporate debt securities typically are issued to finance business expansion.
EMERGING MARKET TRADING VOLUME
The annual trading volume of debt securities from developing economies according
to Salomon Brothers, Inc. has grown from $90 billion in 1990 to $150 billion in
1991, to $400 billion in 1992 and was estimated to be $1,200 billion at the end
of 1993 and $1.5 trillion at the end of 1994, respectively.
- --------------------------------------------------------------------------------
DESCRIPTION OF DEBT RATINGS
- --------------------------------------------------------------------------------
DESCRIPTION OF BOND RATINGS
MOODY'S INVESTORS SERVICE, INC. ("Moody's") rates the 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. They are rated lower than the best
bond 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 risks appear somewhat
greater.
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.
Statement of Additional Information Page 42
<PAGE>
GT GLOBAL INCOME FUNDS
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 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 ratings
classification from Aa through 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.
STANDARD & POOR'S RATINGS GROUP ("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 -- High grade. Very strong capacity to pay interest and repay
principal and differ from AAA issues only in a small degree.
A -- Have a strong capacity to pay interest and repay principal although
they are somewhat more susceptible to the adverse effects of change in
circumstances and economic conditions than debt in higher rated categories.
BBB -- Regarded as having adequate capacity to pay interest and repay
principal. These bonds normally exhibit adequate protection parameters, but
adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity to pay interest and repay principal than for
debt in higher rated categories.
BB, B, CCC, CC, C -- Debt rated "BB," "B," "CCC," "CC," and "C" are
regarded, on balance, as predominantly speculative with respect to capacity
to pay interest and repay principal in accordance with the terms of this
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.
Statement of Additional Information Page 43
<PAGE>
GT GLOBAL INCOME FUNDS
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 which 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.
C -- Reserved for income bonds on which no interest is being paid.
D -- In payment default. The "D" rating is used when interest 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. The "D" rating also will 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 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.
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 (or
supporting institutions) rated Prime-1 have a superior ability to repay senior
short-term debt obligations. Prime-1 repayment ability generally will 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 protections; 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. Issues rated
Prime-2 have a strong ability to repay 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 ratings of commercial paper are graded into several categories ranging
from "A-1" for the highest quality obligations to "D" for the lowest. A-1 --
This highest rating 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 payments on issues with this designation is strong; 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.
Statement of Additional Information Page 44
<PAGE>
GT GLOBAL INCOME FUNDS
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The audited financial statements of GT Global Government Income Fund, GT Global
Strategic Income Fund, GT Global High Income Fund, and Global High Income
Portfolio as of October 31, 1996 and for the year then ended appear on the
following pages.
Statement of Additional Information Page 45
<PAGE>
GT GLOBAL INCOME FUNDS
NOTES
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Statement of Additional Information Page 46
<PAGE>
GT GLOBAL INCOME FUNDS
NOTES
- --------------------------------------------------------------------------------
Statement of Additional Information Page 47
<PAGE>
GT GLOBAL INCOME FUNDS
NOTES
- --------------------------------------------------------------------------------
Statement of Additional Information Page 48
<PAGE>
GT GLOBAL INCOME FUNDS
GT GLOBAL MUTUAL FUNDS
GT GLOBAL OFFERS A BROAD RANGE OF MUTUAL FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY OF THE GT GLOBAL
MUTUAL FUNDS, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR CALL GT GLOBAL
DIRECTLY AT 1-800-824-1580.
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL WORLDWIDE GROWTH FUND
Invests around the world, including the U.S.
GT GLOBAL INTERNATIONAL GROWTH FUND
Provides portfolio diversity for U.S. investors by investing outside the U.S.
GT GLOBAL EMERGING MARKETS GROWTH FUND
Gives access to the growth potential of developing economies
/ / GLOBAL THEME FUNDS
GT GLOBAL CONSUMER PRODUCTS AND
SERVICES FUND
Invests in companies that manufacture, market, retail, or distribute consumer
products or services
GT GLOBAL FINANCIAL SERVICES FUND
Focuses on the worldwide opportunities from the demand for financial services
and products
GT GLOBAL HEALTH CARE FUND
Invests in the growing health care industries worldwide
GT GLOBAL INFASTRUCTURE FUND
Seeks companies that build, improve or maintain a country's infastructure
GT GLOBAL NATURAL RESOURCES FUND
Concentrates on companies that own, explore or develop natural resources
GT GLOBAL TELECOMMUNICATIONS FUND
Invests in companies worldwide that develop, manufacture or sell
telecommunications services or equipment
/ / REGIONALLY DIVERSIFIED FUNDS
GT GLOBAL NEW PACIFIC GROWTH FUND
Offers access to the emerging and established markets of the Pacific Rim,
excluding Japan
GT GLOBAL EUROPE GROWTH FUND
Focuses on investment opportunities in the new, unified Europe
GT GLOBAL LATIN AMERICA GROWTH FUND
Invests in the emerging markets of Latin America
/ / SINGLE COUNTRY FUNDS
GT GLOBAL AMERICA SMALL CAP GROWTH FUND
Invests in equity securities of small U.S. companies
GT GLOBAL AMERICA MID CAP GROWTH FUND
Concentrates on medium-sized companies in the U.S.
GT GLOBAL AMERICA VALUE FUND
Concentrates on equity securities of U.S. companies believed to be undervalued
GT GLOBAL JAPAN GROWTH FUND
Provides U.S. investors with direct access to the Japanese market
GROWTH AND INCOME FUND
GT GLOBAL GROWTH & INCOME FUND
Invests in blue-chip stocks and government bonds from around the world
INCOME FUNDS
GT GLOBAL GOVERNMENT INCOME FUND
Invests in global government securities
GT GLOBAL STRATEGIC INCOME FUND
Allocates its assets among debt securities from the U.S., developed foreign
countries and emerging markets
GT GLOBAL HIGH INCOME FUND
Invests in a portfolio of emerging market debt securities
MONEY MARKET FUND
GT GLOBAL DOLLAR FUND
Invests in high quality, U.S. dollar-denominated money market securities
worldwide for stability and preservation of capital
[LOGO]
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
STATEMENT OF ADDITIONAL INFORMATION AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY GT
GLOBAL GOVERNMENT INCOME FUND, GT GLOBAL STRATEGIC INCOME FUND, GT GLOBAL
HIGH INCOME FUND, GLOBAL HIGH INCOME PORTFOLIO, CHANCELLOR LGT ASSET
MANAGEMENT, INC. OR GT GLOBAL, INC. THIS STATEMENT OF ADDITIONAL INFORMATION
DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF ANY OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
INCSX610MC
<PAGE>
GT GLOBAL GROWTH &
INCOME FUND: ADVISOR CLASS
50 California Street, 27th Floor
San Francisco, California 94111
(415) 392-6181
Toll Free: (800) 824-1580
Statement of Additional Information
March 1, 1997
- --------------------------------------------------------------------------------
GT Global Growth & Income Fund ("Fund") is a non-diversified mutual fund
organized as a separate series of G.T. Investment Funds, Inc. ("Company"), a
registered open-end management investment company. This Statement of Additional
Information relating to the Advisor Class shares of the Fund, which is not a
prospectus, supplements and should be read in conjunction with the Fund's
current Advisor Class Prospectus dated March 1, 1997, a copy of which is
available without charge by writing to the above address or by calling the Fund
at the toll-free telephone number listed above.
Chancellor LGT Asset Management Inc. ( the "Manager") serves as the Fund's
investment manager and administrator. 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 "Transfer Agent").
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Page No.
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<S> <C>
Investment Objective and Policies........................................................................................ 2
Options, Futures and Currency Strategies................................................................................. 5
Risk Factors............................................................................................................. 13
Investment Limitations................................................................................................... 16
Execution of Portfolio Transactions...................................................................................... 17
Directors and Executive Officers......................................................................................... 19
Management............................................................................................................... 21
Valuation of Fund Shares................................................................................................. 22
Information Relating to Sales and Redemptions............................................................................ 23
Taxes.................................................................................................................... 25
Additional Information................................................................................................... 27
Investment Results....................................................................................................... 28
Description of Debt Ratings.............................................................................................. 34
Financial Statements..................................................................................................... 36
</TABLE>
[LOGO]
Statement of Additional Information Page 1
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
INVESTMENT OBJECTIVE AND
POLICIES
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is long-term capital appreciation together
with current income. The Fund seeks its objective by investing in a global
portfolio of both equity securities and debt obligations allocated among diverse
international markets.
SELECTION OF EQUITY INVESTMENTS
For investment purposes, an issuer is typically considered as located in a
particular country if it (a) is incorporated under the laws of or has its
principal office in that country, or (b) it normally derives 50% or more of its
total revenue from business in that country. 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
off-shore operations or subsidiaries and/or export sales exceeding in size the
assets or sales in that country.
INVESTMENTS IN OTHER INVESTMENT COMPANIES
The Fund may invest in the securities of investment companies within the limits
of the Investment Company Act of 1940, as amended ("1940 Act"). These
limitations currently provide that, in general, the Fund may purchase shares of
a closed-end investment company unless (a) such a purchase would cause the Fund
to own in the aggregate more than 3 percent of the total outstanding voting
stock of the investment company or (b) such a purchase would cause the Fund to
have more than 5 percent of its total assets invested in the investment company
or more than 10 percent of its total assets invested in an aggregate of all such
investment companies. Investment in such investment companies may also involve
the payment of substantial premiums above the value of such companies' portfolio
securities. The Fund 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
The Fund may hold equity 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 issuers. These securities may not necessarily be denominated in the
same currency as the securities for which they may be exchanged. ADRs and ADSs
typically are 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 United States securities markets and EDRs in bearer
form are designed for use in European securities markets. For purposes of the
Fund's investment policies, the Fund'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.
WARRANTS OR RIGHTS
Warrants or rights may be acquired by the Fund in connection with other
securities or separately and provide the Fund with the right to purchase at a
later date other securities of the issuer.
LENDING OF PORTFOLIO SECURITIES
For the purpose of realizing additional income, the Fund may make secured loans
of portfolio securities 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 continuously be 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. While the securities loan is
outstanding, the Fund 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. The Fund will have a
right to call each loan and obtain the securities on five business days' notice.
The Fund will not have the right to vote equity securities while they are lent,
but it may call in a loan in anticipation of any important vote. The risks in
lending portfolio securities, as with other extensions of secured credit,
consist of possible delay in receiving additional collateral or in recovery of
the securities or
Statement of Additional Information Page 2
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
possible loss of rights in the collateral should the borrower fail financially.
Loans will be made only 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.
COMMERCIAL BANK OBLIGATIONS
For the purposes of the Fund'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, however, may be limited by the terms of a specific
obligation and by government regulation. As with investment in non-U.S.
securities in general, investments in the obligations of foreign branches of
U.S. banks and of foreign banks may subject the Fund to investment risks that
are different in some respects from those of investments in obligations of
domestic issuers. Although the Fund typically will acquire obligations issued
and supported by the credit of U.S. or foreign banks having total assets at the
time of purchase in excess of $1 billion, this $1 billion figure is not an
investment policy or restriction of the Fund. 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
Repurchase agreements are transactions in which the Fund 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, the Fund intends to enter into repurchase
agreements only with banks and dealers believed by the Manager to present
minimum credit risks in accordance with guidelines established by the Company's
Board of Directors. The Manager will review and monitor the creditworthiness of
such institutions under the Board's general supervision.
The Fund 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, the Fund 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 the Fund's ability
to sell the collateral and the Fund could suffer a loss. However, with respect
to financial institutions whose bankruptcy or liquidation proceedings are
subject to the U.S. Bankruptcy Code, the Fund intends to comply with provisions
under the U.S. Bankruptcy Code that would allow it immediately to resell the
collateral. There is no limitation on the amount of the Fund's assets that may
be subject to repurchase agreements at any given time. The Fund will not enter
into a repurchase agreement with a maturity of more than seven days if, as a
result, more than 10% of the value of its net assets would be invested in such
repurchase agreements and other illiquid investments.
BORROWING, REVERSE REPURCHASE AGREEMENTS AND "ROLL" TRANSACTIONS
The Fund's borrowings will not exceed 33 1/3% of the Fund's total assets, i.e.,
the Fund's total assets at all times will equal at least 300% of the amount of
outstanding borrowings. If market fluctuations in the value of the Fund's
portfolio holdings or other factors cause the ratio of the Fund's total assets
to outstanding borrowings to fall below 300%, within three days (excluding
Sundays and holidays) of such event the Fund may be required to sell portfolio
securities to restore the 300% asset coverage, even though from an investment
standpoint such sales might be disadvantageous. The Fund also may borrow up to
5% of its total assets for temporary or emergency purposes other than to meet
redemptions. Any borrowing by the Fund may cause greater fluctuation in the
value of its shares than would be the case if the Fund did not borrow.
The Fund's fundamental investment limitations permit the Fund to borrow money
for leveraging purposes. The Fund, however, currently is 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 a vote of
a majority of the Company's Board of Directors. In the event that the Fund
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 Fund's net asset value. When the
income and gains on securities purchased with the proceeds of borrowings exceed
the costs of such borrowings, the Fund's earnings or net asset value will
increase faster than otherwise would be the case; conversely, if such income and
gains fail to exceed such costs, the Fund's earnings or net asset value would
decline faster than would otherwise be the case.
The Fund may enter into reverse repurchase agreements. A reverse repurchase
agreement is a borrowing transaction in which the Fund 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. The Fund also may engage in "roll"
borrowing transactions which involve the Fund's sale of Government National
Mortgage
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GT GLOBAL GROWTH & INCOME FUND
Association certificates or other securities together with a commitment (for
which the Fund may receive a fee) to purchase similar, but not identical,
securities at a future date. The Fund will maintain, in a segregated account
with a custodian, cash or other 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
The Fund is authorized to make short sales of securities, although it has no
current intention of doing so. A short sale is a transaction in which the Fund
sells a security in anticipation that the market price of that security will
decline. The Fund may make short sales (i) as a form of hedging to offset
potential declines in long positions in securities it owns, or anticipates
acquiring, and (ii) in order to maintain portfolio flexibility. The Fund may
only make short sales "against the box." In this type of short sale, at the time
of the sale the Fund owns the security it has sold short or has the immediate
and unconditional right to acquire the identical security at no additional cost.
In a short sale, the seller does not immediately deliver the securities sold and
does not receive the proceeds from the sale. To make delivery to the purchaser,
the executing broker borrows the securities being sold short on behalf of the
seller. The seller is said to have a short position in the securities sold until
it delivers the securities sold, at which time it receives the proceeds of the
sale. To secure its obligation to deliver securities sold short, the Fund will
deposit in a separate account with its custodian an equal amount of the
securities sold short or securities convertible into or exchangeable for such
securities at no cost. The Fund could close out a short position by purchasing
and delivering an equal amount of the securities sold short, rather than by
delivering securities already held by the Fund, because the Fund might want to
continue to receive interest and dividend payments on securities in its
portfolio that are convertible into the securities sold short.
The Fund might make a short sale "against the box" in order to hedge against
market risks when the Manager believes that the price of a security may decline,
causing a decline in the value of a security owned by the Fund or a security
convertible into or exchangeable for such security, or when the Manager wants to
sell the security the Fund owns at a current attractive price, but also wishes
to defer recognition of gain or loss for federal income tax purposes and for
purposes of satisfying certain tests applicable to regulated investment
companies under the Internal Revenue Code of 1986, as amended ("Code"). In such
case, any future losses in the Fund's long position should be reduced by a gain
in the short position. Conversely, any gain in the long position should be
reduced by a loss in the short position. The extent to which such gains or
losses in the long position are reduced will depend upon the amount of the
securities sold short relative to the amount of the securities the Fund owns,
either directly or indirectly, and, in the case where the Fund owns convertible
securities, changes in the investment values or conversion premiums of such
securities. There will be certain additional transaction costs associated with
short sales "against the box," but the Fund will endeavor to offset these costs
with income from the investment of the cash proceeds of short sales.
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GT GLOBAL GROWTH & INCOME FUND
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 a Fund entered into a
short hedge because the Manager projected a decline in the price of a
security in the Fund'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 Fund could suffer a loss. In either such case, the Fund
would have been in a better position had it not hedged at all.
(4) As described below, a Fund 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 Fund 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 Fund'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 Fund sell a portfolio security at
a disadvantageous time. The Fund'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 Fund.
WRITING CALL OPTIONS
The Fund 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 Fund.
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 may be assigned an
exercise notice, requiring him 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.
Portfolio securities or currencies on which call options may be written will be
purchased solely on the basis of investment considerations consistent with the
Fund's investment objective. When writing a call option, the Fund, in return for
the
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GT GLOBAL GROWTH & INCOME FUND
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, the Fund 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 the Fund has written expires, the Fund 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 Fund 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. The Fund does not consider a
security or currency covered by a call option to be "pledged" as that term is
used in the Fund'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 a Fund will be obligated to
sell the security or currency at less than its market value.
The premium that the Fund receives for writing a call option is deemed to
constitute the market value of an option. The premium the Fund 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 the Fund to write
another call option on the underlying security or currency with either a
different exercise price, expiration date or both.
The Fund will pay transaction costs in connection with the writing of options
and in entering into closing purchase contracts. Transaction costs relating to
options activity normally are 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 or currencies at the time the options
are written. From time to time, the Fund 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.
The Fund 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 the Fund.
WRITING PUT OPTIONS
The Fund 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.
The Fund generally would write put options in circumstances where the Manager
wishes to purchase the underlying security or currency for the Fund's portfolio
at a price lower than the current market price of the security or currency. In
such event, the Fund 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 Fund also would 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 the Fund will be obligated
to purchase the security or currency at more than its market value.
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GT GLOBAL GROWTH & INCOME FUND
PURCHASING PUT OPTIONS
The Fund may purchase put options on securities, indices and currencies. As the
holder of a put option, the Fund has the right to sell the underlying security
or currency at the exercise price any any time until (American style) or
(European style) the expiration date. The Fund may enter into closing sale
transactions with respect to such options, exercise them or permit them to
expire.
The Fund may purchase a put option on an underlying security or currency
("protective put") owned by the Fund 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 Fund, 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.
The Fund also may purchase put options at a time when the Fund does not own the
underlying security or currency. By purchasing put options on a security or
currency it does not own, the Fund 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 Fund 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
The Fund may purchase call options on securities, indices and currencies. As the
holder of a call option, the Fund would have the right to purchase the
underlying security or currency at the exercise price at any time until
(American style) or (European style) the expiration date. The Fund may enter
into closing sale transactions with respect to such options, exercise them or
permit them to expire.
Call options may be purchased by the Fund for the purpose of acquiring the
underlying security or currency for its portfolio. Utilized in this fashion, the
purchase of call options would enable the Fund 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 also may be useful to the Fund 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 Fund 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.
The Fund also may 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 also may be purchased at times to avoid
realizing losses that would result in a reduction of the Fund's current return.
For example, where the Fund 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 the Fund, an increase in the market price could
result in the exercise of the call option written by the Fund and the
realization of a loss on the underlying security or currency. Accordingly, the
Fund could purchase a call option on the same underlying security or currency,
which could be exercised to fulfill the Fund's delivery obligations under its
written call (if it is exercised). This strategy could allow the Fund to avoid
selling the portfolio security or currency at a time when it has an unrealized
loss; however, the Fund 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 the
Fund's total assets at the time of purchase.
The Fund 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 Fund 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. A call option gives the Fund
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. The Fund 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
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GT GLOBAL GROWTH & INCOME FUND
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 the
Fund 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 the Fund
anticipates purchasing securities.
Options may be either listed on an exchange or traded over-the-counter ("OTC
options"). 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. The Fund 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. The Fund may also sell OTC options and,
in connection therewith, segregate assets or cover its obligations with respect
to OTC options written by the Fund. The assets used as cover for OTC options
written by the Fund will be considered illiquid unless the OTC options are sold
to qualified dealers who agree that the Fund 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.
The Fund's ability to establish and close out positions in exchange-listed
options depends on the existence of a liquid market. The Fund 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 the Fund
will enter into OTC options only with contra parties that are expected to be
capable of entering into closing transactions with the Fund, there is no
assurance that the Fund will in fact be able to close out an OTC option position
at a favorable price prior to expiration. In the extent of insolvency of the
contra party, the Fund 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 the Fund 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 Fund 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 the Fund buys a call on an
index, it pays a premium and has the same rights as to such calls as are
indicated above. When the Fund 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 Fund's exercise of the put, to deliver to the Fund 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 Fund writes a put on an index, it receives a
premium and the purchaser has the right, prior to the expiration date, to
require the Fund 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 a Fund writes a call
on an index it cannot provide in advance for its potential settlement
obligations by acquiring and holding the underlying securities. The Fund 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, the Fund 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 the Fund 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
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GT GLOBAL GROWTH & INCOME FUND
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 Fund 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 the Fund 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 Fund 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
The Fund 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 Fund. The Fund'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 or 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.
The Fund 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 the Fund's exposure to interest rate, currency exchange rate and
stock market fluctuations, the Fund 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 Fund realizes a gain; if it is
more, the Fund realizes a loss. Conversely, if the offsetting sale price is more
than the original purchase price, the Fund realizes a gain; if it is less, the
Fund realizes a loss. The transaction costs also must be included in these
calculations. There can be no assurance, however, that the Fund will be able to
enter into an offsetting transaction with respect to a particular Futures
Contract at a particular time. If the Fund is not able to enter into an
offsetting transaction, the Fund 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
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GT GLOBAL GROWTH & INCOME FUND
Contract was sold and the price paid for the offsetting purchase, after
allowance for transaction costs, represents the profit or loss to the Fund.
The Fund'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 the Fund owns, or Futures Contracts will be
purchased to protect the Fund 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 the Fund in order to initiate Futures trading and to maintain the
Fund's open positions in Futures Contracts. A margin deposit made when the
Futures Contract is entered into ("initial margin") is intended to assure the
Fund'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 modified significantly 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 Fund 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, among other things, by 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 the Fund'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 Contract 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 occasionally have 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 the Fund 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 Fund would continue to be subject to
market risk with respect to the position. In addition, except in the case of
purchased options, the Fund 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
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GT GLOBAL GROWTH & INCOME FUND
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 the Fund 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.
The Fund 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 the Fund 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 Fund's portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the Fund 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 without a shareholder vote. This limitation does not limit
the percentage of the Fund'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. The Fund either may
accept or make delivery of the currency at the maturity of the Forward Contract.
The Fund may also, if its contra party agrees, prior to maturity, enter into a
closing transaction involving the purchase or sale of an offsetting contract.
The Fund engages in forward currency transactions in anticipation of, or to
protect itself against, fluctuations in exchange rates. The Fund 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, the Fund
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, the Fund 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. The Fund will enter into such Forward Contracts with major
U.S. or foreign banks and securities or currency dealers in accordance with the
guidelines approved by the Company's Board of Directors.
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GT GLOBAL GROWTH & INCOME FUND
The Fund may enter into Forward Contracts either with respect to specific
transactions or with respect to the Fund's portfolio positions. 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 the Fund 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 Fund 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
Fund 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 the
Fund to sustain losses on these contracts and transaction costs.
At or before the maturity of a Forward Contract requiring the Fund to sell a
currency, the Fund either may sell a portfolio 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 Fund will obtain, on the same maturity date, the same
amount of the currency that it is obligated to deliver. Similarly, the Fund 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.
The Fund 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 the Fund 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 usually are 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 the Fund 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
A Fund 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 Fund's securities
are denominated. Such currency hedges can protect against price movements in a
security that a Fund 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.
A Fund 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 Fund 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, a Fund 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.
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GT GLOBAL GROWTH & INCOME FUND
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 Fund 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 a Fund has purchased) expose the Fund to an obligation to another
party. A Fund 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 Fund will
comply with SEC guidelines regarding cover for these instruments and, if the
guidelines so require, set aside cash or other 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 a Fund's assets are used for cover or otherwise set aside, it could affect
portfolio management or the Fund's ability to meet redemption requests or other
current obligations.
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RISK FACTORS
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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, the Fund could lose its entire investment in
any such country.
Certain countries in which the Fund 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 the Fund'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 the Fund
invests and adversely affect the value of the Fund's assets.
ILLIQUID SECURITIES. The Fund may invest up to 10% of its net assets in
illiquid securities. Securities may be considered illiquid if the Fund cannot
reasonably expect within seven days to sell the securities for approximately the
amount at which the Fund values such securities. 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 the sale of liquid securities, such as securities eligible for
trading on U.S. securities exchanges or in the over-the-counter 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, the Fund 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 Fund may be permitted to sell a security
under an effective registration statement. If, during such a period, adverse
market conditions were to develop, the Fund might obtain a less favorable price
than prevailed when it decided to sell.
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GT GLOBAL GROWTH & INCOME FUND
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
a Fund, however, could affect adversely the marketability of such portfolio
securities and the Fund might be unable to dispose of such securities promptly
or at favorable prices.
With respect to liquidity determinations generally, the Company's Board of
Directors has the ultimate responsibility for determining whether specific
securities, including restricted securities pursuant to Rule 144A under the 1933
Act, are liquid or illiquid. The Board has delegated the function of making
day-to-day determinations of liquidity to the Manager in accordance with
procedures approved by the Company's Board of Directors. 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 who make quotes for the security; (iii) the number of dealers who 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). Chancellor LGT monitors the liquidity of securities in
the Fund's portfolio and periodically reports on such decisions to the Board of
Directors.
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 the Fund. These restrictions
or controls may at times limit or preclude investment in certain securities and
may increase the cost and expenses of the Fund. 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. The Fund
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 the Fund 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 the Fund 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.
Statement of Additional Information Page 14
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GT GLOBAL GROWTH & INCOME FUND
CURRENCY FLUCTUATIONS. Because the Fund, 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 the
Fund'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 the
Fund's holdings of securities and cash denominated in such currency and,
therefore, will cause an overall decline in the 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 Fund. Moreover, if the value
of the foreign currencies in which the Fund receives its income falls relative
to the U.S. dollar between receipt of the income and the making of Fund
distributions, the Fund may be required to liquidate securities in order to make
distributions if the Fund 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 movement of interest
rates, the pace of business activity in certain other countries and the U.S.,
and other economic and financial conditions affecting the world economy.
Although the Fund values its assets daily in terms of U.S. dollars, the Fund
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. The Fund 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 are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign currency to the
Fund at one rate, while offering a lesser rate of exchange should the Fund
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 U.S., 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 the Fund are uninvested and no return
is earned thereon. The inability of the Fund to make intended security purchases
due to settlement problems could cause the Fund to miss attractive
opportunities. Inability to dispose of a portfolio security due to settlement
problems either could result in losses to the Fund due to subsequent declines in
value of the portfolio security or, if the Fund 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 the
Fund's assets, although the Manager does not believe that such difficulties will
have a material adverse effect on the Fund's portfolio trading activities.
The Fund may use foreign custodians, which may involve risks in addition to
those related to the use of U.S. custodians. Such risks include uncertainties
relating to: (i) determining and monitoring the financial strength, reputation
and standing of the foreign custodian; (ii) maintaining appropriate safeguards
to protect the Funds' investments and (iii) possible difficulties in obtaining
and enforcing judgments against such custodians.
WITHHOLDING TAXES. The Fund's net investment income from foreign issuers may
be subject to withholding taxes by the foreign issuer's country, thereby
reducing the Fund's net investment income or delaying the receipt of income
where those taxes may be recaptured. See "Taxes."
SPECIAL CONSIDERATIONS AFFECTING EUROPE. 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 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 at this time
what the exact form or effect of these Common Market reforms will be on business
in Western Europe or the emerging European markets, it is impossible to predict
the long-term impact of the implementation of these programs on the securities
owned by the Fund.
SPECIAL CONSIDERATIONS AFFECTING JAPAN AND HONG KONG. The concentration of
investments by the Fund in Japan means that the Fund may be more volatile than a
fund that is broadly diversified geographically. Overseas trade is important to
Japan's economy. Japan has few natural resources and must export to pay for its
imports of these basic requirements.
Statement of Additional Information Page 15
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GT GLOBAL GROWTH & INCOME FUND
Because of the concentration of Japanese exports in highly visible products,
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 or other protectionist measures could impact Japan adversely in
both the short and the long term. 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.
Hong Kong is a British colony which will transfer sovereignty to the Peoples
Republic of China in 1997. China has espoused policies antagonistic to free
enterprise capitalism and democracy. There can be no guarantee that property
rights will continue to be safeguarded in Hong Kong after 1997, although
recently, China has moved toward free enterprise, and has established stock
exchanges of its own.
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INVESTMENT LIMITATIONS
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The Fund has adopted the following investment limitations as fundamental
policies which (unless otherwise noted) may not be changed without approval by
the holders 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, and
(ii) more than 50% of the outstanding shares.
The Fund may not:
(1) Invest 25% or more of the value of its total assets in the
securities of issuers conducting their principal business activities in the
same industry, except that this limitation shall not apply to securities
issued or guaranteed as to principal and interest by the U.S. Government or
any of its agencies or instrumentalities;
(2) Invest in companies for the purpose of exercising control or
management;
(3) Buy or sell real estate (including real estate limited partnerships)
or commodities or commodity contracts; however, the 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, and may purchase or sell currencies (including
forward currency exchange contracts), futures contracts and related options
generally as described in the Prospectus and Statement of Additional
Information and subject to operating policy (4) below;
(4) Acquire securities subject to restrictions on disposition or
securities for which there is no readily available market, or enter into
repurchase agreements or purchase time deposits maturing in more than seven
days, or purchase over-the-counter options or hold assets set aside to cover
over-the-counter options written by the Fund, if, immediately after and as a
result, the value of such securities would exceed, in the aggregate, 10% of
the Fund's net assets;
(5) Engage in the business of underwriting securities of other issuers,
except to the extent that the disposal of an investment position may
technically cause it to be considered an underwriter as that term is defined
under the Securities Act of 1933;
(6) Make loans, except that the Fund may purchase debt securities and
enter into repurchase agreements and make loans of portfolio securities;
(7) Purchase securities on margin, provided that the 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 subject to operating policy (4) below;
(8) Borrow money except from banks for temporary or emergency purposes
not in excess of 33 1/3% of the value of the Fund's total assets at the
lower of cost or fair market value. The Fund will not purchase securities
while borrowings in excess of 5% of its total assets are outstanding. This
restriction shall not prevent the Fund from entering into reverse repurchase
agreements and engaging in "roll" transactions, provided that reverse
repurchase agreements, "roll" transactions and any other transactions
constituting borrowing by the Fund may not exceed one-third of the Fund's
total assets. In the event that the asset coverage for the Fund's borrowings
falls below 300%, the Fund will
Statement of Additional Information Page 16
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
reduce, within three days (excluding Sundays and holidays), the amount of
its borrowings in order to provide for 300% asset coverage;
(9) 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;
(10) Invest in interests in oil, gas, or other mineral exploration or
development programs; or
(11) Purchase or retain the securities of any issuer, if those individual
officers and Directors of the Fund, its 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.
For purposes of the concentration policy of the Fund contained in limitation (1)
above, the Fund intends to comply with the SEC staff position that securities
issued or guaranteed as to principal and interest by any single foreign
government or any supranational organizations in the aggregate are considered to
be securities of issuers in the same industry.
The following operating policies of the Fund are not fundamental policies and
may be changed by vote of a majority of the Company's Board of Directors without
shareholder approval. The Fund may not: (1) invest in securities of an issuer if
the investment would cause the Fund to own more than 10% of any class of
securities of any one issuer; (2) sell securities short, except to the extent
that the Fund contemporaneously owns or has the right to acquire at no
additional cost securities identical to those sold short; (3) 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; or (4)
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 Fund's portfolio, after taking into account unrealized
profits and unrealized losses on any contracts the Fund has entered into.
Investors should refer to the Prospectus for further information with respect to
the Fund's investment objective, which may not be changed without the approval
of the shareholders, and other investment policies, techniques and limitations,
which may be changed without shareholder approval.
- --------------------------------------------------------------------------------
EXECUTION OF PORTFOLIO
TRANSACTIONS
- --------------------------------------------------------------------------------
Subject to policies established by the Company's Board of Directors, the Manager
is responsible for the execution of the Fund's portfolio transactions and the
selection of broker/dealers who execute such transactions on behalf of the Fund.
In executing portfolio transactions, the Manager seeks the best net results for
the Fund, 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 the Fund may engage in soft dollar arrangements for
research services, as described below, the Fund has no obligation to deal with
any broker/dealer or group of broker/dealers in the execution of portfolio
transactions.
Debt securities generally are traded on a "net" basis with a dealer acting as
principal for its own account without a stated commission, although the price of
the security usually includes a profit to the dealer. U.S. and foreign
government securities and money market instruments generally are traded in the
OTC markets. In underwritten offerings, securities usually are purchased at a
fixed price which includes an amount of compensation to the underwriter. On
occasion, securities may be purchased directly from an issuer, in which case no
commissions or discounts are paid. Broker/dealers may receive commissions on
futures, currency and options transactions.
Consistent with the interests of the Fund, the Manager may select brokers to
execute the Fund's portfolio transactions, on the basis of the research and
brokerage services they provide to the Manager for its use in managing the Fund
and its other advisory accounts. Such services may include furnishing analyses,
reports and information concerning issuers, industries,
Statement of Additional Information Page 17
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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 brokers are in addition to,
and not in lieu of, the services required to be performed by the Manager under
the Management Contract (defined below). A commission paid to such brokers 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 the Fund and its
other clients and that the total commissions paid by the Fund will be reasonable
in relation to the benefits received by the Fund over the long term. Research
services may also be received from dealers who execute Fund transactions in
over-the-counter 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 the Fund toward payment of the Fund's expenses, such as
transfer agent and custodian fees.
Investment decisions for the Fund 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 the Fund. 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 the Fund is concerned, in other cases, the Manager
believes that coordination and the ability to participate in volume transactions
will be beneficial to the Fund.
Under a policy adopted by the Company's Board of Directors, 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 Fund and the other funds for which the
Manager serves as investment manager in selecting brokers and 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 Fund and such other funds.
The Fund contemplates purchasing most foreign equity securities in
over-the-counter 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 United States 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 the Fund 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 over-the-
counter 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 the Fund may invest generally are traded in the
over-the-counter markets.
The Fund contemplates that, consistent with the policy of obtaining the best net
results, brokerage transactions may be conducted through certain companies that
are members of the Liechtenstein Global Trust. The Company's Board of Directors
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.
For the fiscal years ended October 31, 1996, 1995 and 1994, the Fund paid
aggregate brokerage commissions of $
- -------, $318,958 and $280,861, respectively.
PORTFOLIO TRADING AND TURNOVER
The Fund engages in portfolio trading when the Manager has concluded that the
sale of a security owned by the Fund and/ or the purchase of another security of
better value can enhance principal and/or increase income. A security may be
sold to avoid any prospective decline in market value, or a security may be
purchased in anticipation of a market rise. Consistent with the Fund's
investment objective, a security also may be sold and a comparable security
purchased coincidentally in order to take advantage of what is believed to be a
disparity in the normal yield and price relationship between the two securities.
Although the Fund does not intend generally to trade for short-term profits, the
securities in the Fund's portfolio will be sold whenever management believes it
is appropriate to do so, without regard to the length of time a particular
security may have been held. However the portfolio turnover rate will not be a
limiting factor when the Manager deems portfolio changes appropriate. Higher
portfolio turnover involves correspondingly greater brokerage commissions and
other transaction costs that the Fund will bear directly, and may result in the
realization of net capital gains that are taxable when distributed to the Fund's
shareholders. For the fiscal years ended October 31, 1996, and 1995, the Fund's
portfolio turnover rates were
- --%, and 83%, respectively.
Statement of Additional Information Page 18
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
DIRECTORS AND EXECUTIVE
OFFICERS
- --------------------------------------------------------------------------------
The Company's Directors and Executive Officers are listed below.
<TABLE>
<CAPTION>
NAME, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- --------------------------------------- ------------------------------------------------------------------------------------------
<S> <C>
David A. Minella,* 43 Chairman, the Manager since October 1996; Director, Liechtenstein Global Trust (holding
Director, Chairman of the Board and company of the various international LGT companies) since 1990; President, Asset
President Management Division, Liechtenstein Global Trust since 1995; Director and President, LGT
50 California, Street Asset Management, Inc. ("LGT Asset Management"), formerly LGT Asset Management Holdings,
San Francisco CA 94111 Inc., since 1988; Director and President, the Manager from 1989 to October 1996; Director,
GT Global since 1987 and President, GT Global from 1987 to 1995; Director, GT Services
since 1990; President, GT Services from 1990 to 1995; Director, G.T. Global Insurance
Agency, Inc. ("G.T. Insurance") since 1992; and President, G.T. Insurance from 1992 to
1995. Mr. Minella also is a director or trustee of each of the other investment companies
registered under the 1940 Act that is managed or administered by the Manager.
C. Derek Anderson, 54 Chief Executive Officer, Anderson Capital Management, Inc.; Chairman and Chief Executive
Director Officer, Plantagenet Holdings, Ltd. from 1991 to present; Director, Munsingwear, Inc.; and
220 Sansome Street Director, American Heritage Group Inc. and various other companies. Mr. Anderson also is a
Suite 400 director or trustee of each of the other investment companies registered under the 1940
San Francisco, CA 94104 Act that is managed or administered by the Manager.
Frank S. Bayley, 55 Partner with Baker & McKenzie (a law firm); Director and Chairman, C.D. Stimson Company (a
Director private investment company); and Trustee, Seattle Art Museum. Mr. Bayley also is a
Two Embarcadero Center director or trustee or each of the other investment companies registered under the 1940
Suite 2400 Act that is managed or administered by the Manager.
San Francisco, CA 94111
Arthur C. Patterson, 52 Managing Partner, Accel Partners (a venture capital firm). He also serves as a director of
Director various computing and software companies. Mr. Patterson also is a director or trustee of
One Embarcadero Center each of the other investment companies registered under the 1940 Act that is managed or
Suite 3820 administered by the Manager.
San Francisco, CA 94111
Ruth H. Quigley, 59 Private investor; and President, Quigley Friedlander & Co., Inc. (a financial advisory
Director services firm) from 1984 to 1986. Ms. Quigley also is a director or trustee or each of the
1055 California Street other investment companies registered under the 1940 Act that is managed or administered
San Francisco, CA 94108 by the Manager.
James R. Tufts, 37 Chief Information Officer for the Manager since October 1996; President, GT Services since
Vice President and Chief 1995; Senior Vice President of Finance and Administration, GT Global, GT Services and G.T.
Financial Officer Insurance, from 1994 to 1995; Senior Vice President of Finance and Administration, LGT
50 California Street Asset Management, and the Manager from 1994 to October 1996; Vice President of Finance,
San Francisco, CA 94111 LGT Asset Management Holdings, the Manager, GT Global and GT Services from 1990 to 1994;
Vice President of Finance, G.T. Insurance from 1992 to 1994; and a Director of the
Manager, GT Global and GT Services since 1991.
</TABLE>
- --------------
* Mr. Minella is an "interested person" of the Company as defined by the 1940
Act due to his affiliation with the LGT companies.
Statement of Additional Information Page 19
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
<TABLE>
<S> <C>
Kenneth W. Chancey, 50 Vice President of Mutual Fund Accounting, the Manager since 1992; and
Vice President and Vice President, Putnam Fiduciary Trust Company from 1989 to 1992.
Principal Accounting Officer
50 California Street
San Francisco, CA 94111
Helge K. Lee, 49 Executive Vice President, Asset Management Division, Liechtenstein
Vice President and Secretary Global Trust since October 1996; Senior Vice President, LGT Asset
50 California Street Management, the Manager, GT Global, GT Services and G.T. Insurance from
San Francisco, CA 94111 February 1996 to October 1996; Vice President, LGT Asset Management, the
Manager, GT Global, GT Services and G.T. Insurance from May 1994 to
February 1996; General Counsel, LGT Asset Management, the Manager, GT
Global, GT Services and G.T. Insurance from May 1994 to October 1996;
Secretary, the Manager, since May 1994; Secretary, LGT Asset Management,
GT Global, GT Services and G.T. Insurance from May 1994 to October 1996;
Senior Vice President, General Counsel and Secretary, Strong/Corneliuson
Management, Inc.; and Secretary, each of the Strong Funds from October
1991 to May 1994.
</TABLE>
------------------------------
The Board of Directors has a Nominating and Audit Committee, comprised of Miss
Quigley and Messrs. Anderson, Bayley and Patterson, which is responsible for
nominating persons to serve as Directors, reviewing audits of the Company and
its funds and recommending firms to serve as independent auditors for the
Company. Each of the Directors and officers of the Company is also a Director
and officer of G.T. Investment Portfolios, Inc., G.T. Global Developing Markets
Fund, Inc. and GT Floating Rate Portfolio, a Trustee and officer of G.T. Global
Growth Series and a Trustee of G.T. Greater Europe Fund, G.T. Global Variable
Investment Trust, G.T. Global Variable Investment Series, Global High Income
Portfolio and Global Investment Portfolio, which are also registered investment
companies managed by the Manager. Each Director and Officer serves in total as a
Director or Trustee and Officer, respectively, of
- -- registered investment companies with
- --series managed or administered by the Manager. The Company pays each Director,
who is not a director, officer or employee of the Manager or any affiliated
company, $5,000 per annum, plus $300 per Fund for each meeting of the Board
attended, and reimburses travel and other expenses incurred in connection with
attendance at such meetings. Other Directors and officers receive no
compensation or expense reimbursement from the Company. For the fiscal year
ended October 31, 1996, Mr. Anderson, Mr. Bayley, Mr. Patterson and Ms. Quigley,
who are not directors, officers or employees of the Manager or other affiliated
company, received total compensation of
- --------,
- --------,
- --------and
- --------, respectively, from the Company for which he or she serves as a
Director. For the fiscal year ended October 31, 1996 Mr. Anderson, Mr. Bayley,
Mr. Patterson and Ms. Quigley received total compensation of $
- --------, $
- --------, $
- -------- and $
- --------, respectively, from the
- -- GT Global Mutual Funds for which he or she serves as a Director or Trustee.
Fees and expenses disbursed to the Directors contained no accrued or payable
pension or retirement benefits. As of the date of this Statement of Additional
Information, the officers and Directors and their families as a group owned in
the aggregate beneficially or of record less than 1% of the outstanding shares
of the Fund or of all the Company's funds in the aggregate.
Statement of Additional Information Page 20
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
Chancellor LGT Asset Management, Inc. (the "Manager") serves as the Fund's
investment manager and administrator under an Investment Management and
Administration Contract ("Management Contract") between the Company and the
Manager. As investment manager and administrator, the Manager makes all
investment decisions for the Fund and administers the Fund's affairs. Among
other things, the Manager furnishes the services and pays the compensation and
travel expenses of persons who perform the executive, administrative, clerical
and bookkeeping functions of the Company and the Fund, and provides suitable
office space, necessary small office equipment and utilities. For these
services, the Fund pays the Manager investment management and administration
fees, based on the Fund's average daily net assets, computed daily and paid
monthly, at the annualized rate of .975% on the first $500 million, .95% on the
next $500 million, .925% on the next $500 million, and .90% on amounts
thereafter.
The Management Contract may be renewed for one-year terms, provided that any
such renewal has been specifically approved at least annually by: (i) the
Company's Board of Directors, or by the vote of a majority of the Fund's
outstanding voting securities (as defined in the 1940 Act), and (ii) a majority
of Directors who are not parties to the Management Contract or "interested
persons" of any such party (as defined in the 1940 Act), cast in person at a
meeting called for the specific purpose of voting on such approval. The
Management Contract provides that with respect to the Fund, the Company or the
Manager may terminate the Contract without penalty upon sixty days' written
notice. The Management Contract terminates automatically in the event of its
assignment (as defined in the 1940 Act).
The Manager and GT Global have voluntarily undertaken to limit the Fund's
expenses (exclusive of brokerage commissions, taxes, interest and extraordinary
expenses) to the maximum annual level of 1.50% of the average daily net assets
of the Fund's Advisor Class shares, during each fiscal year and the Manager and
GT Global have agreed to reimburse the Fund if the Fund's expenses exceed that
amount.
The following table discloses the amount of investment management and
administration fees paid by the Fund to the Manager during the Fund's last three
fiscal years:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, AMOUNT PAID
- --------------------------------------------------------------------------------------------------------- -------------
<S> <C>
1996..................................................................................................... $
1995..................................................................................................... $ 6,301,399
1994..................................................................................................... $ 5,676,421
</TABLE>
DISTRIBUTION SERVICES
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 a contingent deferred sales charge.
TRANSFER AGENCY AND ACCOUNTING AGENT SERVICES
GT Global Investor Services, Inc. ("Transfer Agent") has been retained by the
Fund to perform shareholder servicing, reporting and general transfer agent
functions for the Fund. 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 also is reimbursed
by the Fund for its out-of-pocket expenses for such items as postage, forms,
telephone charges, stationery and office supplies.
The Manager serves as the Fund's pricing and accounting agent. The monthly fee
for these services to the Manager is a percentage, not to exceed 0.03% annually,
of the Fund's average daily net assets. The annual fee rate is derived by
applying 0.03% to the first $5 billion of assets of all registered mutual funds
advised by the Manager ("GT Global Mutual Funds") and 0.02% to the assets in
excess of $5 billion, and allocating the result according to each Fund's average
daily net assets.
As of October 31, 1996, the Fund paid the Manager fees of $
- ------ for such accounting services.
Statement of Additional Information Page 21
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
EXPENSES OF THE FUND
The Fund pays all expenses not assumed by the Manager, GT Global and other
agents. These expenses include, in addition to the advisory, distribution,
transfer agency, pricing and accounting agency and brokerage fees discussed
above, legal and audit expenses, custodian fees, directors' fees, organizational
fees, fidelity bond and other insurance premiums, taxes, extraordinary expenses
and the expenses of reports and prospectuses sent to existing investors. The
allocation of general Company expenses and expenses shared among the Fund and
other funds organized as series of the Company are allocated on a basis deemed
fair and equitable, which may be based on the relative net assets of the Fund or
the nature of the services performed and relative applicability to the Fund.
Expenditures, including costs incurred in connection with the purchase or sale
of portfolio securities, which are capitalized in accordance with generally
accepted accounting principles applicable to investment companies, are accounted
for as capital items and not as expenses. The ratio of the Fund's expenses to
its relative net assets can be expected to be higher than the expense ratios of
funds investing solely in domestic securities, since the cost of maintaining the
custody of foreign securities and the rate of investment management fees paid by
the Fund generally are higher than the comparable expenses of such other funds.
- --------------------------------------------------------------------------------
VALUATION OF FUND SHARES
- --------------------------------------------------------------------------------
As described in the Prospectus, the Fund's net asset value per share for each
class of shares is determined at 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
each business day the NYSE is open for business. 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 Fund's portfolio securities and other assets are valued as follows:
Equity securities, including ADRs, ADSs, and EDRs, which are traded on stock
exchanges, are valued at the last sale price on the exchange or in the principal
over-the-counter market in which such securities are traded, as of the close of
business on the day the securities are being valued or, lacking any sales, at
the last available bid price. In cases where securities are traded on more than
one exchange, the securities are valued on the exchange determined by the
Manager to be the primary market.
Long-term debt obligations are valued at the mean of representative quoted bid
and asked prices for such securities or, if such prices are not available, at
prices for securities of comparable maturity, quality and type; however, when
the Manager deems it appropriate, prices obtained for the day of valuation from
a bond pricing service will be used. Short-term investments are amortized to
maturity based on their cost, adjusted for foreign exchange translation,
provided such valuations represent fair value.
Options on indices, securities and currencies purchased by the Fund are valued
at their last bid price in the case of listed options or, in the case of OTC
options, at the 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. The value of each security denominated in a currency other
than U.S. dollars will be translated into U.S. dollars at the prevailing market
rate as determined by the Manager on that day. When market quotations for
futures and options on futures held by the Fund are readily available, those
positions will be valued based upon such quotations.
Securities and other assets for which market quotations are not readily
available (including restricted securities which are subject to limitations as
to their sale) are valued at fair value as determined in good faith by or under
the direction of the Company's Board of Directors. The valuation procedures
applied in any specific instance are likely to vary from case to case. However,
consideration generally is given to the financial position of the issuer and
other fundamental analytical data relating to the investment and to the nature
of the restrictions on disposition of the securities (including any registration
expenses that might be borne by the Fund in connection with such disposition).
In addition, specific factors also generally are considered, such as the cost of
the investment, the market value of any unrestricted securities of the same
class (both at the time of purchase and at the time of valuation), the size of
the holding, the prices of any recent transactions or offers with respect to
such securities and any available analysts' reports regarding the issuer.
Statement of Additional Information Page 22
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
The fair value of any other assets is added to the value of all securities
positions to arrive at the value of the Fund's total assets. The Fund's
liabilities, including accruals for expenses, are deducted from its total
assets. Once the total value of the Fund's net assets is so determined, that
value is then divided by the total number of shares outstanding (excluding
treasury shares), and the result, rounded to the nearer cent, is the net asset
value per share.
Any assets or liabilities initially expressed in terms of foreign currencies are
translated into U.S. dollars at the official exchange rate or at the mean of the
current bid and asked prices of such currencies against the U.S. dollar last
quoted by a major bank that is a regular participant in the foreign exchange
market or on the basis of a pricing service that takes into account the quotes
provided by a number of such major banks. If none of these alternatives are
available, or none are deemed to provide a suitable methodology for converting a
foreign currency into U.S. dollars, the Board of Directors, in good faith, will
establish a conversion rate for such currency.
European, Far Eastern, or Latin American securities trading may not take place
on all days on which the NYSE is open. Further, trading takes place in Japanese
markets on certain Saturdays and in various foreign markets on days on which the
NYSE is not open. In addition, trading in securities on European and Far Eastern
securities exchanges and OTC markets generally is completed well before the
close of the business day in New York. Consequently, the calculation of the
Fund's net asset value may not take place contemporaneously with the
determination of the prices of securities held by the Fund. Events affecting the
values of portfolio securities that occur between the time their prices are
determined and the close of regular trading on the NYSE will not be reflected in
the Fund's net asset value unless the Manager, under the supervision of the
Company's Board of Directors, determines that the particular event would
materially affect net asset value. As a result, the Fund's net asset value may
be significantly affected by such trading on days when a shareholder cannot
purchase or redeem shares of the Fund.
- --------------------------------------------------------------------------------
INFORMATION RELATING TO SALES
AND REDEMPTIONS
- --------------------------------------------------------------------------------
PAYMENT AND TERMS OF OFFERING
Payment for Advisor Class shares purchased should accompany the purchase order,
or funds should be wired to the Transfer Agent as described in the Prospectus.
Payment for Fund shares, 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 cancelled 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 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 cancelled 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 BETWEEN FUNDS
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
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 60 days prior notice to the shareholders of
Statement of Additional Information Page 23
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
such fund and is available only in states where the exchange may be legally
made. 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 30 days' written notice.
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 determined by the SEC, (2) when an
emergency exists, as defined by the SEC, which would prohibit the Fund from
disposing of its portfolio securities 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 Company's Board of Directors, 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 Company 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 value of the net
assets of the Fund at the beginning of such period. This election is irrevocable
so long as Rule 18f-1 remains in effect, unless the SEC by order upon
application permits the withdrawal of such election.
Statement of Additional Information Page 24
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
TAXES
- --------------------------------------------------------------------------------
GENERAL
In order to qualify or to continue to qualify for treatment as a regulated
investment company ("RIC") under the Internal Revenue Code of 1986, as amended
("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, net short-term capital gain and net gains from certain
foreign currency transactions) ("Distribution Requirement") and must meet
several additional requirements. These requirements include the following: (1)
the Fund must derive at least 90% of its gross income each taxable year from
dividends, interest, payments with respect to securities loans and gains from
the sale or other disposition of securities or foreign currencies, or other
income (including gains from options, Futures or Forward Contracts) derived with
respect to its business of investing in securities or those currencies ("Income
Requirement"); (2) 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 -- options or Futures
(other than those on foreign currencies), or foreign currencies (or options,
Futures or Forward Contracts thereon) that are not directly related to the
Fund's principal business of investing in securities (or options and Futures
with respect to securities) ("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.
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 from U.S.
corporations. However, dividends received by a corporate shareholder and
deducted by it pursuant to the dividends-received deduction are subject
indirectly to the alternative minimum tax.
If 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.
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.
FOREIGN TAXES
Dividends and interest received by the Fund may be subject to income,
withholding or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors. If more than 50% of the value of
the Fund's total assets at the close of its taxable year consists of securities
of foreign corporations, the Fund will be eligible to, and may, file an election
with the Internal Revenue Service that will enable its shareholders, in effect,
to receive the benefit of the foreign tax credit with respect to any foreign
income taxes paid by it. Pursuant to the election, the Fund will treat those
taxes as dividends paid to its shareholders and each shareholder will be
required to (1) include in gross income, and treat as paid by him, his
proportionate share of those taxes, (2) treat his share of those taxes and of
any dividend paid by the Fund that
Statement of Additional Information Page 25
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
represents income from foreign sources as his own income from those sources, and
(3) either deduct the taxes deemed paid by him in computing his taxable income
or, alternatively, use the foregoing information in calculating the foreign tax
credit against his federal income tax. The Fund will report to its shareholders
shortly after each taxable year their respective shares of the Fund's income
from sources within, and taxes paid to, foreign countries if it makes this
election.
PASSIVE FOREIGN INVESTMENT COMPANIES
The Fund may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is a foreign corporation that, in general, meets either of the
following tests: (1) at least 75% of its gross income is passive or (2) an
average of at least 50% of its assets produce, or are held for the production
of, passive income. Under certain circumstances, the Fund would be subject to
federal income tax on a portion of any "excess distribution" received on, or of
any gain from disposition of, stock of a PFIC (collectively "PFIC income"), plus
interest thereon, even if the Fund distributed the PFIC income as a taxable
dividend to its shareholders. The balance of the PFIC income would be included
in the Fund's investment company taxable income and, accordingly, would not be
taxable to the Fund to the extent that income is distributed to its
shareholders.
If the Fund does invest in a PFIC and elects to treat the PFIC as a "qualified
electing fund" ("QEF"), then in lieu of the foregoing tax and interest
obligation, the Fund would be required to include in income each taxable year
its pro rata share of the QEF's ordinary earnings and net capital gain (the
excess of net long-term capital gain over net short-term capital loss) -- which
most likely would have to be distributed to satisfy the Distribution Requirement
and to avoid imposition of the Excise Tax -- even if those earnings and gain
were not received by the Fund. In most instances it will be very difficult, if
not impossible, to make this election because of certain requirements thereof.
Pursuant to proposed regulations, open-end RICs, such as the Fund, would be
entitled to elect to "mark-to-market" their stock in certain PFICs.
"Marking-to-market," in this context, means recognizing as gain for each taxable
year the excess, as of the end of that year, of the fair market value of each
such PFIC's stock over the adjusted basis in that stock (including
mark-to-market gain for each prior year for which an election was in effect).
NON-U.S. SHAREHOLDERS
Dividends paid by the Fund to a shareholder who, as to the United States, is a
nonresident alien individual, 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
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.
OPTIONS, FUTURES AND FOREIGN CURRENCY TRANSACTIONS
The use of hedging transactions, such as selling (writing) and purchasing
options and Futures Contracts and entering into Forward Contracts, involves
complex rules that will determine, for federal income tax purposes, the
character and timing of recognition of the gains and losses the Fund realizes in
connection therewith. Gains from foreign currencies (except certain gains that
may be excluded by future regulations), and gains from the disposition of
options, Futures and Forward Contracts derived by the Fund with respect to its
business of investing in securities or foreign currencies, will qualify as
permissible income under the Income Requirement. However, income from the
disposition by the Fund of options and Futures (other than those on foreign
currencies) will be subject to the Short-Short Limitation if they are held for
less than three months. Income from the disposition by the Fund of foreign
currencies, and options, Futures and Forward Contracts on foreign currencies,
that are not directly related to the Fund's principal business of investing in
securities (or options and Futures with respect thereto) also will be subject to
the Short-Short Limitation if they are held for less than three months.
If the Fund satisfies certain requirements, any increase in value of a position
that is part of a "designated hedge" will be offset by any decrease in value
(whether realized or not) of the offsetting hedging position during the period
of the hedge for purposes of determining whether the Fund satisfies the
Short-Short Limitation. Thus, only the net gain (if any) from the designated
hedge will be included in gross income for purposes of that limitation. The Fund
intends that, when it engages in hedging transactions, it will qualify for this
treatment, but at the present time it is not clear whether this treatment will
be available for all those transactions. To the extent this treatment is not
available, the Fund may be forced to defer the closing out of certain options,
Futures, Forward Contracts or foreign currency positions beyond the time when it
otherwise would be advantageous to do so, in order for the Fund to continue to
qualify as a RIC.
Statement of Additional Information Page 26
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
Futures and Forward Contracts that are subject to Section 1256 of the Code
(other than those that are part of a "mixed straddle") ("Section 1256
Contracts") and that are held by the Fund at the end of its taxable year
generally will be deemed to have been sold at market value for federal income
tax purposes. Sixty percent of any net gain or loss recognized on these deemed
sales, and 60% of any net gain or loss realized from any actual sales of Section
1256 Contracts, will be treated as long-term capital gain or loss, and the
balance will be treated as short-term capital gain or loss. Section 988 of the
Code also may apply to gains and losses from transactions in foreign currencies,
foreign-currency-denominated debt securities and options, futures and Forward
Contracts on foreign currencies ("Section 988" gains or loss). Each Section 988
gain or loss generally is computed separately and treated as ordinary income or
loss. In the case of overlap between Sections 1256 and 988, special provisions
determine the character and timing of any income, gain or loss. The Fund
attempts to monitor Section 988 transactions to minimize any adverse tax impact.
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, located in Zurich, Switzerland.
Worldwide asset management affiliates also currently include LGT Asset
Management PLC, formerly GT Management PLC in London, England; LGT Asset
Management Ltd., formerly GT Management (Asia) Ltd. in Hong Kong; LGT Asset
Management Ltd., formerly GT Management (Japan) in Tokyo; LGT Asset Management
Pte. Ltd., formerly GT Management (Singapore) PTE Ltd. located in Singapore; LGT
Asset Management Ltd., formerly GT Management (Australia) Ltd., located in
Sydney; and LGT Asset Management GmbH, formerly BIL Asset Management GmbH,
located in Frankfurt, Germany.
CUSTODIAN
State Street Bank and Trust Company ("State Street"), 225 Franklin Street,
Boston, Massachusetts 02110, acts as custodian of the Fund's assets. State
Street is authorized to establish and has established separate accounts in
foreign currencies and to cause securities of the Fund to be held in separate
accounts outside the United States in the custody of non-U.S. banks.
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 Company and the Fund as to
matters of accounting, regulatory filings, and federal and state income
taxation.
The audited financial statements of the Company 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 said firm as experts in accounting and auditing.
USE OF NAME
The Manager has granted the Company 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 Company and/or the Fund at any time, or to grant the use of such
names to any other company.
Statement of Additional Information Page 27
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
INVESTMENT RESULTS
- --------------------------------------------------------------------------------
The Fund's "Standardized Return," 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 ("T") is computed by using the value at the end of
the period ("EV") 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) to the (n)th power = EV. 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 Board and (4) a complete redemption
at the end of any period illustrated.
The Fund's Standardized Returns for its Class A shares, stated as average
annualized total returns, for the periods shown, were as follows:
<TABLE>
<CAPTION>
PERIOD STANDARDIZED RETURN
- ---------------------------------------------------------------------------------------------------- ---------------------
<S> <C>
Year ended October 31, 1996......................................................................... %
October 31, 1991 to October 31, 1996................................................................ %
September 25, 1990 (commencement of operations) to October 31, 1996................................. %
</TABLE>
The Fund's Standardized Returns for its Class B shares, which were first offered
on October 22, 1992, stated as average annualized total returns, for the periods
shown, were as follows:
<TABLE>
<CAPTION>
PERIOD STANDARDIZED RETURN
- ---------------------------------------------------------------------------------------------------- ---------------------
<S> <C>
Year ended October 31, 1996......................................................................... %
October 22, 1992 (commencement of operations) to October 31, 1996................................... %
</TABLE>
The Fund's Standardized Returns for its Advisor Class shares, stated as average
annualized total returns, for the periods shown, were as follows:
<TABLE>
<CAPTION>
PERIOD STANDARDIZED RETURN
- ---------------------------------------------------------------------------------------------------- ---------------------
<S> <C>
Fiscal year ended October 31, 1996.................................................................. %
June 1, 1995 (commencement of operations) to October 31, 1996....................................... %
</TABLE>
"Non-Standardized Return," as referred to in the Prospectus, is calculated for a
specified period of time by assuming the investment of $1,000 in Fund shares and
further assuming the reinvestment of all dividends and other distributions made
to Fund shareholders in additional Fund shares at their net asset value.
Percentage rates of return are then calculated by comparing this assumed initial
investment to the value of the hypothetical account at the end of the period for
which the Non-Standardized Return is quoted. As discussed in the Prospectus, the
Fund may quote non-standardized total returns that do not reflect the effect of
sales charges. Non-Standardized Returns may be quoted from the same or different
time periods for which Standardized Returns are quoted.
The Fund's Non-Standardized Returns for its Class A shares, stated as aggregate
total returns, for the periods shown, were as follows:
<TABLE>
<CAPTION>
NON-STANDARDIZED
PERIOD AGGREGATE TOTAL RETURN
- -------------------------------------------------------------------------------------------------- -----------------------
<S> <C>
Year ended October 31, 1996....................................................................... %
October 31, 1991 to October 31, 1996.............................................................. %
September 25, 1990 (commencement of operations) to October 31, 1996............................... %
</TABLE>
The Fund's Non-Standardized Returns for its Class B shares which were first
offered on October 22, 1992, stated as aggregate total returns, for the periods
shown, were as follows:
<TABLE>
<CAPTION>
PERIOD AGGREGATE TOTAL RETURN
- -------------------------------------------------------------------------------------------------- -----------------------
<S> <C>
Year ended October 31, 1996....................................................................... %
October 22, 1992 (commencment of operations) to October 31, 1996.................................. %
</TABLE>
Statement of Additional Information Page 28
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
The Fund's Non-Standardized Returns for its Advisor Class shares, stated as
aggregate total returns, for the periods shown, were as follows:
<TABLE>
<CAPTION>
NON-STANDARDIZED
PERIOD AGGREGATE TOTAL RETURN
- -------------------------------------------------------------------------------------------------- -----------------------
<S> <C>
Fiscal year ended October 31, 1996................................................................ %
June 1, 1995 (commencement of operations) to October 31, 1996..................................... %
</TABLE>
The Fund's Non-Standardized Returns for its Class A shares, stated as average
annualized total returns, for the periods shown, were as follows:
<TABLE>
<CAPTION>
NON-STANDARDIZED
AVERAGE ANNUALIZED
PERIOD TOTAL RETURN
- ----------------------------------------------------------------------------------------------------- ---------------------
<S> <C>
Fiscal year ended October 31, 1996................................................................... %
October 31, 1991 to October 31, 1996................................................................. %
September 25, 1990 (commencement of operations) to October 31, 1996.................................. %
</TABLE>
The Fund's Non-Standardized Returns for its Class B shares which were first
offered on October 22, 1992, stated as average annualized total returns, for the
periods shown, were as follows:
<TABLE>
<CAPTION>
PERIOD NON-STANDARDIZED RETURN
- ------------------------------------------------------------------------------------------------ -------------------------
<S> <C>
Fiscal year ended October 31, 1996.............................................................. %
October 22, 1992 (commencement of operations) to October 31, 1996............................... %
</TABLE>
The Fund's Non-Standardized Returns for its Advisor Class shares, stated as
average annualized total returns, for the periods shown, were as follows:
<TABLE>
<CAPTION>
NON-STANDARDIZED
AVERAGE ANNUALIZED
PERIOD TOTAL RETURN
- ----------------------------------------------------------------------------------------------------- ---------------------
<S> <C>
Fiscal year ended October 31, 1996................................................................... %
June 1, 1995 (commencement of operations) to October 31, 1996........................................ %
</TABLE>
IMPORTANT POINTS TO NOTE ABOUT DATA RELATING TO WORLD EQUITY AND BOND MARKETS
Information relating to foreign market performance and diversification is based
on sources believed to be reliable, but is neither all-inclusive nor warranted
as to accuracy by the Company or the Manager. The authors and publishers of such
material are not to be considered as "experts" under the Securities Act of 1933
on account of the inclusion of such information herein. Stocks chosen by Morgan
Stanley Capital International or the IFC for inclusion in its various
international market indices may not necessarily constitute a representative
cross section of the particular markets.
GT Global believes that information relating to foreign market performance and
diversification 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 such indices. The performance of indices does not take expenses
into account, while the Fund incurs expenses in its operations which will reduce
performance. The Fund is actively managed, I.E. The Manager, as the Fund's
investment manager, actively purchases and sells securities in seeking the
Fund's investment objective. Moreover, the Fund may invest a portion of its
assets in corporate bonds, while the above data relates only to government
bonds. Each of these factors will cause the performance of the Fund to differ
from indices.
In addition, GT Global may in its radio, television and other advertising,
employ the use of sound effects such as, for example, sounds of electronic data
being communicated.
The Fund and GT Global may from time to time compare the Fund with, but not
limited to, the following:
(1) Various Salomon Brothers World Bond Indices, which measure 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.
or BBB by Standard and Poor's, or, in the case of nonrated bonds, BBB by
Fitch Investors Service (excluding Collateralized Mortgage Obligations).
Statement of Additional Information Page 29
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
(3) 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.
(4) 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).
(5) Data and mutual fund rankings and comparisons published or prepared
by Lipper Analytical Data Services, Inc. ("Lipper"), CDA/Wiesenberger
Investment Company Services ("CDA/Wiesenberger") and/or other companies that
rank or compare mutual funds by overall performance, investment objectives,
assets, expense levels, periods of existence and/or other factors. In this
regard, the Fund may be compared to the Fund's "peer group" as defined by
Lipper, CDA/Wiesenberger and/or other firms, as applicable, or to specific
funds or groups of funds within or without such peer group. 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.
(6) Bear Stearns Foreign Bond Index, which provides simple average
returns for individual countries and GNP-weighted index, beginning in 1975.
The returns are broken down by local market and currency.
(7) Ibbottson Associates International Bond Index, which provides a
detailed breakdown of local market and currency returns since 1960.
(8) 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 U.S.
(9) 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.
(10) Dow Jones Industrial Average.
(11) CNBC/Financial News Composite Index.
(12) 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 of Europe, Australia and the Far East.
(13) 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.
(14) The World Bank Publication of Trends in Developing Countries (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.
(15) Salomon Brothers Global Telecommunications Index is composed of
telecommunications companies in the developing and emerging countries.
(16) Datastream and Worldscope each is an on-line database retrieval
service for information including but not limited to international financial
and economic data.
(17) International Financial Statistics, which is produced by the
International Monetary Fund.
(18) Various publications and reports produced by the World Bank and its
affiliates.
(19) Various publications from the International Bank for Reconstruction
and Development/The World Bank.
(20) Various publications including but not limited to ratings agencies
such as Moody's Investors Service, Fitch Investors Service and Standard &
Poor's.
(21) Wilshire Associates which is an on-line database for international
financial and economic data including performance measure for a wide range
of securities.
Statement of Additional Information Page 30
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
(22) Bank Rate National Monitor Index, which is an average of the quoted
rates for 100 leading banks and thrifts in ten U.S. cities.
(23) International Finance Corporation (IFC) Emerging Markets Data Base
which provides detailed statistics on stock and bond markets in developing
countries.
(24) Various publications from the Organization for Economic Cooperation
and Development (OECD).
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, 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, performance rankings, ratings and
commentary reported periodically in national financial publications, included
but not limited to, Money 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. Each 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.
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 Fund 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. 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.
GT Global believes that a growing number of consumer products, including, but
not limited to home appliances, automobiles and clothing, purchased by Americans
are manufactured abroad. GT Global believes that investing globally in the
companies that produce products for U.S. consumers can help U.S. investors seek
protection of the value of their assets against the potentially increasing costs
of foreign manufactured goods. Of course, there can be no assurance that there
will be any correlation between global investing and the costs of such foreign
goods unless there is a corresponding change in value of the U.S. dollar to
foreign currencies. From time to time, GT Global may refer to or advertise the
names of such companies although there can be no assurance that any GT Global
Mutual Fund may own the securities of these companies.
The Fund may compare its performance to that of other compilations or indices of
comparable quality to those listed above which may be developed and made
available in the future. The Fund may be compared in advertising to Certificates
of Deposit (CDs), the Bank Rate Monitor National Index, an average of the quoted
rates for 100 leading banks and thrifts in ten U.S. cities chosen to represent
the ten largest Consumer Metropolitan statistical areas, or other investments
issued by banks. The Fund differs from bank investments in several respects. The
Fund may offer greater liquidity or higher potential returns than CDs; but
unlike CDs, the Fund will have a fluctuating share price and return and is not
FDIC insured.
The Fund's performance may be compared to the performance of other mutual funds
in general, or to the performance of particular types of mutual funds. These
comparisons may be expressed as mutual fund rankings prepared by Lipper
Analytical Services, Inc. (Lipper), an independent service which monitors the
performance of mutual funds. 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 Fund's performance
may be compared to mutual fund performance indices prepared by Lipper.
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.
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 is based on the returns of different indices.
Statement of Additional Information Page 31
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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.
In advertising materials, GT Global may reference or discuss its products and
services, which may include: retirement investing; the effects of dollar-cost
averaging and saving for college or a home. In addition, GT Global may quote
financial or business publications and periodicals, including model portfolios
or allocations, as they relate to fund management, investment philosophy, and
investment techniques.
The Fund may discuss its Quotron number, CUSIP number, and its current portfolio
management team.
From time to time, the Fund's performance also may be compared to other mutual
funds tracked by financial or business publications and periodicals. For
example, the fund may quote Morningstar, Inc. in its advertising materials.
Morningstar, Inc. is a mutual fund rating service that rates mutual funds on the
basis of risk-adjusted performance. In addition, the Fund may quote financial or
business publications and periodicals as they relate to fund management,
investment philosophy, and investment techniques. Rankings that compare the
performance of GT Global Mutual Funds to one another in appropriate categories
over specific periods of time may also be quoted in advertising.
The Fund may quote various measures of volatility and benchmark correlation,
such as beta, standard deviation and R(2) 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. 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 the GT Global 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
plans may produce returns superior to comparable non-retirement investments. The
Fund may also discuss these plans which include:
INDIVIDUAL RETIREMENT ACCOUNTS (IRAS): Any individual who receives earned income
from employment (including self-employment) can contribute up to $2,000 each
year to an IRA (or if less, 100% of compensation). If your spouse is not
employed, a total of $2,250 may be contributed each year to IRAs set up for you
and your spouse (subject to the maximum of $2,000 to either IRA). 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 rollover (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.
Statement of Additional Information Page 32
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
SEP-IRAS AND SALARY-REDUCTION SEP-IRAS: Simplified employee pension (SEP) plans
and salary-reduction SEPs provide self-employed individuals (and any eligible
employees) with benefits similar to Keogh-type plans or 401(k) plans, but with
fewer administrative requirements and therefore potential lower annual
administration expenses.
403(B)(7) CUSTODIAL ACCOUNTS: Employees of public schools and most other
not-for-profit corporations can make pre-tax salary reduction contributions to
these accounts.
PROFIT-SHARING (INCLUDING 401(K)) AND MONEY PURCHASE PENSION PLANS: Corporations
can sponsor these qualified defined contribution plans for their employees. A
401(k) plan, a type of profit-sharing plan, additionally permit the eligible,
participating employees to make pre-tax salary reduction contributions to the
plan (up to certain limitations).
GT Global may from time to time in its sales methods and advertising discuss the
risks inherent in investing. The major types of investment risk are market risk,
industry risk, credit risk, interest rate 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 certain information
including, but not limited to, data regarding: individual countries, regions,
world stock exchanges, and economic and demographic statistics from sources GT
Global deems reliable, including, but not limited to, the economic and financial
data of such financial organizations as:
1) Stock market capitalization: Morgan Stanley Capital International World
Indices, International Finance Corporation and Datastream.
2) Stock market trading volume: Morgan Stanley Capital International Industry
Indices, International Finance Corporation.
3) The number of listed companies: International Finance Corporation, G.T.
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 Indices.
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, International Finance Corporation and Datastream.
7) The Consumer Price Index and inflation rate: The World Bank, Datastream and
International Finance Corporation.
8) Gross Domestic Product (GDP): Datastream and The World Bank.
9) GDP growth rate: International Finance Corporation, 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: Organization for Economic Cooperation
and Development and United Nations.
13) Total exports and imports by year: International Finance Corporation, The
World Bank and Datastream.
14) Top three companies by country, industry or market: International Finance
Corporation, G.T. 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) Standard deviation and performance returns for U.S. and non-U.S. equity and
bond markets: Morgan Stanley Capital International.
17) Countries restructuring their debt, including those under the Brady Plan:
the Manager.
18) Political and economic structure of countries: Economist Intelligence Unit.
19) Government and corporate bonds -- credit ratings, yield to maturity and
performance returns: Salomon Brothers, Inc.
20) Dividend yields for U.S. and non-U.S. companies: Bloomberg.
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
Statement of Additional Information Page 33
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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.
THE GT ADVANTAGE
The Manager has developed a unique team approach to its global money management
which we call the GT Advantage. The Manager's money management style combines
the best of the "top-down" and "bottom-up" investment manager strategies. The
top-down approach is implemented by the Manager's Investment Policy Committee
which sets broad guidelines for asset allocation and currency management based
on the Manager's own macroeconomic forecasts and research from our worldwide
offices. The bottom-up approach utilizes regional teams of individual portfolio
managers to implement the committee's guidelines by selecting local securities
that offer strong growth and income potential.
- --------------------------------------------------------------------------------
DESCRIPTION OF DEBT RATINGS
- --------------------------------------------------------------------------------
DESCRIPTION OF BOND RATINGS
MOODY'S INVESTORS SERVICE, INC. ("Moody's") rates the 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 edge." Interest
payments are protected by a large or 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. They are rated lower than the best
bond because margins of protection may not be as large as in Aaa securities,
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risk appear somewhat
greater.
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. 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 to
be well assured. Often the protection of interest and principal payments may
be very moderate, and thereby not well safeguarded during other 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.
Statement of Additional Information Page 34
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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.
STANDARD & POOR'S RATINGS GROUP ("S&P") rates the securities debt of various
entities in categories ranging from "AAA" to "DD" 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 -- High grade. Very strong capacity to pay interest and repay
principal. Generally, these bonds differ from AAA issues only in a small
degree.
A -- Have a strong capacity to pay interest and repay principal although
they are somewhat more susceptible to the adverse effects of change in
circumstances and economic conditions than debt in higher rated categories.
BBB -- Regarded as having adequate capacity to pay interest and repay
principal. These bonds normally exhibit adequate protection parameters, but
adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity to pay interest and repay principal than for
debt in higher rated categories.
BB, B, CCC, CC, C -- Debt rated "BB," "B," "CCC," "CC," and "C" are
regarded, on balance, as predominantly speculative with respect to capacity
to pay interest and repay principal in accordance with the terms of this
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 indefinable 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 which 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.
C -- Reserved for income bonds on which no interest is being paid.
D -- In payment default. The "D" rating is used when interest 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. The "D" rating also will 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.
Statement of Additional Information Page 35
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
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 have a superior capacity for repayment of short-term promissory
obligations. Prime-1 repayment capacity normally will be evidenced by the
following characteristics: leading market positions in well-established
industries; high rates of return on funds employed; conservative capitalization
structures with moderate reliance on debt and ample asset protections; 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. Issues rated Prime-2 have a strong
capacity for repayment of short-term promissory 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, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
S&P ratings of commercial paper are graded into four categories ranging from
"A" for the highest quality obligations to "D" for the lowest. A -- Issues
assigned its highest rating are regarded as having the greatest capacity for
timely payment. Issues in this category are delineated with numbers 1, 2, and 3
to indicate the relative degree of safety. A-1 -- This designation indicates
that the degree of safety regarding timely payment is either overwhelming or
very strong. Those issues determined to possess overwhelming safety
characteristics will be denoted with a plus (++) sign designation. A-2 --
Capacity for timely payments on issues with this designation is strong; however,
the relative degree of safety is not as high as for issues designated "A-1."
COMMERCIAL PAPER RATINGS
The Fund may invest only in high quality commercial paper, i.e. commercial paper
rated Prime-1 by Moody's, A-1 by S&P, or, if unrated, judged by the Manager to
be of comparable quality. Issuers rated Prime-1 by Moody's have, in Moody's
judgment, a superior capacity for repayment of short-term debt obligations.
Prime-1 repayment capacity will normally be evidenced by the following
characteristics: leading market positions in well-established industries; high
rates of return on funds employed; conservative capitalization structures with
moderate reliance on debt and ample asset protections; 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. Issues assigned the A-1 rating by S&P are regarded by S&P
as having the greatest capacity for timely payment. This designation indicates
that the degree of safety regarding timely payment is either overwhelming or
very strong.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The audited financial statements of the Fund as of October 31, 1996, and for its
fiscal year then-ended appear on the following pages.
Statement of Additional Information Page 36
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
NOTES
- --------------------------------------------------------------------------------
Statement of Additional Information Page 37
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
NOTES
- --------------------------------------------------------------------------------
Statement of Additional Information Page 38
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
NOTES
- --------------------------------------------------------------------------------
Statement of Additional Information Page 39
<PAGE>
GT GLOBAL GROWTH & INCOME FUND
GT GLOBAL MUTUAL FUNDS
GT GLOBAL OFFERS A BROAD RANGE OF MUTUAL FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY GT GLOBAL MUTUAL
FUND, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR CALL GT GLOBAL DIRECTLY AT 1-
800-824-1580.
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL WORLDWIDE GROWTH FUND
Invests around the world, including the U.S.
GT GLOBAL INTERNATIONAL GROWTH FUND
Provides portfolio diversity by investing outside the U.S.
GT GLOBAL EMERGING MARKETS FUND
Gives access to the growth potential of developing economies
/ / GLOBAL THEME FUNDS
GT GLOBAL CONSUMER PRODUCTS AND
SERVICES FUND
Invests in companies that manufacture, market, retail, or distribute consumer
products or services
GT GLOBAL FINANCIAL SERVICES FUND
Focuses on the worldwide opportunities from the demand for financial services
and products
GT GLOBAL HEALTH CARE FUND
Invests in the growing health care industries worldwide
GT GLOBAL INFRASTRUCTURE FUND
Seeks companies that build, improve or maintain a country's infrastructure
GT GLOBAL NATURAL RESOURCES FUND
Concentrates on companies that own, explore or develop natural resources
GT GLOBAL TELECOMMUNICATIONS FUND
Invests in companies worldwide that develop, manufacture or sell
telecommunications services or equipment
/ / REGIONALLY DIVERSIFIED FUNDS
GT GLOBAL NEW PACIFIC GROWTH FUND
Offers access to the emerging and established markets of the Pacific Rim,
excluding Japan
GT GLOBAL EUROPE GROWTH FUND
Focuses on investment opportunities in the
new, unified Europe
GT GLOBAL LATIN AMERICA GROWTH FUND
Invests in the emerging markets of Latin America
/ / SINGLE COUNTRY FUNDS
GT GLOBAL AMERICA SMALL CAP GROWTH FUND
Invests in equity securities of small U.S. companies
GT GLOBAL AMERICA MID CAP GROWTH FUND
Concentrates on medium-sized companies in the U.S.
GT GLOBAL AMERICA VALUE FUND
Concentrates on equity securities of large cap U.S. companies believed to be
undervalued
GT GLOBAL JAPAN GROWTH FUND
Provides U.S. investors with direct access to the Japanese market
GROWTH AND INCOME FUNDS
GT GLOBAL GROWTH & INCOME FUND
Invests in blue-chip stocks and government bonds from around the world
FIXED INCOME FUNDS
GT GLOBAL GOVERNMENT INCOME FUND
Earns monthly income from global government securities
GT GLOBAL STRATEGIC INCOME FUND
Allocates its assets among debt securities from the U.S., developed foreign
countries and emerging markets
GT GLOBAL HIGH INCOME FUND
Invests in debt securities in emerging markets
MONEY MARKET FUND
GT GLOBAL DOLLAR FUND
Invests in high quality, U.S. dollar-denominated money market securities
worldwide for stability and preservation of capital
[LOGO]
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY G.T. INVESTMENT FUNDS, INC.,
GT GLOBAL GROWTH & INCOME FUND, CHANCELLOR LGT ASSET MANAGEMENT, INC. OR GT
GLOBAL, INC. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON IN SUCH JURISDICTION TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER.
GROSX610MC
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND:
ADVISOR CLASS
50 California Street, 27th Floor
San Francisco, California 94111
(415) 392-6181
Toll Free: (800) 824-1580
Statement of Additional Information
March 1, 1997
- --------------------------------------------------------------------------------
GT Global Latin America Growth Fund ("Fund") is a non-diversified mutual fund
organized as a separate series of G.T. Investment Funds, Inc. ("Company"), a
registered open-end management investment company. This Statement of Additional
Information relating to the Advisor Class of the Fund is not a prospectus and
supplements and should be read in conjunction with the Fund's current Advisor
Class Prospectus dated March 1, 1997. A copy of the Fund's Prospectus is
available without charge by either writing the Fund at the above address or by
calling the Fund at the toll-free telephone number printed above.
Chancellor LGT Asset Management, Inc. (the "Manager") serves as the Fund's
investment manager and administrator. 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 "Transfer Agent").
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Investment Objective and Policies........................................................................................ 2
Options, Futures and Currency Strategies................................................................................. 5
Risk Factors............................................................................................................. 13
Investment Limitations................................................................................................... 19
Execution of Portfolio Transactions...................................................................................... 20
Directors and Executive Officers......................................................................................... 22
Management............................................................................................................... 24
Valuation of Fund Shares................................................................................................. 25
Information Relating to Sales and Redemptions............................................................................ 26
Taxes.................................................................................................................... 28
Additional Information................................................................................................... 31
Investment Results....................................................................................................... 31
Description of Debt Ratings.............................................................................................. 38
Financial Statements..................................................................................................... 40
</TABLE>
[LOGO]
Statement of Additional Information Page 1
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
INVESTMENT OBJECTIVE
AND POLICIES
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is capital appreciation. The Fund will
normally invest at least 65% of its total assets in securities of a broad range
of Latin American issuers. Under current market conditions, the Fund expects to
invest primarily in equity and debt securities issued by companies and
governments in Mexico, Chile, Brazil and Argentina. Though the Fund can normally
invest up to 35% of its total assets in U.S. securities, the Fund reserves the
right to be primarily invested in U.S. securities for temporary defensive
purposes or pending investment of the proceeds of the offering made hereby.
SELECTION OF EQUITY INVESTMENTS
Chancellor LGT Asset Management, Inc. (the "Manager") is the investment manager
of the Fund. In determining the appropriate distribution of investments among
various countries for the Fund, the Manager ordinarily considers the following
factors: prospects for relative economic growth between the different countries
in which the Fund may invest; expected levels of inflation; government policies
influencing business conditions; the outlook for interest rates; the outlook for
currency relationships; and the range of the individual investment opportunities
available to international investors.
In analyzing companies for investment by the Fund, the Manager ordinarily looks
for one or more of the following characteristics: an above-average earnings
growth per share; high return on invested capital; healthy balance sheet; sound
financial and accounting policies and overall financial strength; strong
competitive advantages; effective research and product development and
marketing; efficient service; pricing flexibility; strength of management; and
general operating characteristics which will enable the companies to compete
successfully in their respective marketplaces. In certain countries,
governmental restrictions and other limitations on investment may affect the
maximum percentage of equity ownership in any one company by the Fund. 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.
There may be times when, in the opinion of the Manager, prevailing market,
economic or political conditions warrant reducing the proportion of the Fund's
assets invested in equity securities and increasing the proportion held in cash
or short-term obligations denominated in U.S. dollars or other currencies. A
portion of the Fund's assets normally will be held in U.S. dollars or short-term
interest-bearing dollar-denominated securities to provide for ongoing expenses
and redemptions.
The Fund may be prohibited under the Investment Company Act of 1940, as amended
("1940 Act") from purchasing the securities of any foreign company that, in its
most recent fiscal year, derived more than 15% of its gross revenues from
securities-related activities ("securities-related companies"). In a number of
Latin American countries, commercial banks act as securities broker/dealers,
investment advisers and underwriters or otherwise engage in securities-related
activities, which may limit the Fund's ability to hold securities issued by
banks. The Fund has obtained an exemption from the Securities and Exchange
Commission (SEC) restrictions to permit the Fund to invest in certain of these
securities subject to certain restrictions.
DEBT CONVERSIONS
Several Latin American countries have adopted debt conversion programs, pursuant
to which investors may use external debt of a country, directly or indirectly,
to make investments in local companies. The terms of the various programs vary
from country to country, although each program includes significant restrictions
on the application of the proceeds received in the conversion and on the
remittance of profits on the investment and of the invested capital. The Fund
intends to acquire Sovereign Debt, as defined in the Prospectus, to hold and
trade in appropriate circumstances as described in the Prospectus, as well as to
use to participate in Latin American debt conversion programs. The Manager will
evaluate opportunities to enter into debt conversion transactions as they arise
but does not currently intend to invest more than 5% of the Fund's assets in
such programs.
Statement of Additional Information Page 2
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
INVESTMENTS IN OTHER INVESTMENT COMPANIES
With respect to certain countries investments by the Fund presently may be made
only by acquiring shares of other investment companies with local governmental
approval to invest in those countries. The Fund may invest in the securities of
closed-end investment companies within the limits of the 1940 Act. These
limitations currently provide, in part, that the Fund may purchase shares of a
closed-end investment company unless (a) such a purchase would cause the Fund to
own in the aggregate more than 3 percent of the total outstanding voting stock
of the investment company or (b) such a purchase would cause the Fund to have
more than 5 percent of its total assets invested in the investment company or
more than 10 percent of its total assets invested in the aggregate in all such
investment companies. Investment in such investment companies may involve the
payment of substantial premiums above the value of such companies' portfolio
securities. The Fund does not intend to invest in such funds 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. At such time as direct
investment in these countries is allowed, the Fund anticipates investing
directly in these markets.
DEPOSITORY RECEIPTS
The Fund 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 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 which evidence
ownership of underlying securities issued by a foreign corporation. EDRs, which
are sometimes referred to as Continental Depository Receipts ("CDRs"), are
receipts issued in Europe typically by foreign banks and trust companies that
evidence ownership of either foreign or domestic securities. Generally, ADRs and
ADSs in registered form are designed for use in United States securities markets
and EDRs and CDRs in bearer form are designed for use in European securities
markets. For purposes of the Fund's investment policies, the Fund's investments
in ADRs, ADSs, EDRs, and CDRs will be deemed to be investments in the equity
securities representing securities of foreign issuers into which they may be
converted.
WARRANTS OR RIGHTS
Warrants or rights may be acquired by the Fund in connection with other
securities or separately and provide the Fund with the right to purchase at a
later date other securities of the issuer.
LENDING OF PORTFOLIO SECURITIES
For the purpose of realizing additional income, the Fund may make secured loans
of portfolio securities amounting to not more than 25% 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 collateral received will
consist of cash, U.S. short-term government securities, bank letters of credit
or such other collateral as may be permitted under the Fund's investment program
and by regulatory agencies and approved by the Company's Board of Directors.
While the securities loan is outstanding, the Fund 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.
The Fund will have a right to call each loan and obtain the securities on five
business days' notice. The Fund will not have the right to vote equity
securities while they are lent, but it may call in a loan in anticipation of any
important vote. The risks in lending portfolio securities, as with other
extensions of secured credit, consist of possible delay in receiving additional
collateral or in recovery of the securities or possible loss of rights in the
collateral should the borrower fail financially. 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.
COMMERCIAL BANK OBLIGATIONS
For the purposes of the Fund'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 investment in non-U.S.
securities in general, investments in the obligations of foreign branches of
U.S. banks and of foreign banks may subject the Fund to investment risks that
are different in some respects from those of investments in obligations of
domestic issuers. Although the Fund will typically acquire obligations issued
and supported by the credit of U.S. or foreign banks having total assets at the
time of purchase in excess of $1 billion, this $1 billion figure is not a
fundamental investment policy or restriction of the Fund. 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.
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GT GLOBAL LATIN AMERICA GROWTH FUND
REPURCHASE AGREEMENTS
Repurchase agreements are transactions in which the Fund 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, the Fund intends to enter into repurchase
agreements only with banks and dealers believed by the Manager to present
minimum credit risks in accordance with guidelines established by the Company's
Board of Directors. The Manager will review and monitor the creditworthiness of
such institutions under the Board's general supervision.
The Fund 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, the Fund 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 the Fund's ability
to sell the collateral and the Fund could suffer a loss. However, with respect
to financial institutions whose bankruptcy or liquidation proceedings are
subject to the U.S. Bankruptcy Code, the Fund intends to comply with provisions
under the U.S. Bankruptcy Code that would allow it immediately to resell the
collateral. There is no limitation on the amount of the Fund's assets that may
be subject to repurchase agreements at any given time. The Fund will not enter
into a repurchase agreement with a maturity of more than seven days if, as a
result, more than 10% of the value of its total assets would be invested in such
repurchase agreements and other illiquid investments.
BORROWING AND REVERSE REPURCHASE AGREEMENTS
The Fund's borrowings will not exceed 33 1/3% of the Fund's total assets, i.e.,
the Fund's total assets at all times will equal at least 300% of the amount of
outstanding borrowings. If market fluctuations in the value of the Fund's
portfolio holdings or other factors cause the ratio of the Fund's total assets
to outstanding borrowings to fall below 300%, the Fund may be required to sell
portfolio securities to restore 300% asset coverage, even though from an
investment standpoint such sales might be disadvantageous. The Fund also may
borrow up to 5% of its total assets for temporary or emergency purposes other
than to meet redemptions. Any borrowing by the Fund may cause greater
fluctuation in the value of its shares than would be the case if the Fund did
not borrow. The Fund's fundamental investment limitations prohibit the Fund from
purchasing securities during times when outstanding borrowings represent more
than 5% of its total assets.
The Fund may enter into reverse repurchase agreements. A reverse repurchase
agreement is a borrowing transaction in which the Fund 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. The Fund will maintain in a segregated
account with a custodian cash or other liquid securities in an amount sufficient
to cover its obligations under reverse repurchase agreements with
broker/dealers. No segregation is required for reverse repurchase agreements
with banks.
SHORT SALES
The Fund is authorized to make short sales of securities, although it has no
current intention of doing so. A short sale is a transaction in which the Fund
sells a security in anticipation that the market price of that security will
decline. The Fund may make short sales (i) as a form of hedging to offset
potential declines in long positions in securities it owns, or anticipates
acquiring, and (ii) in order to maintain portfolio flexibility.
When the Fund 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 Fund 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.
The Fund's obligation to replace the borrowed security when the borrowing is
called or expires will be secured by collateral deposited with the intermediary.
The Fund 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
the Fund on such security, the Fund 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 the Fund replaces the borrowed security, the Fund will incur a
loss; conversely, if the price declines, the Fund will realize a gain. Any gain
will be decreased, and any loss increased, by the transaction costs associated
with the transaction. Although the Fund's gain is limited by the price at which
it sold the security short, its potential loss is theoretically unlimited.
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GT GLOBAL LATIN AMERICA GROWTH FUND
The Fund will not 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 Fund's aggregate short sales of the securities of any one issuer
exceed the lesser of 2% of the Fund's net assets or 2% of the securities of any
class of the issuer. Moreover, the Fund may engage in short sales only with
respect to securities listed on a national securities exchange. The Fund 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 Fund owns the security it has
sold short or has the immediate and unconditional right to acquire at no
additional cost the identical security.
- --------------------------------------------------------------------------------
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 the Fund entered into a
short hedge because the Manager projected a decline in the price of a
security in the Fund'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 Fund could suffer a loss. In either such case, the Fund
would have been in a better position had it not hedged at all.
(4) As described below, the Fund 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 Fund 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 Fund'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 Fund sell a portfolio security at
a disadvantageous time. The Fund's ability to close out a position in an
investment 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 Fund.
WRITING CALL OPTIONS
The Fund may write (sell) call options on securities, indices and currencies.
Call options will generally 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 Fund.
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
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GT GLOBAL LATIN AMERICA GROWTH FUND
writer of a call option continues, he may be assigned an exercise notice,
requiring him 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.
Portfolio securities or currencies on which call options may be written will be
purchased solely on the basis of investment considerations consistent with the
Fund's investment objectives. When writing a call option, the Fund, 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, the Fund 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 the Fund has written expires, the
Fund 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 Fund 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. The Fund does not consider a
security or currency covered by a call option to be "pledged" as that term is
used in the Fund'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 the Fund will be obligated to
sell the security or currency at less than its market value.
The premium that the Fund receives for writing a call option is deemed to
constitute the market value of an option. The premium the Fund 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 the Fund to write
another call option on the underlying security or currency with either a
different exercise price, expiration date or both.
The Fund 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 or currencies at the time the options
are written. From time to time, the Fund 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.
The Fund 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 will generally 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 the Fund.
WRITING PUT OPTIONS
The Fund 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.
The Fund would generally write put options in circumstances where the Manager
wishes to purchase the underlying security or currency for the Fund's portfolio
at a price lower than the current market price of the security or currency. In
such event, the Fund 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 Fund 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
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GT GLOBAL LATIN AMERICA GROWTH FUND
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 the Fund will be obligated
to purchase the security or currency at more than its market value.
PURCHASING PUT OPTIONS
The Fund may purchase put options on securities, indicies and currencies. As the
holder of a put option, the Fund 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. The Fund may enter into closing sale
transactions with respect to such options, exercise them or permit them to
expire.
The Fund may purchase a put option on an underlying security or currency
("protective put") owned by the Fund to protect against an anticipated decline
in the value of the security or currency. Such protection is provided only
during the life of the put option when the Fund, 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.
The Fund may also purchase put options at a time when the Fund does not own the
underlying security or currency. By purchasing put options on a security or
currency it does not own, the Fund 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 Fund 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
The Fund may purchase call options or securities, indices and currencies. As the
holder of a call option, the Fund 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. The Fund may enter
into closing sale transactions with respect to such options, exercise them or
permit them to expire.
Call options may be purchased by the Fund for the purpose of acquiring the
underlying security or currency for its portfolio. Utilized in this fashion, the
purchase of call options would enable the Fund 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 the Fund 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 Fund 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.
The Fund also may 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 Fund's current return.
For example, where the Fund 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 the Fund, an increase in the market price could
result in the exercise of the call option written by the Fund and the
realization of a loss on the underlying security or currency. Accordingly, the
Fund could purchase a call option on the same underlying security or currency,
which could be exercised to fulfill the Fund's delivery obligations under its
written call (if it is exercised). This strategy could allow the Fund to avoid
selling the portfolio security or currency at a time when it has an unrealized
loss; however, the Fund 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 the
Fund's total assets at the time of purchase.
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GT GLOBAL LATIN AMERICA GROWTH FUND
The Fund 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 Fund 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. A call option gives the Fund
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. The Fund 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
the Fund 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
the Fund anticipates purchasing securities.
Options may be either listed on an exchange or traded over-the-counter ("OTC").
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. The Fund 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. The Fund may also sell OTC options and,
in connection therewith, segregate assets or cover its obligations with respect
to OTC options written by the Fund. The assets used as cover for OTC options
written by the Fund will be considered illiquid unless the OTC options are sold
to qualified dealers who agree that the Fund 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.
The Fund's ability to establish and close out positions in exchange-listed
options depends on the existence of a liquid market. The Fund 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 the Fund
will enter into OTC options only with contra parties that are expected to be
capable of entering into closing transactions with the Fund, there is no
assurance that the Fund 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 Fund 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 the Fund writes a call or 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 Fund 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 the Fund buys a call on an
index, it pays a premium and has the same rights as to such call as are
indicated above. When the Fund 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 Fund's exercise of the put, to deliver to the Fund 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 Fund writes a put on an index, it receives a
premium and the purchaser has the right, prior to the expiration date, to
require the Fund 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.
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GT GLOBAL LATIN AMERICA GROWTH FUND
The risks of investment in index options may be greater than options on
securities. Because index options are settled in cash, when the Fund writes a
call on an index it cannot provide in advance for its potential settlement
obligations by acquiring and holding the underlying securities. The Fund 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, the Fund 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 the Fund 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 Fund, 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 the Fund 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 Fund 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 AND CURRENCY FUTURES CONTRACTS
The Fund 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 prices in order to establish more definitely
the effective return on securities or currencies held or intended to be acquired
by the Fund. The Fund's transactions 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 and stock prices.
The Fund will only 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 the Fund's exposure to interest rate, currency exchange rate and
stock market fluctuations, the Fund 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. An
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 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 the securities 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 are usually 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 Fund realizes a gain; if it is
more, the Fund realizes a loss. Conversely, if the offsetting sale price is more
than the original purchase price, the Fund realizes a gain; if it is less, the
Fund realizes a loss. The transaction costs
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GT GLOBAL LATIN AMERICA GROWTH FUND
must also be included in these calculations. There can be no assurance, however,
that the Fund will be able to enter into an offsetting transaction with respect
to a particular Futures Contract at a particular time. If the Fund is not able
to enter into an offsetting transaction, the Fund 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 Treasury Bills 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 Treasury Bills 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 Fund.
The Fund'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 the Fund owns, or Futures Contracts will be
purchased to protect the Fund 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 the Fund in order to initiate Futures trading and to maintain the
Fund's open positions in Futures Contracts. A margin deposit made when the
Futures Contract is entered into ("initial margin") is intended to assure the
Fund'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 Fund 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, among other things, by 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 the Fund'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 Contract 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 the Fund 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 Fund would continue to be subject to
market risk with respect to the position. In addition, except in the case of
purchased options, the Fund 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.
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GT GLOBAL LATIN AMERICA GROWTH FUND
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.
If the Fund 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 Fund would continue to be subject to
market risk with respect to the position. In addition, except in the case of
purchased options, the Fund 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 the Fund 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.
The Fund 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 the Fund 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 Fund's portfolio, after taking into
account
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GT GLOBAL LATIN AMERICA GROWTH FUND
unrealized profits and unrealized losses on any contracts the Fund 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 without
a shareholder vote. This limitation does not limit the percentage of the Fund'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. The Fund may either
accept or make delivery of the currency at the maturity of the Forward Contract.
The Fund may also, if its contra party agrees, prior to maturity, enter into a
closing transaction involving the purchase or sale of an offsetting contract.
The Fund engages in forward currency transactions in anticipation of, or to
protect itself against, fluctuations in exchange rates. The Fund might sell a
particular foreign currency forward, for example, when it holds securities
denominated in a foreign currency but anticipates, and seeks to be protected
against, a decline in the currency against the U.S. dollar. Similarly, the Fund
might sell the U.S. dollar forward when it holds securities 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, the Fund 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. The Fund 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 Company's Board of Directors.
The Fund may enter into Forward Contracts either with respect to specific
transactions or with respect to the Fund's portfolio positions. The precise
matching of the Forward Contract amounts and the value of specific securities
will not generally 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 the Fund 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 Fund 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
Fund 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 accurately predicted, causing the
Fund to sustain losses on these contracts and transaction costs.
At or before the maturity of a Forward Contract requiring the Fund to sell a
currency, the Fund may either sell a portfolio 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 Fund will obtain, on the same maturity date, the same
amount of the currency that it is obligated to deliver. Similarly, the Fund 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.
The Fund 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 the Fund 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 the Fund 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, at the same time
they limit any potential gain that might result should the value of the
currencies increase.
FOREIGN CURRENCY STRATEGIES -- SPECIAL CONSIDERATIONS
The Fund 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 Fund's securities
are denominated. Such currency hedges can protect against price movements in a
security that the Fund owns or intends
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GT GLOBAL LATIN AMERICA GROWTH FUND
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.
The Fund 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 Fund 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 Fund 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 Fund 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 the Fund has purchased) expose the Fund to an obligation to another
party. The Fund 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. The Fund will comply
with SEC guidelines regarding cover for these instruments and, if the guidelines
so require, set aside cash or other 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 the Fund's assets are used for cover or otherwise set aside, it could affect
portfolio management or the Fund's ability to meet redemption requests or other
current obligations.
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RISK FACTORS
- --------------------------------------------------------------------------------
POLITICAL, SOCIAL AND ECONOMIC RISKS. Investing in securities of Latin
American 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, the Fund could lose its
entire investment in any such country.
In addition, even though opportunities for investment may exist in Latin
American countries, any change in the leadership or policies of the governments
of those countries or in the leadership or policies of any other government
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GT GLOBAL LATIN AMERICA GROWTH FUND
which exercises a significant influence over those countries, may halt the
expansion of or reverse the liberalization of foreign investment policies now
occurring and thereby eliminate any investment opportunities which may currently
exist.
Investors should note that upon the accession to power of authoritarian regimes,
the governments of a number of Latin American countries previously expropriated
large quantities of real and personal property, similar to the property which
will be represented by the securities purchased by the Fund. The claims of
property owners against those governments were never finally settled. There can
be no assurance that any property represented by securities purchased by the
Fund will not also be expropriated, nationalized, or otherwise confiscated. If
such confiscation were to occur, the Fund could lose a substantial portion of
its investments in such countries. The Fund's investments would similarly be
adversely affected by exchange control regulations in any of those countries.
RELIGIOUS AND ETHNIC INSTABILITY. Certain countries in which the Fund 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 the Fund'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
the Fund invests and adversely affect the value of the Fund's assets.
ILLIQUID SECURITIES. The Fund may invest up to 10% of its net assets in
illiquid securities. Securities may be considered illiquid if the Fund cannot
reasonably expect within seven days to sell the securities for approximately the
amount at which the Fund values such securities. See "Investment Limitations."
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 the over-the-
counter 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 Staes, will not be considered illiquid. Where
registration is required, the Fund 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 Fund may be permitted to sell a security
under an effective registration statement. If, during such a period, adverse
market conditions were to develop, the Fund might obtain a less favorable price
than prevailed when it decided to sell.
Not all restricted securities are illiquid. Iin 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
a Theme Portfolio, however, could affect adversely the marketability of such
portfolio securities and the Theme Portfolio might be unable to dispose of such
securities promptly or at favorable prices.
With respect to liquidity determinations generally, the Company's Board of
Directors has the ultimate responsibility for determining whether specific
securities, including restricted securities pursuant to Rule 144A under the 1933
Act, are liquid or illiquid. The Board has delegated the function of making
day-to-day determinations of liquidity to the Manager in accordance with
procedures approved by the Company's Board of Directors. The Manager takes into
account a number
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GT GLOBAL LATIN AMERICA GROWTH FUND
of factors in reaching liquidity decisions, including, but not limited to: (i)
the frequency of trading in the security; (ii) the number of dealers who 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 in the Fund's
portfolio and periodically reports such determinations to the Board of
Directors. Moreover, as noted in the Prospectus, certain securities, such as
those subject to repatriation restrictions of more than seven days, will
generally be treated as illiquid.
More than 10% of the Fund's total assets may consist of illiquid securities from
time to time either because of adverse events which occur following the purchase
of the securities which cause them to become illiquid or because liquid
securities are sold to meet redemption requests or other needs of the Fund.
Illiquid securities are more difficult to value accurately due to, among other
things, the fact that such securities often trade infrequently or only in
smaller amounts.
On December 31, 1995 the market capitalizations of listed equity securities on
the major exchanges in Argentina, Brazil, Chile and Mexico were US$26.0 billion,
$77.0 billion, $36.9 billion and $59.3 billion, respectively. By comparison, at
December 31, 1995 the market capitalization of the NYSE alone was US$6.0
trillion. A high proportion of the shares of many Latin American companies may
be held by a limited number of persons, which may further limit the number of
shares available for investment by the Fund. A limited number of issuers in
most, if not all, Latin American securities markets may represent a
disproportionately large percentage of market capitalization and trading value.
The limited liquidity of Latin American securities markets also may affect the
Fund's ability to acquire or dispose of securities at the price and time it
wishes to do so. In addition, certain Latin American securities markets,
including those of Argentina, Brazil, Chile and Mexico, are susceptible to being
influenced by large investors trading significant blocks of securities or by
large dispositions of securities resulting from the failure to meet margin calls
when due.
The high volatility of certain Latin American securities markets is evidenced by
dramatic movements in the Brazilian and Mexican markets in recent years. The
stock markets in Brazil declined sharply in mid 1989, and closed briefly,
following a large settlement failure. Another significant decline occurred in
the first quarter of 1990. In 1987, the Mexican stock exchange experienced a
severe correction, its index declining over 70 percent. This market volatility
may result in greater volatility in the Fund's net asset value than would be the
case for companies investing in domestic securities. If the Fund were to
experience unexpected net redemptions, it could be forced to sell securities in
its portfolio without regard to investment merit, thereby decreasing the asset
base over which Fund expenses can be spread and possibly reducing the Fund's
rate of return.
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 the Fund. These restrictions
or controls may at times limit or preclude investment in certain securities and
may increase the cost and expenses of the Fund. For example, certain countries
require prior governmental approval before investments by foreign persons may be
made, or 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. The Fund
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.
Recent relevant foreign investment restrictions in each of the four principal
economies of Latin America, which are susceptible to significant and immediate
changes, can be summarized in part as follows:
ARGENTINA. Previous restrictions on foreign investment have been abolished
and prior approval of such investment is no longer required (except where
required in specific statutes governing certain activities), ensuring equal
treatment of national and foreign capital applied to economic activities. At
present foreign capital can move freely in and out of Argentina and no foreign
exchange restrictions are applied to dividend or capital gains remittance.
BRAZIL. Under regulations adopted by the government of Brazil, the Fund is
able to purchase Brazilian securities without regard to any diversification or
repatriation restrictions. However, the regulations require that the Fund's
investments be limited to securities issued by publicly-held corporations
acquired on the Brazilian stock exchanges or on over-the-counter markets
organized by the Commission de Valores Mobiliarios (CVM) or units of certain
Financial Investment Funds. The Fund's authority to invest in Brazil pursuant to
this regulation remains subject to approval by the
Statement of Additional Information Page 15
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GT GLOBAL LATIN AMERICA GROWTH FUND
CVM. In addition, the Fund is required to appoint a Brazilian administrator to
perform certain functions with respect to its holdings of Brazilian securities.
CHILE. Direct investment by foreign investors in Chile is subject to certain
Chilean investment restrictions, including a requirement that invested capital
must remain in Chile for a minimum of at least one year. The remittance of
dividends and capital gains can be effected without material restrictions on
timing and amount. Indirect investments, however, may be made through already
established investment funds and such investments will not be subject to the
restriction regarding residency of capital, although they will be subject to the
limitations, described above, regarding investments by the Fund in the
securities of other investment companies. In addition to investing indirectly in
the Chilean market, the Fund may establish its own foreign investment fund in
Chile for which a Chilean administrator will be required. The Fund may also gain
access to investment in Chile via the 18 American Depositary Receipts ("ADRs")
currently traded in the U.S. on the New York Stock Exchange. The Manager
believes these events significantly broadened the Fund's ability to gain access
to the Chilean market.
MEXICO. Generally, foreigners may directly acquire shares of Mexican
companies up to a limit of 49 percent of the share capital of the issuer without
prior approval. Foreigners may acquire shares in the share capital of certain
Mexican listed companies usually reserved to Mexican nationals, and may acquire
in excess of the 49 percent limit referred to above, through trust arrangements
with Nacional Financiera, S.N.C. ("Nafin"), the Mexican government development
finance bank. Under this arrangement Nafin will acquire the securities that the
Fund purchases and then issue Ordinary Certificates of Participation ("CEPOS").
As a holder of the CEPOS, the Fund would have all rights of the shares acquired,
but it would not have voting rights. There are no restrictions on the movement
of capital in and out of Mexico. Dividends and capital gains can also be freely
remitted, subject to any withholding tax.
VENEZUELA. In order to stabilize the country's financial system, the
government suspended foreign exchange trading on July 6, 1994. The market was
"officially" opened July 11, however, the Bolivar did not begin trading until
January 10, 1995 at a level of 212 and 220 (the level held since December 1994).
The Venezuelan Exchange Administration Board issued Resolution No. 41 regarding
foreign investment registration and repatriation for capital dividends and
interest. The Resolution provides that all investment should be registered with
the Superintendency of Foreign Investment (SEIX) and the Technical
Administration Exchange Office (OTAC). Article 2 of the Resolution states that
"investments" is defined as those transactions executed through the local stock
exchange (this prohibits OTC transaction proceeds from being eligible for
repatriation).
Resolution No. 41 also required refiling by funds previously approved. The Fund
has complied with the regulations and has obtained approval by the Regulatory
Commission. This avoids jeopardizing the assets held by the Fund.
In November 1994 the government passed a Resolution allowing foreign investors
to repatriate without restrictions under the new controlled exchange system. It
is now possible to repatriate any capital or income provided that the OTAC has
proof that the investor has obtained a tax identification code and complied with
all tax return filing requirements.
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 the Fund 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 the Fund 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. In addition, for companies that keep accounting records
in local currency, inflation accounting rules in some Latin American countries
require, for both tax and accounting purposes, that certain assets and
liabilities be restated on the company's balance sheet in order to express items
in terms of currency of constant purchasing power. Inflation accounting may
indirectly generate losses or profits. Consequently, data concerning Latin
American securities shown elsewhere in this Statement of Additional Information
may be materially affected by restatements for inflation and may not accurately
reflect the real conditions of companies and securities markets. There is
substantially less publicly available information about foreign
Statement of Additional Information Page 16
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
companies, including Latin American companies, and the governments of Latin
American countries 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 the Fund 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 the
Fund'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 the
Fund's holdings of securities and cash denominated in such currency and,
therefore, will cause an overall decline in the 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 Fund. Moreover, if the value
of the foreign currencies in which the Fund receives its income falls relative
to the U.S. dollar between receipt of the income and the making of Fund
distributions, the Fund may be required to liquidate securities in order to make
distributions if the Fund 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 the Fund values its assets daily in terms of U.S. dollars, the Fund
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. The Fund 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 (the "spread") between the prices at which they are buying and
selling various currencies. Thus, a dealer may offer to sell a foreign currency
to the Fund at one rate, while offering a lesser rate of exchange should the
Fund 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 are generally
subject to less governmental supervision and regulation than in the United
States, and foreign securities transactions are usually subject to fixed
commissions, which are generally 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 the Fund are
uninvested and no return is earned thereon. The inability of the Fund to make
intended security purchases due to settlement problems could cause the Fund to
miss attractive investment opportunities. Inability to dispose of a portfolio
security due to settlement problems either could result in losses to the Fund
due to subsequent declines in value of the portfolio security or, if the Fund
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 the Fund's assets, although the Manager does not
believe that such difficulties will have a material adverse effect on the Fund's
portfolio trading activities.
SPECIAL CONSIDERATIONS AFFECTING EMERGING MARKETS. Emerging securities
markets, such as the markets of Latin America, 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 volume 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 markets
there may be share registration and delivery delays or failures.
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 and corresponding currency devaluations have had
and may continue to have negative effects on the economies and securities
markets of certain Latin American countries.
It should be noted that some Latin American countries require governmental
approval for the repatriation of investment income, capital, or the proceeds of
securities sales by foreign investors. For instance, at present, capital
invested directly in
Statement of Additional Information Page 17
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
Chile cannot under most circumstances be repatriated for at least one year. The
Fund 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.
SOVEREIGN DEBT. Sovereign Debt generally offers high yields, reflecting not
only perceived credit risk, but also the need to compete with other local
investments in domestic financial markets. Certain Latin American countries are
among the largest debtors to commercial banks and foreign governments. A
sovereign debtor's willingness or ability to repay principal and interest due in
a timely manner may be affected by, among other factors, its cash flow
situation, the extent of its foreign reserves, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of the debt
service burden to the economy as a whole, the sovereign debtor's policy towards
the International Monetary Fund and the political constraints to which a
sovereign debtor may be subject. Sovereign debtors may default on their
Sovereign Debt. Sovereign debtors may also be dependent on expected
disbursements from foreign governments, multilateral agencies and others abroad
to reduce principal and interest arrearages on their debt. The commitment on the
part of these governments, agencies and others to make such disbursements may be
conditioned on a sovereign debtor's implementation of economic reforms and/or
economic performance and the timely service of such debtor's obligations.
Failure to implement such reforms, achieve such levels of economic performance
or repay principal or interest when due, may result in the cancellation of such
third parties' commitments to lend funds to the sovereign debtor, which may
further impair such debtor's ability or willingness to timely service its debts.
In recent years, some of the Latin American countries in which the Fund expects
to invest have encountered difficulties in servicing their Sovereign Debt. Some
of these countries have withheld payments of interest and/or principal of
Sovereign Debt. These difficulties have also led to agreements to restructure
external debt obligations -- in particular, commercial bank loans, typically by
rescheduling principal payments, reducing interest rates and extending new
credits to finance interest payments on existing debt. In the future, holders of
Sovereign Debt may be requested to participate in similar reschedulings of such
debt.
The ability of Latin American governments to make timely payments on their
Sovereign Debt is likely to be influenced strongly by a country's balance of
trade and its access to trade and other international credits. A country whose
exports are concentrated in a few commodities could be vulnerable to a decline
in the international prices of one or more of such commodities. Increased
protectionism on the part of a country's trading partners could also adversely
affect its exports. Such events could diminish a country's trade account
surplus, if any. To the extent that a country receives payment for its exports
in currencies other than hard currencies, its ability to make hard currency
payments could be affected.
The occurrence of political, social or diplomatic changes in one or more of the
countries issuing Sovereign Debt could adversely affect the Fund's investments.
The countries issuing such instruments are faced with social and political
issues and some of them have experienced high rates of inflation in recent years
and have extensive internal debt. Among other effects, high inflation and
internal debt service requirements may adversely affect the cost and
availability of future domestic sovereign borrowing to finance governmental
programs, and may have other adverse social, political and economic
consequences. Political changes or a deterioration of a country's domestic
economy or balance of trade may affect the willingness of countries to service
their Sovereign Debt. While the Manager intends to manage the Fund's portfolio
in a manner that will minimize the exposure to such risks, there can be no
assurance that adverse political changes will not cause the Fund to suffer a
loss of interest or principal on any of its holdings.
Periods of economic uncertainty may result in the volatility of market prices of
Sovereign Debt and in turn, the Fund's net asset value, to a greater extent than
the volatility inherent in domestic securities. The value of Sovereign Debt will
likely vary inversely with changes in prevailing interest rates, which are
subject to considerable variance in the international market. If the Fund were
to experience unexpected net redemptions, it may be forced to sell Sovereign
Debt in its portfolio without regard to investment merit, thereby decreasing its
asset base over which Fund expenses can be spread and possibly reducing its rate
of return.
WITHHOLDING TAXES. The Fund's net investment income from foreign issuers may
be subject to withholding taxes by the foreign country issuers, thereby reducing
the Fund's net investment income or delaying the receipt of income where those
taxes may be recaptured. See "Taxes."
SPECIAL CONSIDERATIONS AFFECTING EMERGING MARKETS. Emerging securities
markets, such as the markets of Latin America, 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 volume 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
Statement of Additional Information Page 18
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
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 markets
there may be share registration and delivery delays or failures.
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 and corresponding currency devaluations have had
and may continue to have negative effects on the economies and securities
markets of certain Latin American countries.
- --------------------------------------------------------------------------------
INVESTMENT LIMITATIONS
- --------------------------------------------------------------------------------
The Fund has adopted the following investment limitations as fundamental
policies which (unless otherwise noted) may not be changed without approval by
the holders 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, and
(ii) more than 50% of the outstanding shares.
The Fund may not:
(1) Invest 25% or more of the value of its total assets in the
securities of issuers conducting their principal business activities in the
same industry, except that this limitation shall not apply to securities
issued or guaranteed as to principal and interest by the U.S. Government or
any of its agencies or instrumentalities;
(2) Buy or sell real estate (including real estate limited partnerships)
or commodities or commodity contracts; however, the 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, and may purchase or sell currencies (including
forward currency exchange contracts), futures contracts and related options
generally as described in the Prospectus and Statement of Additional
Information;
(3) Engage in the business of underwriting securities of other issuers,
except to the extent that the disposal of an investment position may
technically cause it to be considered an underwriter as that term is defined
under the Securities Act of 1933;
(4) Make loans, except that the 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 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 for temporary or emergency purposes
not in excess of 33 1/3% of the value of the Fund's total assets (at the
lower of cost or fair market value). The Fund will not purchase securities
while borrowings (including reverse repurchase agreements) in excess of 5%
of its total assets are outstanding. This restriction shall not prevent the
Fund from entering into reverse repurchase agreements, provided that reverse
repurchase agreements, and any other transactions constituting borrowing by
the Fund may not exceed one-third of the Fund's total assets. In the event
that the asset coverage for the Fund's borrowings falls below 300%, the Fund
will reduce, within three days (excluding Sundays and holidays), the amount
of its borrowings in order to provide for 300% asset coverage;
(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;
(8) Invest in direct interests or leases in oil, gas, or other mineral
exploration or development programs; however, the Fund may invest in the
securities of companies that engage in these activities.
Statement of Additional Information Page 19
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GT GLOBAL LATIN AMERICA GROWTH FUND
For purposes of the Fund's concentration policy contained in limitation (1),
above, the Fund intends to comply with the SEC staff position that securities
issued or guaranteed as to principal and interest by any single foreign
government are considered to be securities of issuers in the same industry.
The following operating policies of the Fund are not fundamental policies of the
Fund and may be changed by vote of a majority of the Company's Board of
Directors without shareholder approval. The Fund may not:
(1) Invest in securities of an issuer if the investment would cause the
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 10% 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 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;
or
(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 Fund's portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the Fund
has entered into.
The Fund has the authority to invest up to 10% of its total assets in shares of
other investment companies pursuant to the 1940 Act. The 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 Prospectus for further information with respect to
the Fund's investment objective, which may not be changed without the approval
of the shareholders, and other investment policies, techniques and limitations,
which may be changed without shareholder approval.
- --------------------------------------------------------------------------------
EXECUTION OF PORTFOLIO
TRANSACTIONS
- --------------------------------------------------------------------------------
Subject to policies established by the Company's Board of Directors, the Manager
is responsible for the execution of the Fund's portfolio transactions and the
selection of broker/dealers who execute such transactions on behalf of the Fund.
In executing portfolio transactions, the Manager seeks the best net results for
the Fund, 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. While 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 the Fund may engage in soft dollar arrangements for research
services, as described below, the Fund 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 the Fund, the Manager may select brokers to
execute the Fund's portfolio transactions on the basis of the research and
brokerage services they provide to the Manager for its use in managing the Fund
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 brokers are in addition to, and not in lieu of, the
services required to be performed by the Manager under the Management Contract
(defined below). A commission paid to such broker/dealers may be higher than
that which another qualified broker would have charged for effecting the same
transaction, provided that the
Statement of Additional Information Page 20
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
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 the Fund and its other clients and that the total commissions paid by
the Fund will be reasonable in relation to the benefits received by the Fund
over the long term. Research services may also be received from dealers who
execute Fund transactions.
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 the Fund toward payment of the Fund's expenses, such as
transfer agent and custodian fees.
Investment decisions for the Fund 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 may occasionally be made for
two or more of such accounts including the Fund. 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 the Fund is concerned, in other cases the Manager
believes that coordination and the ability to participate in volume transactions
will be beneficial to the Fund.
Under a policy adopted by the Company's Board of Directors, 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 Fund and the other funds for which the
Manager serves as investment manager in selecting brokers and 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 Fund and such other funds.
The Fund 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
United States 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 the Fund 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 over-the-
counter 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 the Fund may invest are generally traded in the
over-the-counter markets.
The Fund 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 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. For the Fund's fiscal years ended October 31, 1996,
1995 and 1994, the Fund paid aggregate brokerage commissions of $
- -------, $891,513 and $708,799, respectively.
PORTFOLIO TURNOVER AND TRADING
The portfolio turnover rate is calculated by dividing the lesser of sales or
purchases of portfolio securities by the Fund's average month-end portfolio
value, excluding short-term investments. For purposes of this calculation,
portfolio securities exclude purchases and sales of debt securities having a
maturity at the date of purchase of one year or less. The Fund engages in
portfolio trading when the Manager has concluded that the sale of a security
owned by the Fund and/or the purchase of another security of better value can
enhance principal and/or increase income. A security may be sold to avoid any
prospective decline in market value, or a security may be purchased in
anticipation of a market rise. Consistent with the Fund's investment objective,
a security also may be sold and a comparable security purchased coincidentally
in order to take advantage of what is believed to be a disparity in the normal
yield and price relationship between the two securities. Although the Fund does
not intend generally to trade for short-term profits, the securities in the
Fund's portfolio will be sold whenever management believes it is appropriate to
do so, without regard to the length of time a particular security may have been
held. The Fund's portfolio turnover rate will not be a limiting factor when the
Manager deems portfolio changes appropriate. Higher portfolio turnover involves
correspondingly greater brokerage commissions and other transaction costs that
the Fund will bear directly, and may result in the realization of net capital
gains that are taxable when distributed to each Fund's shareholders. The Fund's
portfolio turnover rates for the fiscal years ended October 31, 1996 and 1995
were
- ----% and 125%, respectively.
Statement of Additional Information Page 21
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
DIRECTORS AND EXECUTIVE
OFFICERS
- --------------------------------------------------------------------------------
The Company's Directors and Executive Officers are listed below.
<TABLE>
<CAPTION>
NAME, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- --------------------------------------- ------------------------------------------------------------------------------------------
<S> <C>
David A. Minella*, 43 Chairman, the Manager since October 1996; Director, Liechtenstein Global Trust (holding
Director, Chairman of the Board and company of the various international LGT companies) since 1990; President, Asset
President Management Division, Liechtenstein Global Trust since 1995; Director and President, LGT
50 California, Street Asset Management, Inc. ("LGT Asset Management"), formerly LGT Asset Management Holdings,
San Francisco CA 94111 Inc. since 1988; Director and President, the Manager from 1989 to October 1996; Director,
GT Global since 1987 and President, GT Global from 1987 to 1995; Director, GT Services
since 1990; President, GT Services from 1990 to 1995; Director, G.T. Global Insurance
Agency, Inc. ("G.T. Insurance") since 1992; and President, G.T. Insurance from 1992 to
1995. Mr. Minella also is a director or trustee of each of the other investment companies
registered under the 1940 Act that is managed or administered by the Manager.
C. Derek Anderson, 54 Chief Executive Officer, Anderson Capital Management, Inc.; Chairman and Chief Executive
Director Officer, Plantagenet Holdings, Ltd. from 1991 to present; Director, Munsingwear, Inc.; and
220 Sansome Street Director, American Heritage Group Inc. and various other companies. Mr. Anderson also is a
Suite 400 director or trustee of each of the other investment companies registered under the 1940
San Francisco, CA 94104 Act that is managed or administered by the Manager.
Frank S. Bayley, 55 Partner with Baker & McKenzie (a law firm); Director and Chairman, C.D. Stimson Company (a
Director private investment company); and Trustee, Seattle Art Museum. Mr. Bayley also is a
Two Embarcadero Center director or trustee or each of the other investment companies registered under the 1940
Suite 2400 Act that is managed or administered by the Manager.
San Francisco, CA 94111
Arthur C. Patterson, 52 Managing Partner, Accel Partners (a venture capital firm). He also serves as a director of
Director various computing and software companies. Mr. Patterson also is a director or trustee of
One Embarcadero Center each of the other investment companies registered under the 1940 Act that is managed or
Suite 3820 administered by the Manager.
San Francisco, CA 94111
Ruth H. Quigley, 59 Private investor; and President, Quigley Friedlander & Co., Inc. (a financial advisory
Director services firm) from 1984 to 1986. Ms. Quigley also is a director or trustee or each of the
1055 California Street other investment companies registered under the 1940 Act that is managed or administered
San Francisco, CA 94108 by the Manager.
James R. Tufts, 37 Chief Information Officer for the Manager since October 1996; President, GT Services since
Vice President and Chief 1995; Senior Vice President of Finance and Administration, GT Global, GT Services and G.T.
Financial Officer Insurance, from 1994 to 1995; Senior Vice President of Finance and Administration, LGT
50 California Street Asset Management and the Manager from 1994 to October 1996; Vice President of Finance, LGT
San Francisco, CA 94111 Asset Management, the Manager, GT Global and GT Services from 1990 to 1994; Vice President
of Finance, G.T. Insurance from 1992 to 1994; and a Director of the Manager, GT Global and
GT Services since 1991.
</TABLE>
- --------------
* Mr. Minella is an "interested person" of the Company as defined by the 1940
Act due to his affiliation with the LGT companies.
Statement of Additional Information Page 22
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
<TABLE>
<CAPTION>
NAME, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- -------------------------------- ------------------------------------------------------------------------
Kenneth W. Chancey, 50 Vice President of Mutual Fund Accounting, the Manager since 1992; and Vice President,
Vice President and Putnam Fiduciary Trust Company from 1989 to 1992.
Principal Accounting Officer
50 California Street
San Francisco, CA 94111
<S> <C> <C>
Helge K. Lee, 49 Executive Vice President, Asset Management Division, Liechtenstein
Vice President and Secretary Global Trust since October 1996; Senior Vice President, LGT Asset
50 California Street Management, the Manager, GT Global, GT Services and G.T. Insurance from
San Francisco, CA 94111 February 1996 to October 1996; Vice President, LGT Asset Management, the
Manager, GT Global, GT Services and G.T. Insurance from May 1994 to
February 1996; General Counsel, LGT Asset Management, the Manager, GT
Global, GT Services and G.T. Insurance from May 1994 to October 1996;
Secretary, the Manager, since May 1994; Secretary, LGT Asset Management,
GT Global, GT Services and G.T. Insurance from May 1994 to October 1996;
Senior Vice President, General Counsel and Secretary, Strong/Corneliuson
Management, Inc.; and Secretary, each of the Strong Funds from October
1991 to May 1994.
</TABLE>
------------------------------
The Board of Directors has a Nominating and Audit Committee, comprised of Miss
Quigley and Messrs. Anderson, Bayley and Patterson, which is responsible for
nominating persons to serve as Directors, reviewing audits of the Company and
its funds and recommending firms to serve as independent auditors for the
Company. Each of the Directors and officers of the Company is also a Director
and officer of G.T. Investment Portfolios, Inc., G.T. Global Developing Markets
Fund, Inc. and GT Global Floating Rate Fund, Inc., a Trustee and officer of G.T.
Global Growth Series and a Trustee of G.T. Greater Europe Fund, G.T. Global
Variable Investment Trust, G.T. Global Variable Investment Series, Global High
Income Portfolio, Global Investment Portfolio and Growth Portfolio, which are
also registered investment companies managed by the Manager. Each Director and
Officer serves in total as a Director and or Trustee and Officer, respectively,
of
- -- registered investment companies with
- -- series managed or administered by the Manager. The Company pays each
Director, who is not a director, officer or employee of the Manager or any
affiliated company, $5,000 per annum, plus $300 per Fund for each meeting of the
Board attended, and reimburses travel and other expenses incurred in connection
with attendance at such meetings. Other Directors and officers receive no
compensation or expense reimbursement from the Company. For the fiscal year
ended October 31, 1996, Mr. Anderson, Mr. Bayley, Mr. Patterson and Ms. Quigley,
who are not directors, officers or employees of the Manager or any affiliated
company, received total compensation of $
- --------, $
- --------, $
- -------- and $
- --------, respectively, from the Company for their services as Directors. For
the year ended October 31, 1996, Mr. Anderson, Mr. Bayley, Mr. Patterson and Ms.
Quigley each received total compensation of $
- --------, $
- --------, $
- -------- and $
- --------, respectively, from the
- -- GT Global Mutual Funds for which he or she serves as a Director or Trustee.
Fees and expenses disbursed to the Directors contained no accrued or payable
pension or retirement benefits. As of the date of this Statement of Additional
Information, the officers and Directors and their families as a group owned in
the aggregate beneficially or of record less than 1% of the outstanding shares
of the Fund or of all the Company's funds in the aggregate.
Statement of Additional Information Page 23
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT AND ADMINISTRATION
Chancellor LGT Asset Management, Inc. (the "Manager") serves as the Fund's
investment manager and administrator under an Investment Management and
Administration Contract ("Management Contract") between the Company and the
Manager. As investment manager and administrator, the Manager makes all
investment decisions for the Fund and administers the Fund's affairs. Among
other things, the Manager furnishes the services and pays the compensation and
travel expenses of persons who perform the executive, administrative, clerical
and bookkeeping functions of the Company and the Fund, and provides suitable
office space, necessary small office equipment and utilities.
The Management Contract may be renewed for one-year terms, provided that any
such renewal has been specifically approved at least annually by: (i) the
Company's Board of Directors, or by the vote of a majority of the Fund's
outstanding voting securities (as defined in the 1940 Act), and (ii) a majority
of Directors who are not parties to the Management Contract or "interested
persons" of any such party (as defined in the 1940 Act), cast in person at a
meeting called for the specific purpose of voting on such approval. The
Management Contract provides that with respect to the Fund either the Company or
the Manager may terminate the Contract without penalty upon sixty (60) days'
written notice. The Management Contract terminates automatically in the event of
its assignment (as defined in the 1940 Act).
The Manager and GT Global have undertaken to limit the Fund's Advisor Class
share expenses to 1.90% of average daily net assets of the Advisor Class shares,
and the Manager has agreed to reimburse the Fund if the Fund's annual ordinary
expenses exceed 1.90% of average daily net assets of Fund's Advisor Class shares
(exclusive of brokerage commissions, interest, taxes, certain expenses
attributable to investing outside the U.S. and extraordinary expenses).
For the fiscal year ended October 31, 1996, the Fund paid management and
administration fees in the amount of $
- -------- to the Manager. For the fiscal year ended October 31, 1995, the Fund
paid management and administration fees in the amount of $3,913,429 to the
Manager. For the fiscal year ended October 31, 1994, the Fund paid management
and administration fees in the amount of $3,601,301.
Certain Latin American countries require a local entity to provide
administrative services for all direct investments by foreigners. Where required
by local law, the Fund intends to retain a local entity to provide such
administrative services. The local administrator will be paid a fee by the Fund
for its services.
DISTRIBUTION SERVICES
The Fund's Advisor Class shares are continuously offered through the Fund's
principal underwriter and distributor, GT Global, on a "best efforts" basis
without a sales charge or a contingent deferred sales charge.
TRANSFER AGENCY AND ACCOUNTING AGENT SERVICES
GT Global Investor Services, Inc. ("Transfer Agent") has been retained by the
Fund to perform shareholder servicing, reporting and general transfer agent
functions for the Fund. 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, stationary and office supplies.
The Manager serves as the Fund's pricing and accounting agent. The monthly fee
for these services to the Manager is a percentage, not to exceed 0.03% annually,
of the Fund's average daily net assets. The annual fee rate is derived by
applying 0.03% to the first $5 billion of assets of all registered mutual funds
advised by the Manager ("GT Global Mutual Funds") and 0.02% to the assets in
excess of $5 billion and allocating the result according to each Fund's average
daily net assets. As of October 31, 1996, the Fund paid the Manager fees of $
- ------ for such accounting services.
EXPENSES OF THE FUND
The Fund pays all expenses not assumed by the Manager, GT Global and other
agents. These expenses include, in addition to the advisory and brokerage fees
discussed above, legal and audit expenses, custodian and transfer agency and
pricing and accounting fees, directors' fees, organizational fees, fidelity bond
and other insurance premiums, taxes, extraordinary expenses and the expenses of
reports and prospectuses sent to existing investors. The allocation of general
Statement of Additional Information Page 24
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
Company expenses and expenses shared by the Fund and other funds organized as
series of the Company with one another are allocated on a basis deemed fair and
equitable, which may be based on the relative net assets of the Fund or the
nature of the services performed and relative applicability to the Fund.
Expenditures, including costs incurred in connection with the purchase or sale
of portfolio securities, which are capitalized in accordance with generally
accepted accounting principles applicable to investment companies, are accounted
for as capital items and not as expenses. The ratio of the Fund's expenses to
its relative net assets can be expected to be higher than the expense ratios of
funds investing solely in domestic securities, since the cost of maintaining the
custody of foreign securities and the rate of investment management fees paid by
the Fund generally are higher than the comparable expenses of such other funds.
- --------------------------------------------------------------------------------
VALUATION OF FUND SHARES
- --------------------------------------------------------------------------------
The Fund's portfolio securities and other assets are valued as follows:
Equity securities, including ADRs, ADSs, CDRs and EDRs, which are traded on
stock exchanges are valued at the last sale price on the exchange on which such
securities are traded, as of the close of business on the day the securities are
being valued or, lacking any sales, at the last available bid price. In cases
where securities are traded on more than one exchange, the securities are valued
on the exchange determined by the Manager to be the primary market. Securities
traded in the over-the-counter market are valued at the last available bid price
prior to the time of valuation. Securities and assets for which market
quotations are not readily available (including restricted securities which are
subject to limitations as to their sale) are valued at fair value as determined
in good faith by or under the direction of the Board of Directors.
Long-term debt obligations are valued at the mean of representative quoted bid
and asked prices for such securities or, if such prices are not available, at
prices for securities of comparable maturity, quality and type; however, when
the Manager deems it appropriate, prices obtained for the day of valuation from
a bond pricing service will be used. Short-term debt investments are amortized
to maturity based on their cost, adjusted for foreign exchange translation,
provided such valuations represent fair value.
Options on indices, securities and currencies purchased by the Fund are valued
at their last bid price in the case of listed options or, in the case of OTC
options, at the 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. The value of each security denominated in a currency other
than U.S. dollars will be translated into U.S. dollars at the prevailing
exchange rate as determined by the Manager on that day. When market quotations
for futures and options on futures held by the Fund are readily available, those
positions will be valued based upon such quotations.
Securities and other assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or under the
direction of the Company's Board of Directors. The valuation procedures applied
in any specific instance are likely to vary from case to case. However,
consideration is generally given to the financial position of the issuer and
other fundamental analytical data relating to the investment and to the nature
of the restrictions on disposition of the securities (including any registration
expenses that might be borne by the Fund in connection with such disposition).
In addition, specific factors are also generally considered, such as the cost of
the investment, the market value of any unrestricted securities of the same
class (both at the time of purchase and at the time of valuation), the size of
the holding, the prices of any recent transactions or offers with respect to
such securities and any available analysts' reports regarding the issuer.
The fair value of any other assets is added to the value of all securities
positions to arrive at the value of the Fund's total assets. The Fund's
liabilities, including accruals for expenses, are deducted from its total
assets. Once the total value of the Fund's net assets is so determined, that
value is then divided by the total number of shares outstanding (excluding
treasury shares), and the result, rounded to the nearer cent, is the net asset
value per share.
Any assets or liabilities initially denominated in terms of foreign currencies
are translated into U.S. dollars at the official exchange rate or at the mean of
the current bid and asked prices of such currencies against the U.S. dollar last
quoted by a major bank that is a regular participant in the foreign exchange
market or on the basis of a pricing service that takes into account the quotes
provided by a number of such major banks. If none of these alternatives are
available or none are
Statement of Additional Information Page 25
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
deemed to provide a suitable methodology for converting a foreign currency into
U.S. dollars, the Board of Directors in good faith will establish a conversion
rate for such currency.
Latin American securities trading may not take place on all days on which the
NYSE is open. Further, trading takes place in various foreign markets on days on
which the NYSE is not open. Consequently, the calculation of the Fund's net
asset value may not take place contemporaneously with the determination of the
prices of securities held by the Fund. Events affecting the values of portfolio
securities that occur between the time their prices are determined and the close
of regular trading on the NYSE will not be reflected in the Fund's net asset
value unless the Manager, under the supervision of the Company's Board of
Directors, determines that the particular event would materially affect net
asset value. As a result, the Fund's net asset value may be significantly
affected by such trading on days when a shareholder cannot purchase or redeem
shares of the Fund.
- --------------------------------------------------------------------------------
INFORMATION RELATING TO SALES AND
REDEMPTIONS
- --------------------------------------------------------------------------------
PAYMENT AND TERMS OF OFFERING
Payment for Advisor Class shares 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 cancelled due to nonpayment (for example, because a check is returned for
"not sufficient funds"), the person who made the order will be responsible for
any loss incurred by the 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 cancelled 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 BETWEEN FUNDS
A shareholder may exchange shares of the Fund for shares of other GT Global
Mutual Funds, based on their respective net asset values without imposition of
any sales charges provided the registration remains identical. 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 60 days' written
notice to the shareholders of such fund and is available only in states where
the exchange may be legally made. Advisor Class shares may be exchanged only for
Advisor Class shares of other GT Global Mutual Funds. 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 objectives 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,
will be 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
Statement of Additional Information Page 26
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
Agent reserve the right to refuse any telephone instructions and may discontinue
the aforementioned redemption options upon 30 days' written notice.
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 determined by the SEC, (2) when an
emergency exists, as defined by the SEC, which makes it not reasonably
practicable for the Fund to dispose of securities owned by it or fairly to
determine 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 Company's Board of Directors, 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
marketed 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 Company 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 value of the net assets 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.
Statement of Additional Information Page 27
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
TAXES
- --------------------------------------------------------------------------------
GENERAL
In order to continue to qualify for treatment as a regulated investment company
("RIC") under the Internal Revenue Code of 1986, as amended ("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, net short-term capital gain and net gains from certain foreign currency
transactions) ("Distribution Requirement") and must meet several additional
requirements. These requirements include the following: (1) the Fund must derive
at least 90% of its gross income each taxable year from dividends, interest,
payments with respect to securities loans and gains from the sale or other
disposition of securities or foreign currencies, or other income (including
gains from options, Futures or Forward Contracts) derived with respect to its
business of investing in securities or those currencies ("Income Requirement");
(2) 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 -- options or Futures (other than those on
foreign currencies), or foreign currencies (or options, Futures or Forward
Contracts thereon) that are not directly related to the Fund's principal
business of investing in securities (or options and Futures with respect to
securities) ("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.
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 from U.S.
corporations. However, dividends received by a corporate shareholder and
deducted by it pursuant to the dividends-received deduction are subject
indirectly to the alternative minimum tax.
If 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.
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.
FOREIGN TAXES
Dividends and interest received by the Fund may be subject to income,
withholding, or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors. If more than 50% of the value of
the Fund's total assets at the close of its taxable year consists of securities
of foreign corporations, the Fund will be eligible to, and may, file an election
with the Internal Revenue Service that will enable its shareholders, in effect,
to receive the benefit of the foreign tax credit with respect to any foreign
income taxes paid by it. Pursuant to the election, the Fund will treat those
taxes as dividends paid to its shareholders and each shareholder will be
required to (1) include in gross income, and treat as paid by him, his
proportionate share of those taxes, (2) treat his share of those taxes and of
any dividend paid by the Fund that
Statement of Additional Information Page 28
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
represents income from foreign sources as his own income from those sources, and
(3) either deduct the taxes deemed paid by him in computing his taxable income
or, alternatively, use the foregoing information in calculating the foreign tax
credit against his federal income tax. The Fund will report to its shareholders
shortly after each taxable year their respective shares of the Fund's income
from sources within, and taxes paid to, foreign countries if it makes this
election.
PASSIVE FOREIGN INVESTMENT COMPANIES
The Fund may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is a foreign corporation that, in general, meets either of the
following tests: (1) at least 75% of its gross income is passive or (2) an
average of at least 50% of its assets produce, or are held for the production
of, passive income. Under certain circumstances, the Fund would be subject to
federal income tax on a portion of any "excess distribution" received on, or of
any gain from disposition of, stock of a PFIC (collectively "PFIC income"), plus
interest thereon, even if the Fund distributed the PFIC income as a taxable
dividend to its shareholders. The balance of the PFIC income would be included
in the Fund's investment company taxable income and, accordingly, would not be
taxable to the Fund to the extent that income is distributed to its
shareholders.
If the Fund does invest in a PFIC and elects to treat the PFIC as a "qualified
electing fund" ("QEF"), then in lieu of the foregoing tax and interest
obligation, the Fund would be required to include in income each taxable year
its pro rata share of the QEF's ordinary earnings and net capital gain (the
excess of net long-term capital gain over net short-term capital loss) -- which
most likely would have to be distributed to satisfy the Distribution Requirement
and to avoid imposition of the Excise-Tax -- even if those earnings and gain
were not received by the Fund. In most instances it will be very difficult, if
not impossible, to make this election because of certain requirements thereof.
Pursuant to proposed regulations, open-end RICs, such as the Fund, would be
entitled to elect to "mark-to-market" their stock in certain PFICs.
"Marking-to-market," in this context, means recognizing as gain for each taxable
year the excess, as of the end of that year, of the fair market value of each
such PFIC's stock over the adjusted basis in that stock (including
mark-to-market gain for each prior year for which an election was in effect).
NON-U.S. SHAREHOLDERS
Dividends paid by the Fund to a shareholder who, as to the United States, is a
nonresident alien individual, 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
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.
OPTIONS, FUTURES AND FOREIGN CURRENCY TRANSACTIONS
The use of hedging transactions, such as selling (writing) and purchasing
options and Futures Contracts and entering into Forward Contracts, involves
complex rules that will determine, for federal income tax purposes, the
character and timing of recognition of the gains and losses the Fund realizes in
connection therewith. Gains from foreign currencies (except certain gains that
may be excluded by future regulations), and gains from the disposition of
options, Futures and Forward Contracts derived by the Fund with respect to its
business of investing in securities or foreign currencies will qualify as
permissible income under the Income Requirement. However, income from the
disposition by the Fund of options and Futures (other than those on foreign
currencies) will be subject to the Short-Short Limitation if they are held for
less than three months. Income from the disposition by the Fund of foreign
currencies, and options, Futures and Forward Contracts on foreign currencies,
that are not directly related to the Fund's principal business of investing in
securities (or options and Futures with respect thereto) also will be subject to
the Short-Short Limitation if they are held for less than three months.
If the Fund satisfies certain requirements, any increase in value of a position
that is part of a "designated hedge" will be offset by any decrease in value
(whether realized or not) of the offsetting hedging position during the period
of the hedge for purposes of determining whether the Fund satisfies the
Short-Short Limitation. Thus, only the net gain (if any) from the designated
hedge will be included in gross income for purposes of that limitation. The Fund
intends that, when it engages in hedging transactions, it will qualify for this
treatment, but at the present time it is not clear whether this treatment will
be available for all those transactions. To the extent this treatment is not
available, the Fund may be forced to defer the closing out of certain options,
Futures, Forward Contracts or foreign currency positions beyond the time when it
otherwise would be advantageous to do so, in order for the Fund to continue to
qualify as a RIC.
Statement of Additional Information Page 29
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
Futures and Forward Contracts that are subject to Section 1256 of the Code
(other than those that are part of a "mixed straddle") ("Section 1256
Contracts") and that are held by the Fund at the end of its taxable year
generally will be deemed to have been sold at market value for federal income
tax purposes. Sixty percent of any net gain or loss recognized on these deemed
sales, and 60% of any net gain or loss realized from any actual sales of Section
1256 Contracts, will be treated as long-term capital gain or loss, and the
balance will be treated as short-term capital gain or loss. Section 988 of the
Code also may apply to gains and losses from transactions in foreign currencies,
foreign-currency-denominated debt securities and options, Futures and Forward
Contracts on foreign currencies ("Section 988" gain or loss). Each Section 988
gain or loss generally is computed separately and treated as ordinary income or
loss. In the case of overlap between Sections 1256 and 988, special provisions
determine the character and timing of any income, gain or loss. The Fund
attempts to monitor Section 988 transactions to minimize any adverse tax impact.
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.
Statement of Additional Information Page 30
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH 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, located in Zurich, Switzerland.
Worldwide asset management affiliates also currently include LGT Asset
Management PLC, formerly GT Management PLC in London, England; LGT Asset
Management Ltd., formerly GT Management (Asia) Ltd. in Hong Kong; LGT Asset
Management Ltd., formerly GT Management (Japan) in Tokyo; LGT Asset Management
Pte. Ltd., formerly GT Management (Singapore) PTE Ltd. located in Singapore; LGT
Asset Management Ltd., formerly GT Management (Australia) Ltd., located in
Sydney; and LGT Asset Management GmbH, formerly BIL Asset Management GmbH,
located in Frankfurt, Germany.
CUSTODIAN
State Street Bank and Trust Company ("State Street"), 225 Franklin Street,
Boston, Massachusetts 02110, acts as custodian of the Fund's assets. State
Street is authorized to establish and has established separate accounts in
foreign currencies and to cause securities of the Fund to be held in separate
accounts outside the United States in the custody of non-U.S. banks.
INDEPENDENT ACCOUNTANTS
The Funds' independent accountants are Coopers & Lybrand L.L.P., One Post Office
Square, Boston, Massachusetts 02109. Coopers & Lybrand L.L.P., will conduct an
annual audit of the Fund, assists in the preparation of the Fund's federal and
state income tax returns and consults with the Company and the Fund as to
matters of accounting, regulatory filings, and federal and state income
taxation.
The audited financial statements of the Company 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 said firm as experts in accounting and auditing.
USE OF NAME
The Manager has granted the Company 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 Company and/or the Fund at any time or to grant the use of such
names to any other company.
- --------------------------------------------------------------------------------
INVESTMENT RESULTS
- --------------------------------------------------------------------------------
The Fund's "Standardized Return", as referred to in the Prospectus (see "Other
Information -- Performance Information"), is calculated separately for Class A,
Class B and Advisor Class shares of the Fund, as follows: Standardized Return
("T") is computed by using the value at the end of the period ("EV") 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) to the (n)th
power = EV. 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
Statement of Additional Information Page 31
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
dividends and other distributions at net asset value on the reinvestment date
determined by the Board; and (4) a complete redemption at the end of any period
illustrated.
The Fund's Standardized Return for its Class A shares stated as average
annualized total returns, for the periods shown, were as follows:
<TABLE>
<CAPTION>
STANDARDIZED
PERIOD RETURN
- ---------------------------------------- ------------------
<S> <C>
Year ended October 31, 1996............. %
October 31, 1991 to October 31, 1996.... %
August 13, 1991 (commencement of
operations) to October 31, 1996........ %
</TABLE>
The Fund's Standardized Returns for its Class B shares which were first offered
on April 1, 1993, stated as average annual total returns, for the periods shown,
were:
<TABLE>
<CAPTION>
STANDARDIZED
PERIOD RETURN
- ---------------------------------------- ------------------
<S> <C>
Year ended October 31, 1996............. %
April 1, 1993 (commencement of
operations) to October 31, 1996........ %
</TABLE>
The Fund's Standardized Return for its Advisor Class shares stated as average
annualized total returns, for the periods shown, were as follows:
<TABLE>
<CAPTION>
PERIOD STANDARDIZED RETURN
- ------------------------------------------------------------------------------------------------------ -------------------
<S> <C>
Year ended October 31, 1996........................................................................... %
June 1, 1995 (commencement of operations) to October 31, 1996......................................... %
</TABLE>
"Non-Standardized Return," as referred to in the Prospectus, is calculated for a
specified period of time by assuming the investment of $1,000 in Fund shares and
further assuming the reinvestment of all dividends and other distributions made
to Fund shareholders in additional Fund shares at their net asset value.
Percentage rates of return are then calculated by comparing this assumed initial
investment to the value of the hypothetical account at the end of the period for
which the Non-Standardized Return is quoted.
As discussed in the Prospectus, the Fund may quote Non-Standardized Total
Returns that do not reflect the effect of sales charges. Non-Standardized
Returns may be quoted for the same or different time periods for which
Standardized Returns are quoted.
The Fund's Non-Standardized Returns, for its Class A shares, stated as aggregate
total returns, for the periods shown, were as follows:
<TABLE>
<CAPTION>
AGGREGATE TOTAL
PERIOD RETURN
- ---------------------------------------- ------------------
<S> <C>
Year ended October 31, 1996............. %
August 13, 1991 (commencement of
operations) to October 31, 1996........ %
</TABLE>
The Fund's Non-Standardized Return for its Class B shares which were first
offered on April 1, 1993, stated as aggregate total returns, for the periods
shown, were:
<TABLE>
<CAPTION>
NON-STANDARDIZED
PERIOD RETURN
- ---------------------------------------- ------------------
<S> <C>
Year ended October 31, 1996............. %
April 1, 1993 (commencement of
operations) to October 31, 1996........ %
</TABLE>
The Fund's Non-Standardized Returns, for its Advisor Class shares, stated as
aggregate total returns, for the periods shown, were as follows:
<TABLE>
<CAPTION>
AGGREGATE TOTAL
PERIOD RETURN
- ---------------------------------------- ------------------
<S> <C>
Year ended October 31, 1996............. %
June 1, 1995 (commencement of
operations) to October 31, 1996........ %
</TABLE>
Statement of Additional Information Page 32
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
The Fund's Non-Standardized Returns, for its Class A shares, stated as average
annualized total returns, for the periods shown, were as follows:
<TABLE>
<CAPTION>
NON-STANDARDIZED
AVERAGE ANNUALIZED
PERIOD TOTAL RETURN
- ---------------------------------------- ------------------
<S> <C>
Year ended October 31, 1996............. %
October 31, 1991 to October 31, 1996.... %
August 13, 1991 (commencement of
operations) to October 31, 1996........ %
</TABLE>
The Fund's Non-Standardized Returns for its Class B shares, stated as average
annualized total returns, for the periods shown, were:
<TABLE>
<CAPTION>
NON-STANDARDIZED
AVERAGE ANNUALIZED
PERIOD TOTAL RETURN
- ---------------------------------------- ------------------
<S> <C>
Year ended October 31, 1996............. %
April 1, 1993 (commencement of
operations) to October 31, 1996........ %
</TABLE>
The Fund's Non-Standardized Returns, for its Advisor Class shares, stated as
average annualized total returns, for the periods shown, were as follows:
<TABLE>
<CAPTION>
NON-STANDARDIZED
AVERAGE ANNUALIZED
PERIOD TOTAL RETURN
- ---------------------------------------- ------------------
<S> <C>
June 1, 1995 (commencement of
operations) to October 31, 1996........ %
</TABLE>
IMPORTANT POINTS TO NOTE ABOUT DATA RELATING TO WORLD EQUITY AND BOND MARKETS.
Information relating to foreign market performance, market capitalization and
diversification is based on sources believed to be reliable, but is not
all-inclusive nor warranted as to accuracy by the Fund or the Manager. The
authors and publishers of such material are not to be considered as "experts"
under the Securities Act of 1933 on account of the inclusion of such information
herein. Stocks chosen by Morgan Stanley Capital International for inclusion in
its various international market indices may not necessarily constitute a
representative cross-section of the particular markets.
GT Global believes information relating to foreign market performance, market
capitalization and diversification may be useful to investors considering
whether and to what extent to diversify their investments through the purchase
of mutual funds investing in equity and/or debt 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 the indices represented above. The
performance of indices does not take expenses into account, while the Fund
incurs expenses in its operations that will reduce performance. Moreover, the
Fund is actively managed, i.e. the Manager as the Fund's investment manager
actively purchases and sells securities in seeking the Fund's investment
objective. Moreover, the Fund's concentration in the equity and debt securities
of Latin American issuers will cause the Fund's performance to differ from the
general equity and bond indices.
The Fund and GT Global may from time to time 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 or BBB by S&P, or, in
the case of nonrated bonds, BBB by Fitch Investors Service (excluding
Collateralized Mortgage Obligations).
(3) 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.
(4) 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).
Statement of Additional Information Page 33
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
(5) Data and mutual fund rankings published or prepared by Lipper
Analytical Data Services, Inc. ("Lipper"), CDA/Wiesenberger Investment
Company 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 the Fund may be compared to the Fund's "peer
group" as defined by Lipper, CDA/Wiesenberger and/or other firms as
applicable, or to specific funds or groups of funds within or without such
peer group. 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.
(6) Bear Stearns Foreign Bond Index, which provides simple average
returns for individual countries and GNP-weighted index, beginning in 1975.
The returns are broken down by local market and currency.
(7) Ibbottson Associates International Bond Index, which provides a
detailed breakdown of local market and currency returns since 1960.
(8) Standard & Poor's "500" 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 U.S.
(9) Salomon Brothers Broad Investment Grade Index which is a widely used
index composed of U.S. domestic government, corporate and mortgage-back
fixed income securities.
(10) Dow Jones Industrial Average.
(11) CNBC/Financial News Composite Index.
(12) 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 800
companies of Europe, Australia and the Far East.
(13) Morgan Stanley Capital International Latin America Emerging Market
Indices, including the Morgan Stanley Emerging Markets Free Latin America
Index (which excludes Mexican banks and securities companies which cannot be
purchased by foreigners) and the Morgan Stanley Emerging Markets Global
Latin America Index. Both indices include 60% of the market capitalization
of the following countries: Argentina, Brazil, Chile and Mexico. The indices
are weighted by market capitalization and are calculated without dividends
reinvested.
(14) International Financial Corporation ("IFC") Latin American Indices
which include 60% of the market capitalization in the covered countries and
are market weighted. One index includes dividends and one excludes
dividends.
(15) 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.
(16) The World Bank Publication of Trends in Developing Countries (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.
(17) Salomon Brothers Global Telecommunications Index is composed of
telecommunications companies in the developing and emerging countries.
(18) Datastream and Worldscope each is an on-line database retrieval
service for information including but not limited to international financial
and economic data.
(19) International Financial Statistics, which is produced by the
International Monetary Fund.
(20) Various publications and annual reports such as the World
Development Report, produced by the World Bank and its affiliates.
(21) Various publications from the International Bank for Reconstruction
and Development/The World Bank.
(22) Various publications including but not limited to ratings agencies
such as Moody's Investors Services, Fitch Investors Service and Standard &
Poor's.
(23) Various publications from the Organization for Economic Cooperation
and Development (OECD).
Statement of Additional Information Page 34
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
(24) Wilshire Associates which is an on-line database for international
financial and economic data including performance measure for a wider range
of securities.
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, 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,
included but not limited to, Money 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 indices of comparable
quality to those listed above and other indices which may be developed and made
available.
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. 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.
GT Global believes that a growing number of consumer products, including but not
limited to home appliances, automobiles and clothing, purchased by Americans are
manufactured abroad. GT Global believes that investing globally in the companies
that produce products for U.S. consumers can help U.S. investors seek protection
of the value of their assets against the potentially increasing costs of foreign
manufactured goods. Of course, there can be no assurance that there will be any
correlation between global investing and the costs of such foreign goods unless
there is a corresponding change in value of the U.S. dollar to foreign
currencies. From time to time, GT Global may refer to or advertise the names of
such companies although there can be no assurance that any GT Global Mutual Fund
may own the securities of these companies.
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 Fund assets under management or
rankings by DALBAR Surveys Inc. in advertising materials.
The Fund may compare its performance to that of other compilations or indices of
comparable quality to those listed above which may be developed and made
available in the future. The Fund may be compared in advertising to Certificates
of Deposit (CDs), the Bank Rate Monitor National Index, an average of the quoted
rates for 100 leading banks and thrifts in ten U.S. cities chosen to represent
the ten largest Consumer Metropolitan statistical areas, or other investments
issued by banks. The Fund differs from bank investments in several respects. The
Fund may offer greater liquidity or higher potential returns than CDs; but
unlike CDs, the Fund will have a fluctuating share price and return and is not
FDIC insured.
The Fund's performance may be compared to the performance of other mutual funds
in general, or to the performance of particular types of mutual funds. These
comparisons may be expressed as mutual fund rankings prepared by Lipper
Analytical Services, Inc. (Lipper), an independent service which monitors the
performance of mutual funds. 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 Fund's performance
may be compared to mutual fund performance indices prepared by Lipper.
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.
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 is 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
Statement of Additional Information Page 35
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
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.
In advertising materials, GT Global may reference or discuss its products and
services, which may include: retirement investing; the effects of dollar-cost
averaging and saving for college or a home. In addition, GT Global may quote
financial or business publications and periodicals, including model portfolios
or allocations, as they relate to fund management, investment philosophy, and
investment techniques.
The Fund may discuss its Quotron number, CUSIP number, and its current portfolio
management team.
From time to time, the Fund's performance also may be compared to other mutual
funds tracked by financial or business publications and periodicals. For
example, the fund may quote Morningstar, Inc. in its advertising materials.
Morningstar, Inc. is a mutual fund rating service that rates mutual funds on the
basis of risk-adjusted performance. In addition, the Fund may quote financial or
business publications and periodicals as they relate to fund management,
investment philosophy, and investment techniques. Rankings that compare the
performance of GT Global Mutual Funds to one another in appropriate categories
over specific periods of time may also be quoted in advertising.
The Fund may quote various measures of volatility and benchmark correlation such
as beta, standard deviction and R2 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. Measures of benchmark correlation indicate how valid a
comparative benchmark may be. 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. 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.
Each 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 the 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 plans may produce returns superior to comparable non-retirement
investments. The Funds may also discuss these plans which include:
INDIVIDUAL RETIREMENT ACCOUNTS (IRAS): Any individual who receives earned income
from employment (including self-employment) can contribute up to $2,000 each
year to an IRA (or if less, 100% of compensation). If your spouse is not
employed, a total of $2,250 may be contributed each year to IRAs set up for you
and your spouse (subject to the maximum of $2,000 to either IRA). 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 rollover (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 roll-over 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 AND SALARY-REDUCTION SEP-IRAS: Simplified employee pension (SEP) plans
and salary-reduction SEPs provide self-employed individuals (and any eligible
employees) with benefits similar to Keogh-type plans or 401(k) plans, but with
fewer administrative requirements and therefore potential lower annual
administration expenses.
Statement of Additional Information Page 36
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
403(B)(7) CUSTODIAL ACCOUNTS: Employees of public schools and most other
not-for-profit corporations can make pre-tax salary reduction contributions to
these accounts.
PROFIT-SHARING (INCLUDING 401(K)) AND MONEY PURCHASE PENSION PLANS: Corporations
can sponsor these qualified defined contribution plans for their employees. A
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).
GT Global may from time to time in its sales methods and advertising discuss the
risks inherent in investing. The major types of investment risk are market risk,
industry risk, credit risk, interest rate 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 certain information
regarding individual countries, regions, world stock exchanges, and economic and
demographic statistics from sources GT Global deems reliable, including, but not
limited to, the economic and financial data of such financial organizations as:
(1) Stock market capitalization: Morgan Stanley Capital International World
Indices, International Finance Corporation and Datastream.
(2) Stock market trading volume: Morgan Stanley Capital International Industry
Indices, International Finance Corporation.
(3) The number of listed companies: International Finance Corporation, G.T.
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 Indices.
(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, International Finance Corporation and Datastream.
(7) The Consumer Price Index and inflation rate: The World Bank, Datastream and
International Finance Corporation.
(8) Gross Domestic Product (GDP): Datastream and The World Bank.
(9) GDP growth rate: International Finance Corporation, 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: Organization for Economic Cooperation
and Development and United Nations.
(13) Total exports and imports by year: International Finance Corporation, The
World Bank and Datastream.
(14) Top three companies by country, industry or market: International Finance
Corporation, G.T. 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.
Statement of Additional Information Page 37
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
(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) Dividends yields for U.S. and non-U.S. companies: Bloomberg.
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 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.
THE GT ADVANTAGE
The Manager has developed a unique team approach to its global money management
which we call the GT Advantage. The Manager's money management style combines
the best of the "top-down" and "bottom-up" investment manager strategies. The
top-down approach is implemented by the Manager's Investment Policy Committee
which sets broad guidelines for asset allocation and currency management based
on the Manager's own macroeconomic forecasts and research from our worldwide
offices. The bottom-up approach utilizes regional teams of individual portfolio
managers to implement the committee's guidelines by selecting local securities
that offer strong growth potential.
- --------------------------------------------------------------------------------
DESCRIPTION OF DEBT RATINGS
- --------------------------------------------------------------------------------
DESCRIPTION OF COMMERCIAL PAPER RATINGS
MOODY'S INVESTORS SERVICE, INC. ("Moody's") employs the designations "Prime-1,"
"Prime-2" and "Prime-3" to indicate commercial paper having the highest capacity
for timely repayment. Issuers rated Prime-1 have a superior capacity for
repayment of senior short-term promissory obligations. Prime-1 repayment ability
will often be evidenced by 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 protections; 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.
STANDARD & POOR'S Ratings Group ("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 payments 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.
Statement of Additional Information Page 38
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
DESCRIPTION OF BOND RATINGS
Moody's rates the long-term debt securities issued by various entities from
"Aaa" to "C." Ratings are as follows:
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 bond because margins of protection may not be as large as in
Aaa securities, 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 -- These bonds are judged to have speculative elements; 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 other good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B -- These bonds 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 -- These bonds are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.
Ca -- These bonds represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
C -- These bonds are the lowest rated class of bonds and 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
ranking; and the modifier 3 indicates that the issue ranks in the lower end of
its generic rating category.
S&P rates the long-term securities debt of various entities in categories
ranging from "AAA" to "D" according to quality. Investment grade ratings are as
follows:
AAA -- Highest rating. Capacity to pay interest and repay principal is
extremely strong.
AA -- High grade. Very strong capacity to pay interest and repay
principal. Generally, these bonds differ from AAA issues only in a small
degree.
A -- Have a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of change
in circumstances and economic conditions, than debt in higher rated
categories.
Statement of Additional Information Page 39
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
Speculative grade ratings are as follows:
BBB -- Regarded as having adequate capacity to pay interest and repay
principal. These bonds normally exhibit adequate protection parameters, but
adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity to pay interest and repay principal than for
debt in higher rated categories.
BB -- Have less near-term vulnerability to default than other
speculative issues. However, these bonds face 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.
This rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied 'BBB-'rating.
B -- Have greater vulnerability to default but currently have 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. This rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied 'BB' or 'BB-' rating.
CCC -- Have a currently identifiable vulnerability to default, and are
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, these bonds are 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 -- This rating typically is applied to debt subordinated to senior
debt that is assigned an actual or implied 'CCC' rating.
C -- This rating typically is applied to debt subordinated to senior
debt that is assigned an actual or implied 'CCC-' debt rating. This rating
may be used to cover a situation where a bankruptcy petition has been filed,
but debt service payments are continued.
CI -- This rating is reserved for income bonds on which no interest is
being paid.
D -- Are in payment default. This 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. This rating also will be
used up on 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.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The audited financial statements of GT Global Latin America Growth Fund at
October 31, 1996 and for the period then ended appear on the following pages.
Statement of Additional Information Page 40
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
NOTES
- --------------------------------------------------------------------------------
Statement of Additional Information Page 41
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
NOTES
- --------------------------------------------------------------------------------
Statement of Additional Information Page 42
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
NOTES
- --------------------------------------------------------------------------------
Statement of Additional Information Page 43
<PAGE>
GT GLOBAL LATIN AMERICA GROWTH FUND
GT GLOBAL MUTUAL FUNDS
GT GLOBAL OFFERS A BROAD RANGE OF MUTUAL FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY GT GLOBAL MUTUAL
FUND, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR CALL GT GLOBAL DIRECTLY AT
1-800-824-1580.
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL WORLDWIDE GROWTH FUND
Invests around the world, including the U.S.
GT GLOBAL INTERNATIONAL GROWTH FUND
Provides portfolio diversity for U.S. investors by investing outside the U.S.
GT GLOBAL EMERGING MARKETS FUND
Gives access to the growth potential of developing economies
/ / GLOBAL THEME FUNDS
GT GLOBAL CONSUMER PRODUCTS AND
SERVICES FUND
Invests in companies that manufacture, market, retail, or distribute consumer
products or services
GT GLOBAL FINANCIAL SERVICES FUND
Focuses on the worldwide opportunities from the demand for financial services
and products
GT GLOBAL HEALTH CARE FUND
Invests in the growing health care industries worldwide
GT GLOBAL INFRASTRUCTURE FUND
Seeks companies that build, improve or maintain a country's infrastructure
GT GLOBAL NATURAL RESOURCES FUND
Concentrates on companies that own, explore or develop natural resources
GT GLOBAL TELECOMMUNICATIONS FUND
Invests in companies worldwide that develop, manufacture or sell
telecommunications services or equipment
/ / REGIONALLY DIVERSIFIED FUNDS
GT GLOBAL PACIFIC GROWTH FUND
Offers access to the emerging and established markets of the Pacific Rim,
excluding Japan
GT GLOBAL EUROPE GROWTH FUND
Focuses on investment opportunities in the new, unified Europe
GT GLOBAL LATIN AMERICA GROWTH FUND
Invests in the emerging markets of Latin America
/ / SINGLE COUNTRY FUNDS
GT GLOBAL AMERICA SMALL CAP GROWTH FUND
Invests in equity securities of small U.S. companies
GT GLOBAL AMERICA MID CAP GROWTH FUND
Concentrates on medium-sized companies in the U.S.
GT GLOBAL AMERICA VALUE FUND
Concentrates on large cap equity securities of U.S. companies believed to be
undervalued
GT GLOBAL JAPAN GROWTH FUND
Provides U.S. investors with direct access to the Japanese market
GROWTH AND INCOME FUND
GT GLOBAL GROWTH & INCOME FUND
Invests in blue-chip stocks and government bonds from around the world
INCOME FUNDS
GT GLOBAL GOVERNMENT INCOME FUND
Earns high monthly income from global government securities
GT GLOBAL STRATEGIC INCOME FUND
Allocates its assets among debt securities from the U.S., developed foreign
countries and emerging markets
GT GLOBAL HIGH INCOME FUND
Invests in a portfolio of emerging market debt securities
MONEY MARKET FUND
GT GLOBAL DOLLAR FUND
Invests in high quality, U.S. dollar-denominated money market securities
worldwide for stability and preservation of capital
[LOGO]
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
STATEMENT OF ADDITIONAL INFORMATION AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY GT
GLOBAL LATIN AMERICA GROWTH FUND, G.T. INVESTMENT FUNDS, INC., CHANCELLOR
LGT ASSET MANAGEMENT, INC. OR GT GLOBAL, INC. THIS STATEMENT OF ADDITIONAL
INFORMATION DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF ANY
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
LATSX610MC
<PAGE>
GT GLOBAL EMERGING MARKETS FUND:
ADVISOR CLASS
50 California Street, 27th Floor
San Francisco, California 94111
(415) 392-6181
Toll Free: (800) 824-1580
Statement of Additional Information
March 1, 1997
- --------------------------------------------------------------------------------
GT Global Emerging Markets Fund ("Fund") is a diversified mutual fund organized
as a separate series of G.T. Investment Funds, Inc. ("Company"), a registered
open-end management investment company. This Statement of Additional Information
relating to the Advisor Class share of the Fund, which is not a prospectus,
supplements and should be read in conjunction with the Fund's current Advisor
Class Prospectus dated March 1, 1997. A copy of the Fund's Prospectus is
available without charge by writing to the above address or by calling the Fund
at the toll-free telephone number listed above.
Chancellor LGT Asset Management, Inc. (the "Manager") serves as the Fund's
investment manager and administrator. 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 "Transfer Agent").
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Investment Objective and Policies........................................................................................ 2
Options, Futures and Currency Strategies................................................................................. 6
Risk Factors............................................................................................................. 14
Investment Limitations................................................................................................... 17
Execution of Portfolio Transactions...................................................................................... 18
Directors and Executive Officers......................................................................................... 20
Management............................................................................................................... 22
Valuation of Fund Shares................................................................................................. 23
Information Relating to Sales and Redemptions............................................................................ 24
Taxes.................................................................................................................... 26
Additional Information................................................................................................... 28
Investment Results....................................................................................................... 29
Description of Debt Ratings.............................................................................................. 35
Financial Statements..................................................................................................... 37
</TABLE>
[LOGO]
Statement of Additional Information Page 1
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
INVESTMENT OBJECTIVE
AND POLICIES
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is long-term growth of capital. The Fund
seeks this objective by investing, under normal circumstances, at least 65% of
its total assets in equity securities of companies in emerging markets. The Fund
does not consider the following countries to be emerging markets: Australia,
Austria, Belgium, Canada, Denmark, England, Finland, France, Germany, Ireland,
Italy, Japan, the Netherlands, New Zealand, Norway, Spain, Sweden, Switzerland
and United States. The Fund normally may invest up to 35% of its assets in a
combination of (i) debt securities of government or corporate issuers in
emerging markets; (ii) equity and debt securities of issuers in developed
countries, including the United States; (iii) securities of issuers in emerging
markets not included in the list of emerging markets set forth in the Fund's
current Prospectus, if investing therein becomes feasible and desirable
subsequent to the date of the Fund's current Prospectus; and (iv) cash and money
market instruments.
In determining what countries constitute emerging markets, the Manager will
consider, among other things, data, analysis, and classification of countries
published or disseminated by the International Bank for Reconstruction and
Development (commonly known as the World Bank) and the International Finance
Corporation.
SELECTION OF EQUITY INVESTMENTS
Chancellor LGT Asset Management, Inc. (the "Manager") is the investment manager
of the Fund. In determining the appropriate distribution of investments among
various countries and geographic regions for the Fund, the Manager ordinarily
considers the following factors: prospects for relative economic growth between
the different countries in which the Fund may invest; expected levels of
inflation; government policies influencing business conditions; the outlook for
currency relationships; and the range of the individual investment opportunities
available to international investors.
In analyzing companies in emerging markets for investment by the Fund, the
Manager ordinarily looks for one or more of the following characteristics: an
above-average earnings growth per share; high return on invested capital;
healthy balance sheet; sound financial and accounting policies and overall
financial strength; strong competitive advantages; effective research and
product development and marketing; efficient service; pricing flexibility;
strength of management; and general operating characteristics which will enable
the companies to compete successfully in their respective marketplaces. In
certain countries, governmental restrictions and other limitations on investment
may affect the maximum percentage of equity ownership in any one company by the
Fund. 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.
Although the Fund values its assets daily in terms of U.S. dollars, the Fund
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. The Fund 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 are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign currency to the
Fund at one rate, while offering a lesser rate of exchange should the Fund
desire to sell that currency to the dealer.
The Fund may be prohibited under the Investment Company Act of 1940, as amended
("1940 Act") from purchasing the securities of any foreign company that, in its
most recent fiscal year, derived more than 15% of its gross revenues from
securities-related activities ("securities-related companies"). In a number of
countries, commercial banks act as securities broker/dealers, investment
advisers and underwriters or otherwise engage in securities-related activities,
which may limit the Fund's ability to hold securities issued by banks. The Fund
has obtained an exemption from the Securities and Exchange Commission ("SEC") to
permit the Fund to invest in certain of these securities subject to certain
restrictions.
INVESTMENTS IN OTHER INVESTMENT COMPANIES
With respect to certain countries investments by the Fund presently may be made
only by acquiring shares of other investment companies with local governmental
approval to invest in those countries. The Fund may invest in the securities of
closed-end investment companies within the limits of the 1940 Act. These
limitations currently provide, in part, that the Fund may purchase shares of a
closed-end investment company unless (a) such a purchase would cause the Fund to
own in
Statement of Additional Information Page 2
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
the aggregate more than 3 percent of the total outstanding voting stock of the
investment company or (b) such a purchase would cause the Fund to have more than
5 percent of its total assets invested in the investment company or more than 10
percent of its total assets invested in the aggregate in all such investment
companies. Investment in such investment companies may involve the payment of
substantial premiums above the value of such companies' portfolio securities.
The Fund does not intend to invest in such funds 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. At such time as direct investment in these countries
is allowed, the Fund anticipates investing directly in these markets.
SAMURAI AND YANKEE BONDS
Subject to its fundamental investment restrictions, the Fund may invest in
yen-denominated bonds sold in Japan by non-Japanese issuers ("Samurai bonds"),
and may invest in dollar-denominated bonds sold in the United States by non-U.S.
issuers ("Yankee bonds"). As compared with bonds issued in their countries of
domicile, such bond issues normally carry a higher interest rate but are less
actively traded. It is the policy of the Fund to invest in Samurai or Yankee
bond issues only after taking into account considerations of quality and
liquidity, as well as yield. These bonds would be issued by governments which
are members of the Organization for Economic Cooperation and Development or have
AAA ratings.
DEPOSITORY RECEIPTS
The Fund 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 securities may not necessarily be denominated in
the same currency as the securities for which they may be exchanged. ADRs and
ADSs typically are 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 United States securities markets and
EDRs and CDRs in bearer form are designed for use in European securities
markets. For purposes of the Fund's investment policies, the Fund's investments
in ADRs, ADSs, EDRs, and CDRs 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
Fund may invest in both sponsored and unsponsored ADRs.
WARRANTS OR RIGHTS
Warrants or rights may be acquired by the Fund in connection with other
securities or separately and provide the Fund with the right to purchase at a
later date other securities of the issuer.
COMMERCIAL BANK OBLIGATIONS
For the purposes of the Fund'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, however, may be limited by the terms of a specific
obligation and by government regulation. As with investment in non-U.S.
securities in general, investments in the obligations of foreign branches of
U.S. banks and of foreign banks may subject the Fund to investment risks that
are different in some respects from those of investments in
Statement of Additional Information Page 3
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
obligations of domestic issuers. Although the Fund typically will acquire
obligations issued and supported by the credit of U.S. or foreign banks having
total assets at the time of purchase in excess of $1 billion, this $1 billion
figure is not a fundamental investment policy or restriction of the Fund. 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
Repurchase agreements are transactions in which the Fund 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, the Fund intends to enter into repurchase
agreements only with banks and dealers believed by the Manager to present
minimum credit risks in accordance with guidelines established by the Company's
Board of Directors. The Manager will review and monitor the creditworthiness of
such institutions under the Board's general supervision.
The Fund 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, the Fund 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 the Fund's ability
to sell the collateral and the Fund could suffer a loss. However, with respect
to financial institutions whose bankruptcy or liquidation proceedings are
subject to the U.S. Bankruptcy Code, the Fund intends to comply with provisions
under the U.S. Bankruptcy Code that would allow it immediately to resell the
collateral. There is no limitation on the amount of the Fund's assets that may
be subject to repurchase agreements at any given time. The Fund 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 would be invested in such
repurchase agreements and other illiquid investments.
BORROWING, REVERSE REPURCHASE AGREEMENTS AND "ROLL" TRANSACTIONS
The Fund's borrowings will not exceed 33 1/3% of the Fund's total assets, i.e.,
the Fund's total assets at all times will equal at least 300% of the amount of
outstanding borrowings. If market fluctuations in the value of the Fund's
portfolio holdings or other factors cause the ratio of the Fund's total assets
to outstanding borrowings to fall below 300%, the Fund may be required to sell
portfolio securities to restore 300% asset coverage, even though from an
investment standpoint such sales might be disadvantageous. The Fund also may
borrow up to 5% of its total assets for temporary or emergency purposes other
than to meet redemptions. Any borrowing by the Fund may cause greater
fluctuation in the value of its shares than would be the case if the Fund did
not borrow.
The Fund's fundamental investment limitations permit the Fund to borrow money
for leveraging purposes. The Fund, however, currently is prohibited, pursuant to
a non-fundamental investment policy, from purchasing securities during times
when outstanding borrowings represent more than 5% of its assets. Nevertheless,
this policy may be changed in the future by vote of a majority of the Company's
Board of Directors. In the event that the Fund 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 Fund's net asset value. When the income and gains on securities
purchased with the proceeds of borrowings exceed the costs of such borrowings,
the Fund's earnings or net asset value will increase faster than otherwise would
be the case; conversely, if such income and gains fail to exceed such costs, the
Fund's earnings or net asset value would decline faster than would otherwise be
the case.
The Fund may enter into reverse repurchase agreements. A reverse repurchase
agreement is a borrowing transaction in which the Fund 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. The Fund also may engage in "roll"
borrowing transactions which involve the Fund's sale of Government National
Mortgage Association certificates or other securities together with a commitment
(for which the Fund may receive a fee) to purchase similar, but not identical,
securities at a future date. The Fund will maintain in a segregated account with
a custodian cash or other 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.
LENDING OF PORTFOLIO SECURITIES
For the purpose of realizing additional income, the Fund may make secured loans
of portfolio securities 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 continuously be 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. While the securities loan is
outstanding, the
Statement of Additional Information Page 4
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
Fund 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. The Fund has a right to call each loan
and obtain the securities on five business days' notice. The Fund will not have
the right to vote equity securities while they are being lent, but it will call
in a loan in anticipation of any important vote. The risks in lending portfolio
securities, as with other extensions of secured credit, consist of possible
delay in receiving additional collateral or in recovery of the securities or
possible loss of rights in the collateral should the borrower fail financially.
Loans only will 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.
SHORT SALES
The Fund is authorized to make short sales of securities, although it has no
current intention of doing so. A short sale is a transaction in which the Fund
sells a security in anticipation that the market price of that security will
decline. The Fund may make short sales (i) as a form of hedging to offset
potential declines in long positions in securities it owns, or anticipates
acquiring, and (ii) in order to maintain portfolio flexibility.
When the Fund 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 Fund 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.
The Fund's obligation to replace the borrowed security when the borrowing is
called or expires will be secured by collateral deposited with the intermediary.
The Fund also will 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
the Fund on such security, the Fund 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 the Fund replaces the borrowed security, the Fund will incur a
loss; conversely, if the price declines, the Fund will realize a gain. Any gain
will be decreased, and any loss increased, by the transaction costs associated
with the transaction. Although the Fund's gain is limited by the price at which
it sold the security short, its potential loss theoretically is unlimited.
The Fund will not 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 Fund's aggregate short sales of the securities of any one issuer
exceed the lesser of 2% of the Fund's net assets or 2% of the securities of any
class of the issuer. Moreover, the Fund may engage in short sales only with
respect to securities listed on a national securities exchange. The Fund 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 Fund owns the security it has
sold short or has the immediate and unconditional right to acquire at no
additional cost the identical security.
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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 the Fund entered into a
short hedge because the Manager projected a decline in the price of a
security in the Fund'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 Fund could suffer a loss. In either such case, the Fund
would have been in a better position had it not hedged at all.
(4) As described below, the Fund 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 Fund 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 Fund'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 Fund sell a portfolio security at
a disadvantageous time. The Fund'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 Fund.
WRITING CALL OPTIONS
The Fund 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 Fund.
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). As long as
the obligation of the writer of a call option continues, he may be assigned an
exercise notice, requiring him 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.
Portfolio securities or currencies on which call options may be written will be
purchased solely on the basis of investment considerations consistent with the
Fund's investment objectives. When writing a call option, the Fund, in return
for the
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GT GLOBAL EMERGING MARKETS FUND
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, the Fund 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 the Fund has written expires, the Fund 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 Fund 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. The Fund does not consider a
security or currency covered by a call option to be "pledged" as that term is
used in the Fund'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 the Fund will be obligated to
sell the security or currency at less than its market value.
The premium that the Fund receives for writing a call option is deemed to
constitute the market value of an option. The premium the Fund 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 the Fund to write
another call option on the underlying security or currency with either a
different exercise price, expiration date or both.
The Fund 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 or currencies at the time the options
are written. From time to time, the Fund 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.
The Fund 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 the Fund.
WRITING PUT OPTIONS
The Fund 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 identical substantially to that of call options.
The Fund generally would write put options in circumstances where the Manager
wishes to purchase the underlying security or currency for the Fund's portfolio
at a price lower than the current market price of the security or currency. In
such event, the Fund 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 Fund 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 the Fund will be obligated
to purchase the security or currency at more than its market value.
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GT GLOBAL EMERGING MARKETS FUND
PURCHASING PUT OPTIONS
The Fund may purchase put options on securities, indices and currencies. As the
holder of a put option, the Fund 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. The Fund may enter into closing sale
transactions with respect to such options, exercise them or permit them to
expire.
The Fund may purchase a put option on an underlying security or currency
("protective put") owned by the Fund to protect against an anticipated decline
in the value of the security or currency. Such protection is provided only
during the life of the put option when the Fund, 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.
The Fund also may purchase put options at a time when the Fund does not own the
underlying security or currency. By purchasing put options on a security or
currency it does not own, the Fund 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 Fund 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
The Fund may purchase call options on securities, indices and currencies. As the
holder of a call option, the Fund 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. The Fund may enter
into closing sale transactions with respect to such options, exercise them or
permit them to expire.
Call options may be purchased by the Fund for the purpose of acquiring the
underlying security or currency for its portfolio. Utilized in this fashion, the
purchase of call options would enable the Fund 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 also may be useful to the Fund 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 Fund 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.
The Fund also may 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 also may be purchased at times to avoid
realizing losses that would result in a reduction of the Fund's current return.
For example, where the Fund 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 the Fund, an increase in the market price could
result in the exercise of the call option written by the Fund and the
realization of a loss on the underlying security or currency. Accordingly, the
Fund could purchase a call option on the same underlying security or currency,
which could be exercised to fulfill the Fund's delivery obligations under its
written call (if it is exercised). This strategy could allow the Fund to avoid
selling the portfolio security or currency at a time when it has an unrealized
loss; however, the Fund 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 the
Fund's total assets at the time of purchase.
The Fund may attempt to accomplish objectives similar to those involved in its
use of Forward Contracts by purchasing put or call options on currencies. A put
option gives the Fund 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. A call option gives the Fund
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 expiratiaon date. The Fund 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
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GT GLOBAL EMERGING MARKETS FUND
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 the
Fund 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 the Fund
anticipates purchasing securities.
Options may be either listed on an exchange or traded over-the-counter ("OTC").
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. The Fund 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. The Fund may also sell OTC options and,
in connection therewith, segregate assets or cover its obligations with respect
to OTC options written by the Fund. The assets used as cover for OTC options
written by the Fund will be considered illiquid unless the OTC options are sold
to qualified dealers who agree that the Fund 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.
The Fund's ability to establish and close out positions in exchange-listed
options depends on the existence of a liquid market. The Fund 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 the Fund
will enter into OTC options only with contra parties that are expected to be
capable of entering into closing transactions with the Fund, there is no
assurance that the Fund 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 Fund 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 the Fund 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 Fund 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 the Fund buys a call on an
index, it pays a premium and has the same rights as to such call as are
indicated above. When the Fund 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 Fund's exercise of the put, to deliver to the Fund 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 Fund writes a put on an index, it receives a
premium and the purchaser has the right, prior to the expiration date, to
require the Fund 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 the Fund writes a
call on an index it cannot provide in advance for its potential settlement
obligations by acquiring and holding the underlying securities. The Fund 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, the Fund 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 the Fund 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
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GT GLOBAL EMERGING MARKETS FUND
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 Fund, 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 the Fund 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 Fund 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 AND CURRENCY FUTURES CONTRACTS
The Fund may enter into interest rate or currency futures contracts, and may
enter into stock index futures contracts (collective "Futures" or "Futures
Contracts"), as a hedge against changes in prevailing levels of interest rates,
currency exchange rates or stock prices in order to establish more definitely
the effective return on securities or currencies held or intended to be acquired
by the Fund. The Fund's transactions 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 and stock prices.
The Fund will only 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 the Fund's exposure to interest rate, currency exchange rate and
stock market fluctuations, the Fund 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. An
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 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 the securities 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 are usually 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 Fund realizes a gain; if it is
more, the Fund realizes a loss. Conversely, if the offsetting sale price is more
than the original purchase price, the Fund realizes a gain; if it is less, the
Fund realizes a loss. The transaction costs must also be included in these
calculations. There can be no assurance, however, that the Fund will be able to
enter into an offsetting transaction with respect to a particular Futures
Contract at a particular time. If the Fund is not able to enter into an
offsetting transaction, the Fund 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 Fund.
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The Fund'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 the Fund owns, or Futures Contracts will be
purchased to protect the Fund 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 the Fund in order to initiate Futures trading and to maintain the
Fund's open positions in Futures Contracts. A margin deposit made when the
Futures Contract is entered into ("initial margin") is intended to assure the
Fund'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 modified significantly 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 Fund 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 value, a process
known as marking-to-market.
RISKS OF USING FUTURES CONTRACTS. The prices of Futures Contracts are
volatile and are influenced, among other things, by 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 the Fund'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 Contract 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 the Fund 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 Fund would continue to be subject to
market risk with respect to the position. In addition, except in the case of
purchased options, the Fund 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.
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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 the Fund 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.
The Fund 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 the Fund 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 Fund's portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the Fund 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 without a shareholder vote. This limitation does not limit
the percentage of the Fund'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. The Fund may either
accept or make delivery of the currency at the maturity of the Forward Contract.
The Fund may also, if its contra party agrees, prior to maturity, enter into a
closing transaction involving the purchase or sale of an offsetting contract.
The Fund engages in forward currency transactions in anticipation of, or to
protect itself against, fluctuations in exchange rates. The Fund might sell a
particular foreign currency forward, for example, when it holds securities
denominated in a foreign currency but anticipates, and seeks to be protected
against, a decline in the currency against the U.S. dollar. Similarly, the Fund
might sell the U.S. dollar forward when it holds securities 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, the Fund 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. The Fund 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 Company's Board of Directors.
The Fund may enter into Forward Contracts either with respect to specific
transactions or with respect to the Fund's portfolio positions. The precise
matching of the Forward Contract amounts and the value of specific securities
will not generally 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
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GT GLOBAL EMERGING MARKETS FUND
matures. Accordingly, it may be necessary for the Fund 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 Fund 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 Fund 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 accurately predicted, causing the
Fund to sustain losses on these contracts and transaction costs.
At or before the maturity of a Forward Contract requiring the Fund to sell a
currency, the Fund may either sell a portfolio 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 Fund will obtain, on the same maturity date, the same
amount of the currency that it is obligated to deliver. Similarly, the Fund 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.
The Fund 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 the Fund 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 usually are 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 the Fund 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
The Fund 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 Fund's securities
are denominated. Such currency hedges can protect against price movements in a
security that the Fund 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.
The Fund 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 Fund 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 Fund 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 Fund 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.
Statement of Additional Information Page 13
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GT GLOBAL EMERGING MARKETS FUND
COVER
Transactions using Forward Contracts, Futures Contracts and options (other than
options that the Fund has purchased) expose the Fund to an obligation to another
party. The Fund 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. The Fund will comply
with SEC guidelines regarding cover for these instruments and, if the guidelines
so require, set aside cash or other 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 the Fund's assets are used for cover or otherwise set aside, it could affect
portfolio management or the Fund's ability to meet redemption requests or other
current obligations.
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RISK FACTORS
- --------------------------------------------------------------------------------
SPECIAL CONSIDERATIONS AFFECTING EMERGING MARKETS. Investing in equity
securities of companies in emerging markets may entail greater risks than
investing in equity securities in developed countries. These risks include (i)
less social, political and economic stability; (ii) the small current size of
the markets for such securities and the currently low or nonexistent volume of
trading, which result in a lack of liquidity and in greater price volatility;
(iii) certain national policies which may restrict the Fund's investment
opportunities, including restrictions on investment in issuers or industries
deemed sensitive to national interests; (iv) foreign taxation; and (v) the
absence of developed structures governing private or foreign investment or
allowing for judicial redress for injury to private property. Investing in the
securities of companies in emerging markets, including the markets of Latin
America and certain Asian markets such as Taiwan, Malaysia and Indonesia, may
entail special risks relating to the 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 the capital invested. In the event of
such expropriation, nationalization or other confiscation by any country, the
Fund could lose its entire investment in any such country.
Settlement mechanisms in emerging securities markets may be less efficient and
reliable than in more developed markets. In such emerging securities markets
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.
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, the Fund could lose its entire investment in
any such country.
In addition, even though opportunities for investment may exist in emerging
markets, any change in the leadership or policies of the governments of those
countries or in the leadership or policies of any other government which
exercises a significant influence over those countries, may halt the expansion
of or reverse the liberalization of foreign investment policies now occurring
and thereby eliminate any investment opportunities which may currently exist.
Investors should note that upon the accession to power of authoritarian regimes,
the governments of a number of Latin American countries previously expropriated
large quantities of real and personal property similar to the property which
will be represented by the securities purchased by the Fund. The claims of
property owners against those governments were never finally settled. There can
be no assurance that any property represented by securities purchased by the
Fund will not also be expropriated, nationalized, or otherwise confiscated. If
such confiscation were to occur, the Fund could lose its entire investment in
such countries. The Fund's investments would similarly be adversely affected by
exchange control regulation in any of those countries.
Statement of Additional Information Page 14
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GT GLOBAL EMERGING MARKETS FUND
RELIGIOUS AND ETHNIC INSTABILITY. Certain countries in which the Fund 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 the Fund'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
the Fund invests and adversely affect the value of the Fund's assets.
ILLIQUID SECURITIES. The Fund may invest up to 15% of its net assets in
illiquid securities. Securities may be considered illiquid if the Fund cannot
reasonably expect within seven days to sell the securities for approximately the
amount at which the Fund values such securities. See "Investment Limitations."
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 the sale of liquid securities such as securities
eligible for trading on U.S. securities exchanges or in the over-the-counter
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, a Fund 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 Fund may be permitted to sell a security
under an effective registration statement. If, during such a period, adverse
market conditions were to develop, the Fund 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
the Fund, however, could affect adversely the marketability of such portfolio
securities and the Fund might be unable to dispose of such securities promptly
or at favorable prices.
With respect to liquidity determinations generally, the Company's Board of
Directors has the ultimate responsibility for determining whether specific
securities, including restricted securities pursuant to Rule 144A under the 1933
Act, are liquid or illiquid. The Board has delegated the function of making
day-to-day determinations of liquidity to the Manager, in accordance with
procedures approved by the Company's Board of Directors. 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 who make quotes for the security: (iii) the number of dealers who 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 affected
(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 in the
Fund's portfolio and periodically reports on such decisions to the Board of
Directors.
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 the Fund. These restrictions
or controls may at times limit or preclude investment in certain securities and
may increase the cost and expenses of the Fund. 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 may 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
Statement of Additional Information Page 15
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GT GLOBAL EMERGING MARKETS FUND
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. The Fund 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 the Fund 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 the Fund 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 the Fund, 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 the
Fund'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 the
Fund's holdings of securities and cash denominated in such currency and,
therefore, will cause an overall decline in the 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 Fund. Moreover, if the value
of the foreign currencies in which the Fund receives its income falls relative
to the U.S. dollar between receipt of the income and the making of Fund
distributions, the Fund may be required to liquidate securities in order to make
distributions if the Fund 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
U.S., and other economic and financial conditions affecting the world economy.
Although the Fund values its assets daily in terms of U.S. dollars, the Fund
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. The Fund 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 are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign currency to the
Fund at one rate, while offering a lesser rate of exchange should the Fund
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 are generally
subject to less governmental supervision and regulation than in the United
States, and foreign securities transactions are usually subject to fixed
commissions, which are generally 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 the Fund are
uninvested and no return is earned thereon. The inability of the Fund to make
intended security purchases due to settlement problems could cause the Fund to
miss attractive investment opportunities. Inability to dispose of a portfolio
security due to settlement problems either could result in losses to the Fund
due to subsequent declines in value of the portfolio security or, if the Fund
has entered into a contract to sell the security, could result in possible
liability to the purchaser. The Manager will consider such difficulties when
Statement of Additional Information Page 16
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GT GLOBAL EMERGING MARKETS FUND
determining the allocation of the Fund's assets, although the Manager does not
believe that such difficulties will have a material adverse effect on the Fund's
portfolio trading activities.
The Fund may use foreign custodians, which may involve risks in addition to
those related to the use of U.S. custodians. Such risks include uncertainties
relating to: (i) determining and monitoring the financial strength, reputation
and standing of the foreign custodian; (ii) maintaining appropriate safeguards
to protect the Fund's investments and (iii) possible difficulties in obtaining
and enforcing judgments against such custodians.
WITHHOLDING TAXES. The Fund's net investment income from foreign issuers may
be subject to withholding taxes by the foreign issuer's country, thereby
reducing the Fund's net investment income or delaying the receipt of income
where those taxes may be recaptured. See "Taxes."
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INVESTMENT LIMITATIONS
- --------------------------------------------------------------------------------
The Fund has adopted the following investment limitations as fundamental
policies which (unless otherwise noted) may not be changed without approval by
the holders 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, and
(ii) more than 50% of the outstanding shares.
The Fund may not:
(1) Invest 25% or more of the value of its total assets in the
securities of issuers conducting their principal business activities in the
same industry, except that this limitation shall not apply to securities
issued or guaranteed as to principal and interest by the U.S. Government or
any of its agencies or instrumentalities;
(2) Purchase or sell real estate, provided that the Fund may invest in
securities secured by real estate or interests therein or issued by
companies that invest in real estate or interests therein;
(3) Purchase or sell commodities or commodity contracts, except that the
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 transactions in
foreign currencies;
(4) Underwrite securities of other issuers, except to the extent that,
in connection with the disposition of portfolio securities, the Fund may be
deemed an underwriter under federal or state securities laws;
(5) Make loans, except that the Fund may purchase debt securities and
enter into repurchase agreements and make loans of portfolio securities;
(6) Purchase securities on margin, provided that the 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 the use of options, futures contracts, options thereon or
forward currency contracts. The Fund may make deposits of margin in
connection with futures and forward contracts and options thereon;
(7) Borrow money in excess of 33 1/3% of the Fund's total assets
(including the amount borrowed), less all liabilities and indebtedness
(other than borrowing). Transactions involving options, futures contracts,
options on futures contracts and forward currency contracts, and collateral
arrangements relating thereto will not be deemed to be borrowings;
(8) Mortgage, pledge, or in any other manner transfer as security for
any indebtedness any of its assets, except to secure permitted borrowings.
Collateral arrangements with respect to initial or variation margin for
futures contracts will not be deemed to be a pledge of the Fund's assets;
(9) Invest in direct interests or leases in oil, gas, or other mineral
exploration or development programs, however, the Fund may invest in
securities of companies that engage in these activities; or
(10) With respect to 75% of its total assets, invest more than 5% of its
assets in the securities of any one issuer or purchase more than 10% of the
outstanding voting securities of any one issuer.
Statement of Additional Information Page 17
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GT GLOBAL EMERGING MARKETS FUND
For purposes of concentration policy of the Fund contained in limitation (1)
above, the Fund intends to comply with the SEC staff position that securities
issued or guaranteed as to principal and interest by any single foreign
government or any supranational organizations in the aggregate are considered to
be securities of issuers in the same industry.
The following operating policies of the Fund are not fundamental policies and
may be changed by vote of a majority of the Company's Board of Directors without
shareholder approval. The Fund may not:
(1) Invest in securities of an issuer if the investment would cause the
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) Purchase or retain the securities of any issuer, if, to the Fund's
knowledge, one or more of the officers or Directors of the Fund, its
investment adviser, or distributor, each own beneficially more than 1/2 of
1% of the securities of such issuer and together own beneficially more than
5% of the securities of such issuer;
(4) 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 Fund's portfolio, after taking into
account unrealized profits and unrealized losses on any contracts the Fund
has entered into;
(5) Borrow money except for temporary or emergency purposes (not for
leveraging) not in excess of 33 1/3% of the value of the Fund's total
assets, except that the Fund may purchase securities when outstanding
borrowings represent less than 5% of the Fund's assets;
(6) 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; or
(7) Invest more than 10% of its total assets in securities that are
restricted as to resale without registration under the 1933 Act.
Investors should refer to the Prospectus for further information with respect to
the Fund's investment objective, which may not be changed without the approval
of the shareholders, and other investment policies, techniques and limitations,
which may be changed without shareholder approval.
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EXECUTION OF PORTFOLIO
TRANSACTIONS
- --------------------------------------------------------------------------------
Subject to policies established by the Company's Board of Directors, the Manager
is responsible for the execution of the Fund's portfolio transactions and the
selection of brokers and dealers who execute such transactions on behalf of the
Fund. In executing portfolio transactions, the Manager seeks the best net
results for the Fund, 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 the Fund may engage in soft dollar
arrangements for research services, as described below, the Fund 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 the Fund, the Manager may select brokers to
execute the Fund's portfolio transactions on the basis of the research and
brokerage services they provide to the Manager for its use in managing the Fund
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 brokers are in addition to, and not in lieu of, the
services required to be performed by the Manager under the Management Contract
(defined below). A commission paid to such brokers may be higher than that which
another qualified broker would have charged for effecting the same transaction,
provided that the Manager
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GT GLOBAL EMERGING MARKETS FUND
determines in good faith that such commission is reasonable in terms either of
that particular transaction or the overall responsibility of the Manager to the
Fund and its other clients and that the total commissions paid by the Fund will
be reasonable in relation to the benefits received by the Fund over the long
term. Research services may also be received from dealers who execute Fund
transactions.
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 the Fund toward payment of the Fund's expenses, such as
transfer agent and custodian fees.
Investment decisions for the Fund 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 the Fund. 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 the Fund is concerned, in other cases the Manager
believes that coordination and the ability to participate in volume transactions
will be beneficial to the Fund.
Under a policy adopted by the Company's Board of Directors, 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 Fund and the other funds for which the
Manager serves as investment manager in selecting brokers and 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 Fund and such other funds.
The Fund contemplates purchasing most foreign equity securities in
over-the-counter 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 United States transactions. There generally is less
government supervision and regulation of foreign stock exchanges and
broker/dealers 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 the Fund 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 over-the-
counter 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 the Fund may invest are generally traded in the
over-the-counter markets.
The Fund 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 has
adopted procedures in conformity with Rule 17e-1 under the 1940 Act to ensure
that all brokerage commissions paid to 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. For the fiscal years ended October 31, 1994, 1995 and 1996, the
Fund paid aggregate brokerage commissions of $1,747,307, $3,307,402 and $
- --------, respectively.
PORTFOLIO TRADING AND TURNOVER
The portfolio turnover rate is calculated by dividing the lesser of sales or
purchases of portfolio securities by the Fund's average month-end portfolio
value, excluding short-term investments. For purposes of this calculation,
portfolio securities exclude purchases and sales of debt securities having a
maturity at the date of purchase of one year or less. The Fund engages in
portfolio trading when the Manager has concluded that the sale of a security
owned by the Fund and/or the purchase of another security of better value can
enhance principal and/or increase income. A security may be sold to avoid any
prospective decline in market value, or a security may be purchased in
anticipation of a market rise. Consistent with the Fund's investment objective,
a security also may be sold and a comparable security purchased coincidentally
in order to take advantage of what is believed to be a disparity in the normal
yield and price relationship between the two securities.
Statement of Additional Information Page 19
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
Although the Fund generally does not intend to trade for short-term profits, the
securities in the Fund's portfolio will be sold whenever the Manager believes it
is appropriate to do so, without regard to the length of time a particular
security may have been held. Portfolio turnover rate will not be a limiting
factor when management deems portfolio changes appropriate. Higher portfolio
turnover involves correspondingly greater brokerage commissions and other
transaction costs that the Fund will bear directly, and may result in the
realization of net capital gains that are taxable when distributed to each
Fund's shareholders. For the fiscal years ended October 31, 1996 and 1995, the
Fund's portfolio turnover rates were
- ---% and 114%, respectively.
- --------------------------------------------------------------------------------
DIRECTORS AND EXECUTIVE
OFFICERS
- --------------------------------------------------------------------------------
The Company's Directors and Executive Officers are listed below.
<TABLE>
<CAPTION>
NAME, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- --------------------------------------- ------------------------------------------------------------------------------------------
<S> <C>
David A. Minella,* 43 Chairman, the Manager since October 1996; Director, Liechtenstein Global Trust (holding
Director, Chairman of the Board and company of the various international LGT companies) since 1990; President, Asset
President Management Division, Liechtenstein Global Trust since 1995; Director and President, LGT
50 California, Street Asset Management, Inc. ("LGT Asset Management"), formerly LGT Asset Management Holdings,
San Francisco CA 94111 Inc., since 1988; Director and President, the Manager from 1989 to October 1996; Director,
GT Global since 1987 and President, GT Global from 1987 to 1995; Director, GT Services
since 1990; President, GT Services from 1990 to 1995; Director, G.T. Global Insurance
Agency, Inc. ("G.T. Insurance") since 1992; and President, G.T. Insurance from 1992 to
1995. Mr. Minella also is a director or trustee of each of the other investment companies
registered under the 1940 Act that is managed or administered by the Manager.
C. Derek Anderson, 54 Chief Executive Officer, Anderson Capital Management, Inc.; Chairman and Chief Executive
Director Officer, Plantagenet Holdings, Ltd. from 1991 to present; Director, Munsingwear, Inc.; and
220 Sansome Street Director, American Heritage Group Inc. and various other companies. Mr. Anderson also is a
Suite 400 director or trustee of each of the other investment companies registered under the 1940
San Francisco, CA 94104 Act that is managed or administered by the Manager.
Frank S. Bayley, 55 Partner with Baker & McKenzie (a law firm); Director and Chairman, C.D. Stimson Company (a
Director private investment company); and Trustee, Seattle Art Museum. Mr. Bayley also is a
Two Embarcadero Center director or trustee or each of the other investment companies registered under the 1940
Suite 2400 Act that is managed or administered by the Manager.
San Francisco, CA 94111
Arthur C. Patterson, 52 Managing Partner, Accel Partners (a venture capital firm). He also serves as a director of
Director various computing and software companies. Mr. Patterson also is a director or trustee of
One Embarcadero Center each of the other investment companies registered under the 1940 Act that is managed or
Suite 3820 administered by the Manager.
San Francisco, CA 94111
</TABLE>
- --------------
* Mr. Minella is an "interested person" of the Company as defined by the 1940
Act due to his affiliation with the LGT companies.
Statement of Additional Information Page 20
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
<TABLE>
<CAPTION>
NAME, POSITION(S) WITH THE PRINCIPAL OCCUPATIONS AND BUSINESS
COMPANY AND ADDRESS EXPERIENCE FOR PAST 5 YEARS
- --------------------------------------- ------------------------------------------------------------------------------------------
<S> <C>
Ruth H. Quigley, 59 Private investor; and President, Quigley Friedlander & Co., Inc. (a
Director financial advisory services firm) from 1984 to 1986. Ms. Quigley also is
1055 California Street a director or trustee or each of the other investment companies
San Francisco, CA 94108 registered under the 1940 Act that is managed or administered by the
Manager.
James R. Tufts, 37 Chief Information Officer for the Manager since October 1996; President,
Vice President and Chief GT Services since 1995; Senior Vice President of Finance and
Financial Officer Administration, GT Global, GT Services and G.T. Insurance, from 1994 to
50 California Street 1995; Senior Vice President of Finance and Administration, LGT Asset
San Francisco, CA 94111 Management, and the Manager from 1994 to October 1996; Vice President of
Finance, LGT Asset Management, the Manager, GT Global and GT Services
from 1990 to 1994; Vice President of Finance, G.T. Insurance from 1992
to 1994; and a Director of the Manager, GT Global and GT Services since
1991.
Kenneth W. Chancey, 50 Vice President of Mutual Fund Accounting, the Manager since 1992; and
Vice President and Vice President, Putnam Fiduciary Trust Company from 1989 to 1992.
Principal Accounting Officer
50 California Street
San Francisco, CA 94111
Helge K. Lee, 49 Executive Vice President, Asset Management Division, Liechtenstein
Vice President and Secretary Global Trust since October 1996; Senior Vice President, LGT Asset
50 California Street Management, the Manager, GT Global, GT Services and G.T. Insurance from
San Francisco, CA 94111 February 1996 to October 1996; Vice President, LGT Asset Management, the
Manager, GT Global, GT Services and G.T. Insurance from May 1994 to
February 1996; General Counsel, LGT Asset Management, the Manager, GT
Global, GT Services and G.T. Insurance from May 1994 to October 1996;
Secretary, the Manager, since May 1994; Secretary, LGT Asset Management,
GT Global, GT Services and G.T. Insurance from May 1994 to October 1996;
Senior Vice President, General Counsel and Secretary, Strong/Corneliuson
Management, Inc.; and Secretary, each of the Strong Funds from October
1991 to May 1994.
</TABLE>
------------------------------
The Board of Directors has a Nominating and Audit Committee, comprised of Miss
Quigley and Messrs. Anderson, Bayley and Patterson, which is responsible for
nominating persons to serve as Directors, reviewing audits of the Company and
its funds and recommending firms to serve as independent auditors of the
Company. Each of the Directors and officers of the Company is also a Director
and officer of G.T. Investment Portfolios, Inc., G.T. Global Developing Markets
Fund, Inc. and GT Global Floating Rate Fund, Inc., a Trustee and officer of G.T.
Global Growth Series and a Trustee and officer of G.T. Greater Europe Fund,
Global High Income Portfolio, G.T. Global Variable Investment Trust, G.T. Global
Variable Investment Series and Global Investment Portfolio, which also are
registered investment companies managed by the Manager. Each Director and
officer serves in total as a Director and or Trustee and officer, respectively,
of
- -- registered investment companies with
- -- series managed or administered by the Manager. The Company pays each Director
who is not a director, officer or employee of the Manager or any affiliated
company $5,000 per annum, plus $300 per Fund for each meeting of the Board
attended, and reimburses travel and other expenses incurred in connection with
attendance at such meetings. Other Directors and officers receive no
compensation or expense reimbursement from the Company. For the fiscal year
ended October 31, 1996, Mr. Anderson, Mr. Bayley, Mr. Patterson and Ms. Quigley,
who are not directors, officers or employees of the Manager or any affiliated
company, received total compensation of $
- --------, $
- --------, $
- -------- and $
- --------, respectively, from the Company for their services as Directors. For
the year ended October 31, 1996, Mr. Anderson, Mr. Bayley, Mr. Patterson and Ms.
Quigley received total compensation of $
- --------, $
- --------, $
- -------- and $
- --------, respectively, from the
- -- GT Global Mutual Funds for which he or she serves as a Director or Trustee.
Fees and expenses disbursed to the Directors contained no accrued or payable
pension or retirement benefits. As of the date of Additional Information, the
officers and Directors and their families as a group owned in the aggregate
beneficially or of record less than 1% of the outstanding shares of the Fund or
of all the Company's funds in the aggregate.
Statement of Additional Information Page 21
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
MANAGEMENT
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT AND ADMINISTRATION SERVICES
Chancellor LGT Asset Management, Inc. (the "Manager")serves as the Fund's
investment manager and administrator under an Investment Management and
Administration Contract ("Management Contract") between the Company and the
Manager. As investment manager and administrator, the Manager makes all
investment decisions for the Fund and administers the Fund's affairs. Among
other things, the Manager furnishes the services and pays the compensation and
travel expenses of persons who perform the executive, administrative, clerical
and bookkeeping functions of the Company and the Fund, and provides suitable
office space, necessary small office equipment and utilities. For these
services, the Fund pays the Manager investment management and administration
fees, based on the Fund's average daily net assets, computed daily and paid
monthly at the annualized rate of .975% on the first $500 million, .95% on the
next $500 million, .925% on the next $500 million and .90% on amounts
thereafter.
The Management Contract may be renewed for one-year terms, provided that any
such renewal has been specifically approved at least annually by: (i) the
Company's Board of Directors, or by the vote of a majority of the Fund's
outstanding voting securities (as defined in the 1940 Act), and (ii) a majority
of Directors who are not parties to the Management Contract or "interested
persons" of any such party (as defined in the 1940 Act), cast in person at a
meeting called for the specific purpose of voting on such approval. The
Management Contract provides that with respect to the Fund either the Company or
the Manager may terminate the Contract without penalty upon sixty (60) days'
written notice to the other party. The Management Contract terminates
automatically in the event of its assignment (as defined in the 1940 Act).
The Manager and GT Global have undertaken to limit the Fund's Advisor Class
share expenses (exclusive of brokerage commissions, taxes, interest, and
extraordinary items) to the maximum annual level of 1.90% of the average daily
net assets of the Advisor Class shares of the Fund. For the fiscal years ended
October 31, 1994, 1995 and 1996, the Fund paid investment management and
administration fees to the Manager in the amounts of $4,702,869, $5,410,744 and
$
- --------, respectively.
Certain emerging market countries require a local entity to provide
administrative services for all direct investments by foreigners. Where required
by local law, the Fund intends to retain a local entity to provide such
administrative services. The local administrator will be paid a fee by the Fund
for its services.
DISTRIBUTION SERVICES
The Fund's Advisor Class shares are offered through the Fund's principal
underwriter and distributor, GT Global, on a "best efforts" basis without a
sales charge or a contingent deferred sales charge.
TRANSFER AGENCY AND ACCOUNTING AGENT SERVICES
GT Global Investor Services, Inc. ("Transfer Agent") has been retained by the
Fund to perform shareholder servicing, reporting and general transfer agent
functions for the Fund. 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 also is reimbursed
by the Fund for its out-of-pocket expenses for such items as postage, forms,
telephone charges, stationery and office supplies.
The Manager serves as the Fund's pricing and accounting agent. The monthly fee
for these services to the Manager is a percentage, not to exceed 0.03% annually,
of the Fund's average daily net assets. The annual fee rate is derived by
applying 0.03% to the first $5 billion of assets of all registered mutual funds
advised by the Manager ("GT Global Mutual Funds") and 0.02% to the assets in
excess of $5 billion and allocating the result according to each Fund's average
daily net assets. As of October 31, 1996, the Fund paid the Manager fees of $
- ------ for such accounting services.
EXPENSES OF THE FUND
As described in the Prospectus, the Fund pays all of its own expenses not
assumed by other parties. These expenses include, in addition to the advisory
and brokerage fees discussed above, legal and audit expenses, custodian and
transfer agency and pricing and accounting fees, directors' fees, organizational
fees, fidelity bond and other insurance premiums, taxes, extraordinary expenses
and expenses of reports and prospectuses sent to existing investors. The
allocation of general Company expenses and expenses shared among the Fund and
other funds organized as series of the Company are
Statement of Additional Information Page 22
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
allocated on a basis deemed fair and equitable, which may be based on the
relative net assets of the Fund or the nature of the services performed and
relative applicability to the Fund. Expenditures, including costs incurred in
connection with the purchase or sale of portfolio securities, which are
capitalized in accordance with generally accepted accounting principles
applicable to investment companies, are accounted for as capital items and not
as expenses. The ratio of the Fund's expenses to its relative net assets can be
expected to be higher than the expense ratios of funds investing solely in
domestic securities, since the cost of maintaining the custody of foreign
securities and the rate of investment management fees paid by the Fund generally
are higher than the comparable expenses of such other funds.
- --------------------------------------------------------------------------------
VALUATION OF FUND SHARES
- --------------------------------------------------------------------------------
As described in the Prospectus, the Fund's net asset value per share for each
class of shares is determined at the end of regular trading on The New York
Stock Exchange, Inc. ("NYSE") (currently at 4:00 p.m. Eastern time, unless
weather, equipment failure or other factors contribute to an earlier closing
time), on each Business Day as open for business. 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 Funds' portfolio securities and other assets are valued as follows:
Equity securities, including ADRs, ADSs, CDRs and EDRs, which are traded on
stock exchanges, are valued at the last sale price on the exchange, or in the
principal over-the-counter market on which such securities are traded, as of the
close of business on the day the securities are being valued or, lacking any
sales, at the last available bid price. In cases where securities are traded on
more than one exchange, the securities are valued on the exchange determined by
the Manager to be the primary market. Securities and assets for which market
quotations are not readily available (including restricted securities which are
subject to limitations as to their sale) are valued at fair value as determined
in good faith by or under the direction of the Board of Directors. Trading in
securities on European and Far Eastern securities exchanges and over-the-counter
markets is normally completed well before the close of the business day in New
York.
Long-term debt obligations are valued at the mean of representative quoted bid
and asked prices for such securities or, if such prices are not available, at
prices for securities of comparable maturity, quality and type; however, when
the Manager deems it appropriate, prices obtained for the day of valuation from
a bond pricing service will be used. Short-term investments are amortized to
maturity based on their cost, adjusted for foreign exchange translation,
provided such valuations represent fair value.
Options on indices, securities and currencies purchased by the Fund are valued
at their last bid price in the case of listed options or, in the case of OTC
options, at the 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. The value of each security denominated in a currency other
than U.S. dollars will be translated into U.S. dollars at the prevailing
exchange rate as determined by the Manager on that day. When market quotations
for futures and options on futures held by the Fund are readily available, those
positions will be valued based upon such quotations.
Securities and other assets for which market quotations are not readily
available are valued at fair value as determined in good faith by or under the
direction of the Company's Board of Directors. The valuation procedures applied
in any specific instance are likely to vary from case to case. However,
consideration generally is given to the financial position of the issuer and
other fundamental analytical data relating to the investment and to the nature
of the restrictions on disposition of the securities (including any registration
expenses that might be borne by the Fund in connection with such disposition).
In addition, specific factors also generally are considered, such as the cost of
the investment, the market value of any unrestricted securities of the same
class (both at the time of purchase and at the time of valuation), the size of
the holding, the prices of any recent transactions or offers with respect to
such securities and any available analysts' reports regarding the issuer.
The fair value of any other assets is added to the value of all securities
positions to arrive at the value of the Fund's total assets. The Fund's
liabilities, including accruals for expenses, are deducted from its total
assets. Once the total value of the Fund's net assets is so determined, that
value is then divided by the total number of shares outstanding (excluding
treasury shares), and the result, rounded to the nearer cent, is the net asset
value per share.
Statement of Additional Information Page 23
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
Any assets or liabilities initially denominated in terms of foreign currencies
are translated into U.S. dollars at the official exchange rate or at the mean of
the current bid and asked prices of such currencies against the U.S. dollar last
quoted by a major bank that is a regular participant in the foreign exchange
market or on the basis of a pricing service that takes into account the quotes
provided by a number of such major banks. If none of these alternatives are
available or none are deemed to provide a suitable methodology for converting a
foreign currency into U.S. dollars, the Board of Directors in good faith will
establish a conversion rate for such currency.
Securities trading in emerging markets may not take place on all days on which
the NYSE is open. Further, trading takes place in Japanese markets on certain
Saturdays and in various foreign markets on days on which the NYSE is not open.
Consequently, the calculation of the Fund's net asset values therefore may not
take place contemporaneously with the determination of the prices of securities
held by the Fund. Events affecting the values of portfolio securities that occur
between the time their prices are determined and the close of regular trading on
the NYSE will not be reflected in the Fund's net asset value unless the Manager,
under the supervision of the Company's Board of Directors, determines that the
particular event would materially affect net asset value. As a result, the
Fund's net asset value may be significantly affected by such trading on days
when a shareholder cannot provide or redeem the Fund.
- --------------------------------------------------------------------------------
INFORMATION RELATING TO SALES
AND REDEMPTIONS
- --------------------------------------------------------------------------------
PAYMENT AND TERMS OF OFFERING
Payment of Advisor Class shares 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 cancelled due to nonpayment (for example, because a check is returned for
"not sufficient funds"), the person who made the order will be responsible for
any loss incurred by the 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 cancelled 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.
EXCHANGES BETWEEN FUNDS
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
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 60 days prior notice to the shareholders of such fund and is available only
in states where the exchange may be legally made. 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
Statement of Additional Information Page 24
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
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 30 days' written notice.
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 make it not reasonably practicable for the
Fund to dispose of its portfolio securities or fairly to determine 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 Company's Board of Directors, 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 Company 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 value of the Fund's
net assets at the beginning of such period. This election is irrevocable so long
as Rule 18f-1 remains in effect, unless the SEC by order upon application
permits the withdrawal of such election.
Statement of Additional Information Page 25
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
TAXES
- --------------------------------------------------------------------------------
GENERAL
In order to continue to qualify for treatment as a regulated investment company
("RIC") under the Internal Revenue Code of 1986, as amended ("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, net short-term capital gain and net gains from certain foreign currency
transactions) ("Distribution Requirement") and must meet several additional
requirements. These requirements include the following: (1) the Fund must derive
at least 90% of its gross income each taxable year from dividends, interest,
payments with respect to securities loans and gains from the sale or other
disposition of securities or foreign currencies, or other income (including
gains from options, Futures or Forward Contracts) derived with respect to its
business of investing in securities or those currencies ("Income Requirement");
(2) 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 -- options or Futures (other than those on
foreign currencies), or foreign currencies (or options, Futures or Forward
Contracts thereon) that are not directly related to the Fund's principal
business of investing in securities (or options and Futures with respect to
securities) ("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.
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 from U.S.
corporations. However, dividends received by a corporate shareholder and
deducted by it pursuant to the dividends-received deduction are subject
indirectly to the alternative minimum tax.
If 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.
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.
FOREIGN TAXES
Dividends and interest received by the Fund may be subject to income,
withholding or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors. If more than 50% of the value of
the Fund's total assets at the close of its taxable year consists of securities
of foreign corporations, the Fund will be eligible to, and may, file an election
with the Internal Revenue Service that will enable its shareholders, in effect,
to receive the benefit of the foreign tax credit with respect to any foreign
income taxes paid by it. Pursuant to the election, the Fund will treat those
taxes as dividends paid to its shareholders and each shareholder will be
required to (1) include in gross income, and treat as paid by him, his
proportionate share of those taxes, (2) treat his share of those taxes and of
any dividend paid by the Fund that
Statement of Additional Information Page 26
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
represents income from foreign sources as his own income from those sources, and
(3) either deduct the taxes deemed paid by him in computing his taxable income
or, alternatively, use the foregoing information in calculating the foreign tax
credit against his federal income tax. The Fund will report to its shareholders
shortly after each taxable year their respective shares of the Fund's income
from sources within, and taxes paid to, foreign countries if it makes this
election.
PASSIVE FOREIGN INVESTMENT COMPANIES
The Fund may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is a foreign corporation that, in general, meets either of the
following tests: (1) at least 75% of its gross income is passive or (2) an
average of at least 50% of its assets produce, or are held for the production
of, passive income. Under certain circumstances, the Fund would be subject to
federal income tax on a portion of any "excess distribution" received, on the
stock or of any gain from disposition of, stock of a PFIC (collectively "PFIC
income"), plus interest thereon, even if the Fund distributed the PFIC income as
a taxable dividend to its shareholders. The balance of the PFIC income would be
included in the Fund's investment company taxable income and, accordingly, would
not be taxable to the Fund to the extent that income is distributed to its
shareholders.
If the Fund does invest in a PFIC and elects to treat the PFIC as a "qualified
electing fund" ("QEF"), then in lieu of the foregoing tax and interest
obligation, the Fund would be required to include in income each taxable year
its pro rata share of the QEF's ordinary earnings and net capital gain (the
excess of net long-term capital gain over net short-term capital loss) -- which
most likely would have to be distributed to satisfy the Distribution Requirement
and to avoid imposition of the Excise Tax -- even if those earnings and gain
were not received by the Fund. In most instances it will be very difficult, if
not impossible, to make this election because of certain requirements thereof.
Pursuant to proposed regulations, open-end RICs, such as the Fund, would be
entitled to elect to "mark-to-market" their stock in certain PFICs.
"Marking-to-market," in this context, means recognizing as gain for each taxable
year the excess, as of the end of that year, of the fair market value of each
such PFIC's stock over the adjusted basis in that stock (including
mark-to-market gain for each prior year for which an election was in effect).
NON-U.S. SHAREHOLDERS
Dividends paid by the Fund to a shareholder who, as to the United States, is a
nonresident alien individual, 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
business," in which case the reporting and withholding requirements applicable
to 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.
OPTIONS, FUTURES AND FOREIGN CURRENCY TRANSACTIONS
The use of hedging transactions, such as selling (writing) and purchasing
options and Futures Contracts and entering into Forward Contracts, involves
complex rules that will determine, for federal income tax purposes, the
character and timing of recognition of the gains and losses the Fund realizes in
connection therewith. Gains from foreign currencies (except certain gains that
may be excluded by future regulations), and gains from the disposition of
options, Futures and Forward Contracts derived by the Fund with respect to its
business of investing in securities or foreign currencies, will qualify as
permissible income under the Income Requirement. However, income from the
disposition by the Fund of options and Futures (other than those on foreign
currencies) will be subject to the Short-Short Limitation if they are held for
less than three months. Income from the disposition by the Fund of foreign
currencies, and options, Futures and Forward Contracts on foreign currencies,
that are not directly related to the Fund's principal business of investing in
securities (or options and futures with respect thereto) also will be subject to
the Short-Short Limitation if they are held for less than three months.
If the Fund satisfies certain requirements, any increase in value of a position
that is part of a "designated hedge" will be offset by any decrease in value
(whether realized or not) of the offsetting hedging position during the period
of the hedge for purposes of determining whether the Fund satisfies the
Short-Short Limitation. Thus, only the net gain (if any) from the designated
hedge will be included in gross income for purposes of that limitation. The Fund
intends that, when it engages in hedging transactions, it will qualify for this
treatment, but at the present time it is not clear whether this treatment will
be available for all of those transactions. To the extent this treatment is not
available, the Fund may be forced to defer the closing out of certain options,
Futures, Forward Contracts or foreign currency positions beyond the time when it
otherwise would be advantageous to do so, in order for the Fund to continue to
qualify as a RIC.
Statement of Additional Information Page 27
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
Futures and Forward Contracts that are subject to Section 1256 of the Code
(other than those that are part of a "mixed straddle") ("Section 1256
Contracts") and that are held by the Fund at the end of its taxable year
generally will be deemed to have been sold at market value for federal income
tax purposes. Sixty percent of any net gain or loss recognized on these deemed
sales, and 60% of any net gain or loss realized from any actual sales of Section
1256 Contracts, will be treated as long-term capital gain or loss, and the
balance will be treated as short-term capital gain or loss. Section 988 of the
Code also may apply to gains and losses from transactions in foreign currencies,
foreign currency-denominated debt securities and options, Futures and Forward
Contracts and options on foreign currencies ("Section 988 gains" or loss). Each
Section 988 gain or loss generally is computed separately and treated as
ordinary income or loss. In the case of overlap between Sections 1256 and 988,
special provisions determine the character and timing of any income, gain or
loss. The Fund attempts to monitor Section 988 transactions to minimize any
adverse tax impact.
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, located 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) in Tokyo; LGT Asset Management
Pte. Ltd., formerly G.T. Management (Singapore) PTE Ltd. located in Singapore;
LGT Asset Management Ltd., formerly G.T. Management (Australia) Ltd., located in
Sydney; and LGT Asset Management GmbH, formerly BIL Asset Management GmbH,
located in Frankfurt, Germany.
CUSTODIAN
State Street Bank and Trust Company ("State Street"), 225 Franklin Street,
Boston, Massachusetts 02110, acts as custodian of the Fund's assets. State
Street is authorized to establish and has established separate accounts in
foreign currencies and to cause securities of the Fund to be held in separate
accounts outside the United States in the custody of non-U.S. banks.
INDEPENDENT ACCOUNTANTS
The Funds' independent accountants are Coopers & Lybrand L.L.P., One Post Office
Square, Boston, Massachusetts 02109. Coopers & Lybrand L.L.P. will conduct an
annual audit of the Fund, assist in the preparation of the Fund's federal and
state income tax returns and consult with the Company and the Fund as to matters
of accounting, regulatory filings, and federal and state income taxation.
The audited financial statements of the Company 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 said firm as experts in accounting and auditing.
USE OF NAME
The Manager has granted the Company 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 Company and/or the Fund at any time, or to grant the use of such
names to any other company.
Statement of Additional Information Page 28
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
INVESTMENT RESULTS
- --------------------------------------------------------------------------------
The Fund's "Standardized Return," 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 ("T") is computed by using the value at the end of
the period ("EV") 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) to the (n)th power = EV. 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 $1,000 initial investment;
(2) for Class B shares, 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
Board; and (4) a complete redemption at the end of any period illustrated.
The Fund's Standardized Returns for its Class A shares, stated as average
annualized total returns, for the periods shown, were as follows:
<TABLE>
<CAPTION>
PERIOD STANDARDIZED RETURN
- ---------------------------------------------------------------------------------------------------- ---------------------
<S> <C>
Fiscal year ended October 31, 1996..................................................................
---%
May 18, 1992 (commencement of operations) to October 31, 1996.......................................
---%
</TABLE>
The Fund's Standardized Returns for its Class B shares which were first offered
on April 1, 1993, stated as average annual total returns, for the periods shown,
were:
<TABLE>
<CAPTION>
PERIOD STANDARDIZED RETURN
- ---------------------------------------------------------------------------------------------------- ---------------------
<S> <C>
Fiscal year ended October 31, 1996..................................................................
---%
April 1, 1993 (commencement of operations) to October 31, 1996......................................
---%
</TABLE>
The Fund's Standardized Returns for its Advisor Class shares, stated as average
annualized total returns, for the periods shown, were as follows:
<TABLE>
<CAPTION>
PERIOD STANDARDIZED RETURN
- ---------------------------------------------------------------------------------------------------- ---------------------
<S> <C>
Fiscal year ended October 31, 1996..................................................................
---%
June 1, 1995 (commencement of operations) to October 31, 1996.......................................
---%
</TABLE>
"Non-Standardized Return," as referred to in the Prospectus, is calculated for a
specified period of time by assuming the investment of $1,000 in Fund shares and
further assuming the reinvestment of all dividends and other distributions made
to Fund shareholders in additional Fund shares at their net asset value.
Percentage rates of return are then calculated by comparing this assumed initial
investment to the value of the hypothetical account at the end of the period for
which the Non-Standardized Return is quoted. As discussed in the Prospectus, the
Fund may quote non-standardized total returns that do not reflect the effect of
sales charges. Non-Standardized Returns may be quoted from the same or different
time periods for which Standardized Returns are quoted.
The Fund's Non-Standardized Returns for Class A shares, stated as aggregate
total returns, for the periods shown, were as follows:
<TABLE>
<CAPTION>
NON-STANDARDIZED
PERIOD AGGREGATE TOTAL RETURN
- -------------------------------------------------------------------------------------------------- -----------------------
<S> <C>
Fiscal year ended October 31, 1996................................................................
---%
May 18, 1992 (commencement of operations) to October 31, 1996.....................................
---%
</TABLE>
The Fund's Non-Standardized Return for its Class B shares which were first
offered on April 1, 1993, stated as aggregate total returns, for the periods
shown, were as follows:
<TABLE>
<CAPTION>
NON-STANDARDIZED RETURN
PERIOD AGGREGATE TOTAL RETURN
- ------------------------------------------------------------------------------------------------ -------------------------
<S> <C>
Fiscal year ended October 31, 1996..............................................................
---%
April 1, 1993 (commencement of operations) to October 31, 1996..................................
---%
</TABLE>
Statement of Additional Information Page 29
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
The Fund's Non-Standardized Returns for its Advisor Class shares, stated as
aggregate total returns, for the periods shown, were as follows:
<TABLE>
<CAPTION>
NON-STANDARDIZED
PERIOD AGGREGATE TOTAL RETURN
- -------------------------------------------------------------------------------------------------- -----------------------
<S> <C>
Fiscal year ended October 31, 1996................................................................
---%
June 1, 1995 (commencement of operations) to October 31, 1996.....................................
---%
</TABLE>
The Fund's Non-Standardized Returns for its Class A shares, stated as average
annualized total returns, for the periods shown, were as follows:
<TABLE>
<CAPTION>
NON-STANDARDIZED
AVERAGE ANNUALIZED
PERIOD TOTAL RETURN
- ----------------------------------------------------------------------------------------------------- -------------------
<S> <C>
Fiscal year ended October 31, 1996...................................................................
---%
May 18, 1992 (commencement of operations) to October 31, 1996........................................
---%
</TABLE>
The Fund's Non-Standardized Returns for its Class B shares, stated as average
annualized total returns, for the periods shown, were:
<TABLE>
<CAPTION>
NON-STANDARDIZED
AVERAGE ANNUALIZED
PERIOD TOTAL RETURN
- ----------------------------------------------------------------------------------------------------- -------------------
<S> <C>
Fiscal year ended October 31, 1996...................................................................
---%
April 1, 1993 (commencement of operations) to October 31, 1996.......................................
---%
</TABLE>
The Fund's Non-Standardized Returns for its Advisor Class shares, stated as
average annualized total returns, for the periods shown, were as follows:
<TABLE>
<CAPTION>
NON-STANDARDIZED
AVERAGE ANNUALIZED
PERIOD TOTAL RETURN
- ----------------------------------------------------------------------------------------------------- -------------------
<S> <C>
Fiscal year ended October 31, 1996...................................................................
---%
June 1, 1995 (commencement of operations) to October 31, 1996........................................
---%
</TABLE>
IMPORTANT POINTS TO NOTE ABOUT DATA RELATING TO EMERGING EQUITY AND BOND MARKETS
Information relating to foreign market performance, diversification and market
capitalization is based on sources believed to be reliable, but is neither
all-inclusive nor warranted as to accuracy by the Company or the Manager. The
authors and publishers of such material are not to be considered as "experts"
under the Securities Act of 1933 on account of the inclusion of such information
herein. Stocks chosen by Morgan Stanley Capital International or the IFC for
inclusion in its various international market indicies may not necessarily
constitute a representative cross-section of the particular markets.
GT Global believes that information relating to foreign market performance and
market capitalization 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 such indices. The performance of indices does not take expenses
into account, while the Fund incurs expenses in its operations which will reduce
performance. Moreover, the Fund is actively managed, i.e. the Manager as the
Fund's investment manager actively purchases and sells securities in seeking the
Fund's investment objective; this will cause the performance of the Fund to
differ from indices.
The Fund and GT Global may from time to time 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 or
BBB by Standard and Poor's, or, in the case of nonrated bonds, BBB by Fitch
Investors Service (excluding Collateralized Mortgage Obligations).
(3) 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.
Statement of Additional Information Page 30
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
(4) 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).
(5) Data and mutual fund rankings published or prepared by Lipper
Analytical Data Services, Inc. ("Lipper"), CDA/Wiesenberger Investment
Company 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 the Fund may be compared to the Fund's "peer
group" as defined by Lipper, CDA/Wiesenberger and/or other firms as
applicable, or to specific funds or groups of funds within or without such
peer group. 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.
(6) Bear Stearns Foreign Bond Index, which provides simple average
returns for individual countries and GNP-weighted index, beginning in 1975.
The returns are broken down by local market and currency.
(7) Ibbottson Associates International Bond Index, which provides a
detailed breakdown of local market and currency returns since 1960.
(8) Standard & Poor's "500" 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 U.S.
(9) Salomon Brothers Broad Investment Grade Index which is a widely used
index composed of U.S. domestic government, corporate and mortgage-back
fixed income securities.
(10) Dow Jones Industrial Average.
(11) CNBC/Financial News Composite Index.
(12) 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 800
companies of Europe, Australia and the Far East.
(13) International Finance Corporation (IFC) Emerging Markets Data Base
which provides detailed statistics on stock markets in developing countries.
(14) 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.
(15) The World Bank Publication of Trends in Developing Countries (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.
(16) Salomon Brothers Global Telecommunications Index is composed of
telecommunications companies in the developing and emerging countries.
(17) Datastream and Worldscope an on-line database retrieval service for
information including but not limited to international financial and
economic data.
(18) International Financial Statistics, which is produced by the
International Monetary Fund.
(19) Various publications and annual reports such as the World
Development Report, produced by the World Bank and its affiliates.
(20) Various publications from the International Bank for Reconstruction
and Development/The World Bank.
(21) Various publications including but not limited to ratings agencies
such as Moody's Investors Service, Fitch Investors Service and Standard &
Poor's.
(22) Wilshire Associates which is an on-line database for international
financial and economic data including performance measure for a wide range
of securities.
(23) Various publications from the Organization for Economic Cooperation
and Development (OECD).
Statement of Additional Information Page 31
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
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, 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, included but not limited to, Money 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. Each 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.
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. The Fund does not represent a complete
investment program and investors should consider the Fund as appropriate for a
portion of their overall investment portfolio with regard to their long-term
investment goals.
GT Global believes that a growing number of consumer products, including but not
limited to home appliances, automobiles and clothing, purchased by Americans are
manufactured abroad. GT Global believes that investing globally in the companies
that produce products for U.S. consumers can help U.S. investors seek protection
of the value of their assets against the potentially increasing costs of foreign
manufactured goods. Of course, there can be no assurance that there will be any
correlation between global investing and the costs of such foreign goods unless
there is a corresponding change in value of the U.S. dollar to foreign
currencies. From time to time, GT Global may refer to or advertise the names of
such companies although there can be no assurance that any GT Global Mutual Fund
may own the securities of these companies.
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 Fund assets under management or
rankings by DALBAR Surveys, Inc. in advertising materials.
The Fund may compare its performance to that of other compilations or indices of
comparable quality to those listed above which may be developed and made
available in the future. The Fund may be compared in advertising to Certificates
of Deposit (CDs), the Bank Rate Monitor National Index, an average of the quoted
rates for 100 leading banks and thrifts in ten U.S. cities chosen to represent
the ten largest Consumer Metropolitan statistical areas, or other investments
issued by banks. The Fund differs from bank investments in several respects. The
Fund may offer greater liquidity or higher potential returns than CDs; but
unlike CDs, the Fund will have a fluctuating share price and return and is not
FDIC insured.
The Fund's performance may be compared to the performance of other mutual funds
in general, or to the performance of particular types of mutual funds. These
comparisons may be expressed as mutual fund rankings prepared by Lipper
Analytical Services, Inc. (Lipper), an independent service which monitors the
performance of mutual funds. 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 Fund's performance
may be compared to mutual fund performance indices prepared by Lipper.
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.
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 is 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.
Statement of Additional Information Page 32
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
In advertising materials, GT Global may reference or discuss its products and
services, which may include: retirement investing; the effects of dollar-cost
averaging and saving for college or a home. In addition, GT Global may quote
financial or business publications and periodicals, including model portfolios
or allocations, as they relate to fund management, investment philosophy, and
investment techniques.
The Fund may discuss its Quotron number, CUSIP number, and its current portfolio
management team.
From time to time, the Fund's performance also may be compared to other mutual
funds tracked by financial or business publications and periodicals. For
example, the fund may quote Morningstar,Inc. in its advertising materials.
Morningstar, Inc. is a mutual fund rating service that rates mutual funds on the
basis of risk-adjusted performance. In addition, the Fund may quote financial or
business publications and periodicals as they relate to fund management,
investment philosophy, and investment techniques. Rankings that compare the
performance of GT Global Mutual Funds to one another in appropriate categories
over specific periods of time may also be quoted in advertising.
The Fund may quote various measures of volatility and benchmark correlation such
as beta, standard deviation and R(2) 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. Measures of benchmark correlation indicate how valid a
comparative benchmark may be. 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. 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.
Each Fund may be available for purchase through retirement plans of 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 the GT Global Mutual Funds through various retirement plans that
offer deferral of income taxes on investment earnings and may also enable you to
make pre-tax contributions. Because of their advantages, these retirement plans
may produce returns superior to comparable non-retirement investments. The Funds
may also discuss these plans which include:
INDIVIDUAL RETIREMENT ACCOUNTS (IRAS): Any individual who receives earned income
from employment (including self-employment) can contribute up to $2,000 each
year to an IRA (or if less, 100% of compensation). If your spouse is not
employed, a total of $2,250 may be contributed each year to IRAs set up for you
and your spouse (subject to the maximum of $2,000 to either IRA). 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 rollover (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 roll-over 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 AND SALARY-REDUCTION SEP-IRAS: Simplified employee pension (SEP) plans
and salary-reduction SEPs provide self-employed individuals (and any eligible
employees) with benefits similar to Keogh-type plans or 401(k) plans, but with
fewer administrative requirements and therefore potential lower annual
administration expenses.
403(B)(7) CUSTODIAL ACCOUNTS: Employees of public schools and most other
not-for-profit corporations can make pre-tax salary reduction contributions to
these accounts.
Statement of Additional Information Page 33
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
401(K), PROFIT SHARING (INCLUDING 401(K)) AND MONEY PURCHASE PENSION
PLANS: Corporations can sponsor these qualified defined contribution plans for
their employees. A 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).
GT Global may from time to time in its sales methods and advertising discuss the
risks inherent in investing. The major types of investment risk are market risk,
industry risk, credit risk, interest rate 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 Funds and GT Global will quote certain data regarding
individual countries, regions, world stock exchanges, and economic and
demographic statistics from sources GT Global deems reliable, including but not
limited to, the economic and financial data of such financial organizations as:
1) Stock market capitalization: Morgan Stanley Capital International World
Indices, International Finance Corporation and Datastream.
2) Stock market trading volume: Morgan Stanley Capital International Industry
Indices, International Finance Corporation.
3) The number of listed companies: International Finance Corporation, G.T.
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 Indices.
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, International Finance Corporation and Datastream.
7) The Consumer Price Index and inflation rate: The World Bank, Datastream and
International Finance Corporation.
8) Gross Domestic Product (GDP): Datastream and The World Bank.
9) GDP growth rate: International Finance Corporation, 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: Organization for Economic Cooperation
and Development and United Nations.
13) Total exports and imports by year: International Finance Corporation, The
World Bank and Datastream.
14) Top three companies by country, industry or market: International Finance
Corporation, G.T. 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) Standard deviation and performance returns for U.S. and non-U.S. equity and
bond markets: Morgan Stanley Capital International.
17) Countries restructuring their debt, including those under the Brady Plan:
the Manager.
18) Political and economic structure of countries: Economist Intelligence Unit.
19) Government and corporate bonds -- credit ratings, yield to maturity and
performance returns: Salomon Brothers, Inc.
20) Dividend yields for U.S. and non-U.S. companies: Bloomberg.
21) 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).
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.
Statement of Additional Information Page 34
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
THE GT ADVANTAGE
With respect to GT Global Emerging Markets Fund, the Manager has developed a
unique team approach to its emerging markets money management. The Manager's
economists and strategists in Hong Kong determine the geographic allocation of
the Fund's assets according to each country's relative industrial development,
potential for productivity gains, and the likely impact of financial
liberalization. Then, portfolio managers in London, San Francisco, Hong Kong and
Singapore identify the individual securities that they believe have the
strongest long-term growth potential in each emerging market. Generally,
securities in Asia are selected by managers in Hong Kong; San Francisco-based
managers look for opportunities in Latin America; and European securities are
selected by London-based personnel.
For the other funds in the GT Global Mutual Funds, the Manager has developed a
unique team approach to its global money management which we call the GT
Advantage. The Manager's money management style combines the best of the
"top-down" and "bottom-up" investment manager strategies. The top-down approach
is implemented by the Manager's Investment Policy Committee which sets broad
guidelines for asset allocation and currency management based on the Manager's
own macroeconomic forecasts and research from our worldwide offices. The
bottom-up approach utilizes regional teams of individual portfolio managers to
implement the committee's guidelines by selecting local securities that offer
strong growth potential.
- --------------------------------------------------------------------------------
DESCRIPTION OF DEBT RATINGS
- --------------------------------------------------------------------------------
DESCRIPTION OF COMMERCIAL PAPER RATINGS
MOODY'S INVESTORS SERVICE, INC. ("Moody's") employs the designations "Prime-1"
"Prime-2" and "Prime-3" to indicate commercial paper having the highest capacity
for timely repayment. Issuers rated Prime-1 have a superior capacity for
repayment of short-term promissory obligations. Prime-1 repayment capacity will
normally be evidenced by the following characteristics: leading market positions
in well-established industries; high rates of return on funds employed;
conservative capitalization structures with moderate reliance on debt and ample
asset protections; 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. Issues rated
Prime-2 have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the characteristics
cited above, but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained. Issuers rated Prime-3 have an acceptable ability for
repayment of senior short-term promissory obligations. The effect of industry
characteristics and market composition may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.
STANDARD & POOR'S RATINGS GROUP ("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.
Statement of Additional Information Page 35
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
DESCRIPTION OF BOND RATINGS
Moody's rates the long-term debt securities issued by various entities from
"Aaa" to "C." Investment grade ratings are as follows:
Aaa -- Best quality. These securities carry the smallest degree of
investment risk and are generally referred to as "gilt edge." 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. They are rated lower than the best
bond because margins of protection may not be as large as in Aaa securities,
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risk appear somewhat
greater.
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. 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.
Speculative grade ratings are as follows:
Ba -- These Bonds are judged to have speculative elements; 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 other good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B -- These bonds 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 -- These bonds are of poor standing. Such issues may be in default
or there may be present elements of danger with respect to principal or
interest.
Ca -- These bonds represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
C -- These bonds are the lowest rated class of bonds and 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 reason unrelated to the quality of the
issue.
Should no rating be assigned, the reasons 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 long-term securities debt of various entities in categories
ranging from "AAA" to "D" according to quality. Investment grade ratings are as
follows:
AAA -- Highest rating. Capacity to pay interest and repay principal is
extremely strong.
AA -- High grade. Very strong capacity to pay interest and repay
principal. Generally, these bonds differ from AAA issues only in a small
degree.
Statement of Additional Information Page 36
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
A -- Have a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of change
in circumstances and economic conditions, than debt in higher rated
categories.
BBB -- Regarded as having adequate capacity to pay interest and repay
principal. These bonds normally exhibit adequate protection parameters, but
adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity to pay interest and repay principal than for
debt in higher rated categories.
Speculative grade ratings are as follows:
BB -- Have less near-term vulnerability to default than other
speculative issues. However, these bonds face 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.
This rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied 'BBB-'rating.
B -- Have greater vulnerability to default but currently have 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. This rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied 'BB' or 'BB-' rating.
CCC -- Have currently identifiable vulnerability to default and are
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, these bonds are 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 -- This rating typically is applied to debt subordinated to senior
debt that is assigned an actual or implied 'CCC' rating.
C -- This rating typically is applied to debt subordinated to senior
debt that is assigned an actual or implied 'CCC-' debt rating. This rating
may be used to cover a situation where a bankruptcy petition has been filed,
but debt service payments are continued.
CI -- This rating is reserved for income bonds on which no interest is
being paid.
D -- Are in payment default. This 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. This rating also will be
used up on 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.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The audited financial statements of the GT Global Emerging Markets Fund at
October 31, 1996 and for the fiscal year then ended appear on the following
pages.
Statement of Additional Information Page 37
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
NOTES
- --------------------------------------------------------------------------------
Statement of Additional Information Page 38
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
NOTES
- --------------------------------------------------------------------------------
Statement of Additional Information Page 39
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
NOTES
- --------------------------------------------------------------------------------
Statement of Additional Information Page 40
<PAGE>
GT GLOBAL EMERGING MARKETS FUND
GT GLOBAL MUTUAL FUNDS
GT GLOBAL OFFERS A BROAD RANGE OF MUTUAL FUNDS TO COMPLEMENT MANY INVESTORS'
PORTFOLIOS. FOR MORE INFORMATION AND A PROSPECTUS ON ANY GT GLOBAL MUTUAL
FUND, PLEASE CONTACT YOUR FINANCIAL ADVISOR OR CALL GT GLOBAL DIRECTLY AT
1-800-824-1580.
GROWTH FUNDS
/ / GLOBALLY DIVERSIFIED FUNDS
GT GLOBAL WORLDWIDE GROWTH FUND
Invests around the world, including the U.S.
GT GLOBAL INTERNATIONAL GROWTH FUND
Provides portfolio diversity for U.S. investors by investing outside the U.S.
GT GLOBAL EMERGING MARKETS FUND
Gives access to the growth potential of developing economies
/ / GLOBAL THEME FUNDS
GT GLOBAL CONSUMER PRODUCTS AND
SERVICES FUND
Invests in companies that manufacture, market, retail, or distribute consumer
products or services
GT GLOBAL FINANCIAL SERVICES FUND
Focuses on the worldwide opportunities from the demand for financial services
and products
GT GLOBAL HEALTH CARE FUND
Invests in the growing health care industries worldwide
GT GLOBAL INFRASTRUCTURE FUND
Seeks companies that build, improve or maintain a country's infrastructure
GT GLOBAL NATURAL RESOURCES FUND
Concentrates on companies that own, explore or develop natural resources
GT GLOBAL TELECOMMUNICATIONS FUND
Invests in companies worldwide that develop, manufacture or sell
telecommunications services or equipment
/ / REGIONALLY DIVERSIFIED FUNDS
GT GLOBAL NEW PACIFIC GROWTH FUND
Offers access to the emerging and established markets of the Pacific Rim,
excluding Japan
GT GLOBAL EUROPE GROWTH FUND
Focuses on investment opportunities in the new, unified Europe
GT GLOBAL LATIN AMERICA GROWTH FUND
Invests in the emerging markets of Latin America
/ / SINGLE COUNTRY FUNDS
GT GLOBAL AMERICA SMALL CAP GROWTH FUND
Invests in equity securities of small U.S. companies
GT GLOBAL AMERICA MID CAP GROWTH FUND
Concentrates on medium-sized companies in the U.S.
GT GLOBAL AMERICA VALUE FUND
Concentrates on equity securities of large cap U.S. companies believed to be
undervalued
GT GLOBAL JAPAN GROWTH FUND
Provides U.S. investors with direct access to the Japanese market
GROWTH AND INCOME FUND
GT GLOBAL GROWTH & INCOME FUND
Invests in blue-chip stocks and government bonds from around the world
INCOME FUNDS
GT GLOBAL GOVERNMENT INCOME FUND
Invests in global government securities
GT GLOBAL STRATEGIC INCOME FUND
Allocates its assets among debt securities from the U.S., developed foreign
countries and emerging markets
GT GLOBAL HIGH INCOME FUND
Invests in a portfolio of emerging market debt securities
MONEY MARKET FUND
GT GLOBAL DOLLAR FUND
Invests in high quality, U.S. dollar-denominated money market securities
worldwide for stability and preservation of capital
[LOGO]
NO DEALER, SALES REPRESENATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
STATEMENT OF ADDITIONAL INFORMATION AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY GT
GLOBAL EMERGING MARKETS FUND, G.T. INVESTMENT FUNDS, INC., CHANCELLOR LGT
ASSET MANAGEMENT, INC. OR GT GLOBAL, INC. THIS STATEMENT OF ADDITIONAL
INFORMATION DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF ANY
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
EMESX610MC
<PAGE>
G.T. INVESTMENT FUNDS, INC.
PART C: OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS -- The following audited financial statements as of
October 31, 1996, and for the fiscal year then ended, for Class A, Class B, and
Advisor Class of the GT Global Income Funds (consisting of GT Global Strategic
Income Fund, GT Global Government Income Fund and GT Global High Income Fund),
GT Global Theme Funds (consisting of GT Global Telecommunications Fund, GT
Global Health Care Fund, GT Global Financial Services Fund, GT Global
Infrastructure Fund, GT Global Natural Resources Fund and GT Global Consumer
Products and Services Fund), GT Global Growth & Income Fund, GT Global Emerging
Markets Fund and GT Global Latin America Growth Fund, each a series of
Registrant, will be included in the Funds' Statements of Additional Information
and will be filed by amendment:
-- Reports of Independent Accountants
-- Portfolios of Investments
-- Statements of Assets and Liabilities
-- Statements of Operations
-- Statements of Changes in Net Assets
-- Financial Highlights
-- Notes to Financial Statements
(b) EXHIBITS REQUIRED BY PART C, ITEM 24 OF FORM N-1A.
(1)(a) The Registrant's Articles of Incorporation dated October 27,
1987 -- filed herewith.
(1)(b) Articles Supplementary to Registrant's Articles of
Incorporation dated December 18, 1987 -- filed herewith.
(1)(c) Articles Supplementary to Registrant's Articles of
Incorporation dated February 17, 1988 -- filed herewith.
(1)(d) Articles of Amendment to Registrant's Articles of
Incorporation dated March 29, 1988 -- filed herewith.
(1)(e) Articles Supplementary to Registrant's Articles of
Incorporation dated April 27, 1989 -- filed herewith.
(1)(f) Articles Supplementary to Registrant's Articles of
Incorporation dated July 18, 1991 -- filed herewith.
(1)(g) Articles Supplementary to Registrant's Articles of
Incorporation dated July 31, 1991 -- filed herewith.
(1)(h) Articles Supplementary to Registrant's Articles of
Incorporation dated December 31, 1991 -- filed herewith.
(1)(i) Articles Supplementary to Registrant's Articles of
Incorporation dated March 11, 1992 -- filed herewith.
(1)(j) Articles Supplementary to Registrant's Articles of
Incorporation dated August 31, 1992 -- filed herewith.
(1)(k) Articles of Amendment to Registrant's Articles of
Incorporation dated January 25, 1993 -- filed herewith.
(1)(l) Articles Supplementary to Registrant's Articles of
Incorporation dated November 15, 1993 -- filed herewith.
(1)(m) Articles Supplementary to Registrant's Articles of
Incorporation dated January 26, 1994 -- filed herewith.
(1)(n) Articles Supplementary to Registrant's Articles of
Incorporation dated January 26, 1994 -- filed herewith.
(1)(o) Articles Supplementary to Registrant's Articles of
Incorporation dated September 23, 1994 -- filed herewith.
C-1
<PAGE>
<TABLE>
<S> <C>
(1)(p) Articles Supplementary to Registrant's Articles of
Incorporation dated January 30, 1995 -- to be filed.
(2) Registrant's By-Laws -- filed herewith.
(3) Voting Trust Agreement. Not applicable.
(4) Instruments defining the rights of holders of the
Registrant's share of beneficial interest -- to be filed.
(5)(a) Investment Management and Administration Contract dated
April 19, 1989 -- filed herewith.
(5)(b) Investment Management and Administration Contract Fee Letter
relating to:
</TABLE>
(i) GT Global Growth & Income Fund -- filed herewith.
(ii) GT Global Latin America Growth Fund and GT Global Small
Companies Fund -- filed herewith.
(iii) GT Global Telecommunications Fund -- filed herewith.
(iv) Withdrawn
(v) GT Global Emerging Markets Fund -- filed herewith.
(5)(c) Administration Contract relating to:
(i) GT Global High Income Fund -- filed herewith.
(ii) (Form of Administration Contract) GT Global
Infrastructure Fund, GT Global Natural Resources Fund and
GT Global Financial Services Fund -- filed herewith.
(5)(d) Administration Contract Fee Letter relating to the GT Global
Consumer Products and Services Fund (2).
(6)(a) Distribution Agreement relating to Class A shares -- filed
herewith.
(6)(b) Distribution Agreement relating to Class B shares -- filed
herewith.
(7) Not applicable.
(8) The Custodian Agreement between the Registrant and State
Street Bank and Trust Company -- filed herewith.
(9)(a) The Transfer Agent Contract dated May 25, 1990 -- filed
herewith.
(9)(b) Other material contracts:
(i) Broker/dealer sales contract -- filed herewith.
(ii) Bank sales contract -- filed herewith.
(iii) Agency sales contract -- filed herewith.
(iv) Foreign sales contract -- filed herewith.
(10)(a) Opinion and consent of counsel relating to GT Global
Government Income Fund and GT Global Strategic Income Fund
(formerly G.T. Global Bond Fund) -- filed herewith.
(10)(b) Opinion and consent of counsel relating to GT Global Health
Care Fund -- filed herewith.
(10)(c) Opinion and consent of counsel relating to GT Global Growth
& Income Fund -- filed herewith.
(10)(d) Opinion and consent of counsel relating to GT Global Latin
America Growth Fund and GT Global Small Companies Fund --
filed herewith.
(10)(e) Opinion and consent of counsel relating to GT Global
Telecommunications Fund and GT Global Financial Services
Fund -- filed herewith.
C-2
<PAGE>
<TABLE>
<S> <C>
(10)(f) Opinion and consent of counsel relating to GT Global
Emerging Markets Fund -- filed herewith.
(10)(g) Opinion and consent of counsel relating to GT Global High
Income Fund -- filed herewith.
(10)(h) Opinion and consent of counsel relating to GT Global
Infrastructure Fund and GT Global Natural Resources Fund --
filed herewith.
(10)(i) Opinion and consent of counsel relating to GT Global
Consumer Products and Services Fund and GT Global Financial
Services Fund -- filed herewith.
(11)(a) Consents of Coopers & Lybrand L.L.P., Independent
Accountants, relating to:
</TABLE>
(i) GT Global Government Income Fund -- to be filed.
(ii) GT Global Strategic Income Fund -- to be filed.
(iii) GT Global Health Care Fund -- to be filed.
(iv) GT Global Growth & Income Fund -- to be filed.
(v) GT Global Latin America Growth Fund -- to be filed.
(vi) Not Applicable
(vii) Not Applicable
(viii) GT Global Emerging Markets Fund -- to be filed.
(ix) GT Global Telecommunications Fund -- to be filed.
(x) GT Global High Income Fund -- to be filed.
(xi) GT Global Financial Services Fund -- to be filed.
(xii) GT Global Infrastructure Fund -- to be filed.
(xiii) GT Global Natural Resources Fund -- to be filed.
(xiv) GT Global Consumer Products and Services Fund -- to be
filed.
(12) Not applicable.
(13) Not applicable.
(14) Model retirement plan -- GT Global Individual Retirement
Account Disclosure Statement and Application(1).
(15)(a) Distribution Plan adopted pursuant to Rule 12b-1 relating to
Class A Shares -- filed herewith.
(15)(b) Distribution Plan adopted pursuant to Rule 12b-1 relating to
Class B Shares -- filed herewith.
(16) Schedules of Computation of Performance Data relating to the
Class A, Class B and Advisor Class shares of:
(i) GT Global Government Income Fund -- to be filed.
(ii) GT Global Strategic Income Fund -- to be filed.
(iii) GT Global Health Care Fund -- to be filed.
(iv) GT Global Growth & Income Fund -- to be filed.
(v) GT Global Latin America Growth Fund -- to be filed.
(vi) GT Global Telecommunications Fund -- to be filed.
(vii) GT Global Emerging Markets Fund -- to be filed.
(viii) GT Global High Income Fund -- to be filed.
(ix) GT Global Financial Services Fund -- to be filed.
(x) GT Global Infrastructure Fund -- to be filed.
(xi) GT Global Natural Resources Fund -- to be filed.
(xii) GT Global Consumer Products and Services Fund -- to be
filed.
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<PAGE>
(18) Multiple Class Plan adopted pursuant to Rule 18f-3 -- to be
filed.
Other Exhibits:
(a) Power of Attorney -- superseded.
(b) Power of Attorney -- superseded.
(c) Powers of Attorney for Helge K. Lee, Peter R. Guarino and
David J. Thelander for G.T. Investment Funds, Inc. and
Global Investment Portfolio(2).
(d) Powers of Attorney for Helge K. Lee, Peter R. Guarino and
David J. Thelander for Global High Income Portfolio(3).
- ------------------------
(1) Incorporated by reference to the identically enumerated Exhibit of
Post-Effective Amendment No. 16 to the Registration Statement on Form N-1A,
filed on January 17, 1992.
(2) Incorporated by reference to the identically enumerated Exhibit of
Post-Effective Amendment No. 42 to the Registration Statement on Form N-1A,
filed on June 30, 1995.
(3) Incorporated by reference to the identically enumerated Exhibit of
Post-Effective Amendment No. 43 to the Registration Statement on Form N-1A,
filed on December 29, 1995.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE REGISTRANT
None.
C-4
<PAGE>
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of December 4, 1996:
<TABLE>
<CAPTION>
NUMBER OF RECORD
TITLE OF CLASS HOLDERS
- ------------------------------------------------------------------------------------ ----------------
<S> <C>
Capital Stock, $.0001 par value, of:
GT Global Growth & Income Fund Class A........................................ 21,129
GT Global Growth & Income Fund Class B........................................ 30,304
GT Global Growth & Income Fund Advisor Class.................................. 261
GT Global Strategic Income Fund Class A....................................... 12,234
GT Global Strategic Income Fund Class B....................................... 22,734
GT Global Strategic Income Fund Advisor Class................................. 78
GT Global Government Income Fund Class A...................................... 16,281
GT Global Government Income Fund Class B...................................... 10,519
GT Global Government Income Fund Advisor Class................................ 43
GT Global High Income Fund Class A............................................ 8,900
GT Global High Income Fund Class B............................................ 14,229
GT Global High Income Fund Advisor Class...................................... 236
GT Global Health Care Fund Class A............................................ 41,382
GT Global Health Care Fund Class B............................................ 11,731
GT Global Health Care Fund Advisor Class...................................... 150
GT Global Latin America Growth Fund Class A................................... 25,623
GT Global Latin America Growth Fund Class B................................... 21,053
GT Global Latin America Growth Fund Advisor Class............................. 167
GT Global Telecommunications Fund Class A..................................... 123,948
GT Global Telecommunications Fund Class B..................................... 113,653
GT Global Telecommunications Fund Advisor Class............................... 299
GT Global Financial Services Fund Class A..................................... 1,093
GT Global Financial Services Fund Class B..................................... 1,482
GT Global Financial Services Fund Advisor Class............................... 22
GT Global Infrastructure Fund Class A......................................... 5,751
GT Global Infrastructure Fund Class B......................................... 7,301
GT Global Infrastructure Fund Advisor Class................................... 118
GT Global Natural Resources Fund Class A...................................... 5,949
GT Global Natural Resources Fund Class B...................................... 6,967
GT Global Natural Resources Fund Advisor Class................................ 205
GT Global Emerging Markets Fund Class A....................................... 30,266
GT Global Emerging Markets Fund Class B....................................... 32,876
GT Global Emerging Markets Fund Advisor Class................................. 302
GT Global Currency Fund....................................................... 1
GT Global Small Companies Fund................................................ 1
GT Global Consumer Products and Services Fund
Class A...................................................................... 8,550
GT Global Consumer Products and Services Fund
Class B...................................................................... 9,505
GT Global Consumer Products and Services Fund
Advisor Class................................................................ 218
</TABLE>
C-5
<PAGE>
ITEM 27. INDEMNIFICATION
Article VII(g) of the Registrant's Articles of Incorporation provides for
indemnification of certain persons acting on behalf of the Fund.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended ("1933 Act") may be permitted to Directors, 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 Director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such Director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question 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 Amendment and the material appearing under the headings
"Directors and Officers" and "Management" included in Part B (Statement of
Additional Information) of this Amendment. Information as to the Directors and
Officers of the Adviser is included in its 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 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
Portfolios, Inc. (which includes one fund: GT Global Dollar Fund); G.T. 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 and GT Global Money Market
Fund); and 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 Strategic Income Fund, GT Global Variable Emerging Markets Fund, GT
Global Variable Global Government Income Fund and GT Global Variable U.S.
Government Income Fund).
C-6
<PAGE>
(b) Directors and Officers of GT Global, Inc.
Unless otherwise indicated, the business address of each person listed is 50
California Street, San Francisco, CA 94111.
<TABLE>
<CAPTION>
POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
- -------------------------------------------- ---------------------------------- ----------------------------------
<S> <C> <C>
David A. Minella Chairman of the Board of Chairman of the Board of Directors
Directors and President
Helge K. Lee Senior Vice President and General Vice President and Secretary
Counsel
Raymond R. Cunningham Senior Vice President -- National None
Bank Sales and Director
Philip D. Edelstein Senior Vice President None
9 Huntly Circle
Palm Beach Gardens, FL 33418
Stephen A. Maginn Senior Vice President -- Regional None
519 S. Juanita Sales Manager
Redondo Beach, CA 90277
David J. Thelander Vice President and Assistant Assistant Secretary
General Counsel
David P. Anderson, Jr. Vice President None
1012 William
Plymouth, MI 48170
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
Jon Fessel Vice President None
1781 Pine Harrier Circle
Sarasota, FL 34231
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
1454 High School Drive
Brentwood, MO 63144
</TABLE>
C-7
<PAGE>
<TABLE>
<CAPTION>
POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
- -------------------------------------------- ---------------------------------- ----------------------------------
<S> <C> <C>
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
C. David Matthews Vice President None
2445 Pebblebrook
Westlake, OH 44145
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 R. Rogers Vice President None
100 Southbank Drive
Cary, NC 27511
James Sandidge Vice President None
16437 W. First Ave.
Golden, CO 80401
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
Brian A. Williams Vice President None
874 Lincoln Ave.
Winnetka, IL 60093
Eric T. Zeigler Vice President None
3100 The Strand
Manhattan Beach, CA 90266
</TABLE>
(c) None.
C-8
<PAGE>
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, 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 the Registrant's Transfer Agent, GT Global Investor
Services, Inc., 2121 N. California Boulevard, Suite 450, Walnut Creek, CA,
94596, and by the Registrant's Custodian, State Street Bank and Trust Company,
225 Franklin Street, Boston, Massachusetts 02110.
ITEM 31. MANAGEMENT SERVICES
None.
ITEM 32. UNDERTAKINGS
None
C-9
<PAGE>
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 Post-Effective Amendment to its 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 23rd day of December, 1996.
G.T. INVESTMENT FUNDS, INC.
By: David A. Minella*
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement of G.T. Investment Funds,
Inc. has been signed below by the following persons in the capacities indicated
on the 23rd day of December, 1996.
President, Director and
David A. Minella* Chairman of the Board
(Principal Executive Officer)
/s/ JAMES R. TUFTS Vice President, Treasurer
- ---------------------------------------- and Principal Financial
James R. Tufts Officer
/s/ KENNETH W. CHANCEY
- ---------------------------------------- Vice President and Principal
Kenneth W. Chancey Accounting Officer
C. Derek Anderson* Director
Arthur C. Patterson* Director
Frank S. Bayley* Director
Ruth H. Quigley* Director
*By: /s/ DAVID J. THELANDER
-----------------------------------
David J. Thelander
Attorney-in-Fact, pursuant to
Power-of-Attorney previously filed
C-10
<PAGE>
SIGNATURES
Global Investment Portfolio has duly caused this Post-Effective Amendment of
G.T. Investment Funds, Inc. 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 23rd day of December, 1996.
GLOBAL INVESTMENT PORTFOLIO
By: David A. Minella*
President
This Post-Effective Amendment to the Registration Statement of G.T.
Investment Funds, Inc. has been signed below by the following persons in the
capacities indicated on the 23rd day of December, 1996.
President, Trustee and
David A. Minella* Chairman of the Board
(Principal Executive Officer)
/s/ JAMES R. TUFTS Vice President, Treasurer
- ---------------------------------------- and Principal Financial
James R. Tufts Officer
/s/ KENNETH W. CHANCEY
- ---------------------------------------- Vice President and Principal
Kenneth W. Chancey Accounting Officer
C. Derek Anderson* Trustee
Arthur C. Patterson* Trustee
Frank S. Bayley* Trustee
Ruth H. Quigley* Trustee
*By: /s/ DAVID J. THELANDER
-----------------------------------
David J. Thelander
Attorney-in-Fact, pursuant to
Power of Attorney previously filed
C-11
<PAGE>
SIGNATURES
Global High Income Portfolio has duly caused this Post-Effective Amendment
of G.T. Investment Funds, Inc. 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 23rd day of December, 1996.
GLOBAL HIGH INCOME PORTFOLIO
By: David A. Minella*
President
This Post-Effective Amendment to the Registration Statement of G.T.
Investment Funds, Inc. has been signed below by the following persons in the
capacities indicated on the 23rd day of December, 1996.
President, Trustee and
David A. Minella* Chairman of the Board
(Principal Executive Officer)
/s/ JAMES R. TUFTS Vice President, Treasurer
- ---------------------------------------- and Principal Financial
James R. Tufts Officer
/s/ KENNETH W. CHANCEY
- ---------------------------------------- Vice President and Principal
Kenneth W. Chancey Accounting Officer
C. Derek Anderson* Trustee
Arthur C. Patterson* Trustee
Frank S. Bayley* Trustee
Ruth H. Quigley* Trustee
*By: /s/ DAVID J. THELANDER
-----------------------------------
David J. Thelander
Attorney-in-Fact, pursuant to
Power of Attorney previously filed
C-12
<PAGE>
G.T. GLOBAL INCOME SERIES, INC.
ARTICLES OF INCORPORATION
I.
INCORPORATOR
The undersigned, Hilary E. O'Brien, whose mailing address is 345
California Street, San Francisco, California 94104, being at least 18 years of
age, does hereby form a corporation under and by virtue of the General Laws of
the State of Maryland.
II.
NAME
The name of the corporation (hereinafter called the "Corporation") is:
G.T. Global Income Series, Inc.
III.
PURPOSES AND POWERS
The purpose or purposes for which the Corporation is formed and the
business or objects to be transacted, carried on a promoted by it are:
(a) To conduct and carry on the business of an open-end-investment
company under the Investment Company Act of 1940 ("1940 Act").
(b) To hold, invest and reinvest its assets in securities and other
investments including holding part or all of its assets in cash, including
foreign currencies.
(c) To issue and sell shares of its capital stock in such amounts and
on such terms and conditions and for such purposes and for such amount or kind
of consideration (including, without limitation, securities) now or hereafter
permitted by law.
(d) To redeem, purchase or otherwise acquire, hold, dispose of,
resell, transfer, reissue or cancel (all without the vote or consent of the
shareholders of the Corporation) shares of its capital stock, in any manner and
to the extent now or hereafter permitted by law and by these Articles of
Incorporation.
(e) To do any and all such acts or things and to exercise any and all
such further powers or rights as may be necessary, incidental, relative,
conducive, appropriate or
<PAGE>
desirable for the accomplishment, carrying out or attainment of the purposes
stated in this Article.
The foregoing enumerated purposes and objects shall be in no way
limited or restricted by reference to, or inference from, the terms of any other
clause of this or any other article of these Articles of Incorporation, and
shall each be regarded as independent; and they are intended to be and shall be
construed as powers as well as purposes and objects of the Corporation and shall
be in addition to and not in limitation of the general powers of corporations
under the laws of the State of Maryland.
IV.
PRINCIPAL OFFICE AND RESIDENT AGENT
The principal address of the Corporation in the State of Maryland is
c/o The Corporation Trust Incorporated, 32 South Street, Baltimore, Maryland
21202. The name and address of the Corporation's resident agent is The
Corporation Trust Incorporated, 32 South Street, Baltimore, Maryland 21202.
Said resident agent is a Maryland corporation.
V.
CAPITAL STOCK
(a) The total number of shares of capital stock which the Corporation
shall have the authority to issue is One Billion (1,000,000,000) shares of
capital stock (par value $.0001 per share) amounting in aggregate par value to
One Hundred Thousand Dollars ($100,000). The Board of Directors of the
Corporation is hereby empowered to increase or decrease, from time to time, the
total number of shares of capital stock that the Corporation shall have
authority to issue without any action by the shareholders.
(b) Any fractional share shall carry proportionately all the rights
of a whole share, excepting any right to receive a certificate evidencing such
fractional share, but including the right to vote and the right to receive
dividends.
(c) All persons who shall acquire stock in the Corporation shall
acquire the same subject to the provisions of these Articles of Incorporation
and the By-Laws of the Corporation.
(d) As used in these Articles of Incorporation, a "series" of shares
represent interests in the same assets, liabilities, income, earnings and
profits of the Corporation; each "class" of shares of a series represents
interests in the same underlying assets, liabilities, income, earnings and
profits, but may differ from other classes of such series with respect to fees,
expenses, other liabilities, dividends, distributions, liquidation preferences,
voting rights, redemption rights, or such other matters as shall be established
by the Board of Directors. Initially, the shares of capital stock of the
Corporation shall be all of one class and series. The
<PAGE>
Board of Directors shall have authority to classify and reclassify any
authorized but unissued shares of capital stock from time to time by setting or
changing in any one or more respects the preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends, qualifications
or terms or conditions of redemption of the capital stock. Subject to the
provisions of Section (e) of this Article V and applicable law, the power of the
Board of Directors to classify or reclassify any of the shares of capital stock
shall include, without limitation, authority to classify or reclassify any such
stock into one or more series of capital stock and to divide and classify shares
of any series into one or more classes of such series, by determining, fixing or
altering one or more of the following:
1. The distinctive designation of such class or series and the
number of shares to constitute such class or series; provided that, unless
otherwise prohibited by the terms of such class or series, the number of
shares of any class or series may be decreased by the Board of Directors in
connection with any classification or reclassification of unissued shares
and the number of shares of such class or series may be increased by the
Board of Directors in connection with any such classification or
reclassification, and any shares of any class or series which have been
redeemed, purchased or otherwise acquired by the Corporation shall remain
part of the authorized capital stock and be subject to classification and
reclassification as provided herein;
2. Whether and, if so, the rates, amounts and times at which,
and the condition under which, dividends shall be payable on shares of
such class or series;
3. Whether shares of such class or series shall have voting
rights in addition to any general voting rights provided by law and the
charter of the Corporation and, if so, the terms of such additional voting
rights;
4. The rights of the holders of shares of such class or series
upon the liquidation, dissolution or winding up of the affairs of, or upon
any distribution of the assets of, the Corporation.
(e) Shares of capital stock of the Corporation shall have the
following preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption:
1. ASSETS BELONGING TO A CLASS OR SERIES.
All consideration received by the Corporation for the issue or sale of
stock of any class or series of capital stock, together with all assets in
which such consideration is invested and reinvested, income, earnings,
profits and proceeds thereof, including any proceeds derived from the sale,
exchange or liquidation thereof, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to the class or series of shares of capital stock with
respect to which such assets, payments or funds were received by the
Corporation for all purposes subject only to the rights of creditors, and
shall be so recorded upon the books of account of the Corporation. Such
consideration, assets, income, earnings, profits and proceeds thereof,
<PAGE>
including any proceeds derived from the sale, exchange or liquidation
thereof, and any assets derived from any reinvestment of such proceeds in
whatever form, are herein referred to as "assets belonging to" such class
or series. Any assets, income, earnings, profits, and proceeds thereof,
funds or payment which are not readily attributable to any particular class
or series shall be allocable among any one or more of the classes or series
in such manner and on such basis as the Board of Directors, in its sole
discretion, shall deem fair and equitable; and each such allocation by the
Board of Directors shall be conclusive and binding upon the shareholders of
all classes and series for all purposes.
2. LIABILITIES BELONGING TO A CLASS OR SERIES. The assets
belonging to each particular class or series shall be charged with the
liabilities of the Corporation in respect of that class or series and with
all expenses, costs, charges, and reserves attributable to that class or
series, and shall be so recorded upon the books of account of the
Corporation. Such liabilities, expenses, costs, charges and reserves,
together with any items allocated to that class or series as provided in
the following sentence, so charged to that class or series are herein
referred to as "liabilities belonging to" that class or series. The Board
of Directors shall allocate and charge any general liabilities, expenses,
costs, charges or reserves of the Corporation that are not readily
identifiable as belonging to any particular class or series to and among
any one or more of the classes or series created from time to time in such
manner and on such basis as the Board of Directors in its sole discretion
deems fair and equitable; and each such allocation by the Board of
Directors shall be conclusive and binding upon the shareholders of all
classes and series for all purposes.
3. DIVIDENDS AND DISTRIBUTIONS. Shares of each class or series
of capital stock shall be entitled to such dividends and distributions, in
stock or in cash or both, as may be declared from time to time by the Board
of Directors, acting in its sole discretion, with respect to such class or
series, provided, however, that dividends and distributions on shares of a
class or series of capital stock shall be paid only out of the lawfully
available assets belonging to such class or series after providing for
liabilities belonging to such class or series.
All dividends and distributions on shares of a particular class
or series shall be distributed pro rata to the holders of that class or
series in proportion to the number of shares of that class or series held
by such holders at the date and time of record established for the payment
of such dividends or distributions, except that in connection with any
dividend or distribution program or procedure, the Board of Directors may
determine that no dividend or distribution shall be payable on shares as to
which the shareholder's purchase order and/or payment have not been
received by the time or times established by the Board of Directors.
The Corporation intends to qualify as a "regulated investment
company" under the Internal Revenue Code of 1986, or any successor or
comparable statute thereto, and regulations promulgated thereunder.
Inasmuch as the computation of net income and gains for Federal income tax
purposes may vary from the computation thereof on the
<PAGE>
books of the Corporation, the Board of Directors shall have the power, in
its sole discretion, to distribute in any fiscal year as dividends,
including dividends designated in whole or in part as capital gains
distributions, amounts sufficient, in the opinion of the Board of
Directors, to enable the Corporation to qualify as a regulated investment
company and to avoid liability of the Corporation for Federal income tax in
respect of that year. However, nothing in the foregoing shall limit the
authority of the Board of Directors to make distributions greater than or
less than the amount necessary to qualify as a regulated investment company
and to avoid liability of the Corporation for such tax.
4. LIQUIDATION. In the event of the liquidation or dissolution
of the Corporation, or of a particular class or series shareholders of each
class or series of capital stock shall be entitled to receive, as a series,
out of the assets of the Corporation available for distribution to
shareholders, but other than general assets not belonging to any particular
class or series of capital stock, the assets belonging to such class or
series. The assets so distributable to the shareholders of any class or
series of capital stock shall be distributed among such shareholders in
proportion to the number of shares of such class or series held by them and
recorded on the books of the Corporation. In the event that there are any
general assets not belonging to any particular class or series of capital
stock and available for distribution, such distribution shall be made to
the holders of capital stock of all classes or series of capital stock in
proportion to the asset value of the respective class or series of capital
stock determined as hereinafter provided.
The liquidation of any particular class or series in which there
are shares then outstanding may be authorized by vote of a majority of the
Board of Directors then in office, subject to the approval of a majority of
the outstanding securities of that class or series, as defined in the 1940
Act, and without the vote of any other class or series. The liquidation or
dissolution of a particular class or series may be accomplished, in whole
or in part, by the transfer of assets of such class or series to another
class or series or by the exchange of shares of such class or series for
the shares of another class or series.
5. VOTING. Each shareholder of each class or series of capital
stock shall be entitled to one vote for each share of capital stock,
irrespective of the class or series, then standing in his name on the books
of the Corporation, and on any matter submitted to a vote of shareholders,
all shares of capital stock then issued and outstanding and entitled to
vote shall be voted in the aggregate and not by series except: (i) when
expressly required by the 1940 Act or the laws of the state of Maryland,
shares of capital stock shall be voted by individual class or series and
(ii) when only shares of capital stock of a particular class or series are
affected by a matter only such shares so affected shall be entitled to vote
on such matter.
6. REDEMPTION. To the extent the Corporation has funds or
other property legally available therefor, each holder of shares of capital
stock of the Corporation shall be entitled to require the Corporation to
redeem all or any part of the shares standing in the name of such holder on
the books of the Corporation, at the redemption price of such shares as in
effect from time to time as may be determined by
<PAGE>
the Board of Directors of the Corporation in accordance with provisions of
applicable law. Without limiting the generality of the foregoing, the
Corporation shall, to the extent permitted by applicable law, have the
right at any time to redeem the shares owned by any holder of capital stock
of the Corporation if the value of such shares in the account of such
holder is less than the minimum initial investment amount applicable to
that account as set forth in the Corporation's current registration
statement under the 1940 Act, and subject to such further terms and
conditions as the Board of Directors of the Corporation may from time to
time adopt. The redemption price of shares of capital stock of the
Corporation shall, except as otherwise provided in this Section (e)(6), be
the net asset value thereof as determined by, or pursuant to methods
approved by, the Board of Directors of the Corporation from time to time in
accordance with the provisions of applicable law, less such redemption fee
or other charge, if any, as may be specified in the Corporation's current
registration statement under the 1940 Act. Payment of the redemption price
shall be made in cash by the Corporation at such time and in such manner as
may be determined from time to time by the Board of Directors of the
Corporation unless, in the opinion of the Board of Directors, which shall
be conclusive, conditions exist which may payment wholly in cash unwise or
undesirable. In such event the Corporation may make payment wholly or
partly by securities or other property included in the assets belonging or
allocable to the class or series of the shares redemption of which is being
sought, the value of which shall be determined as provided herein.
7. STOCK CERTIFICATES. The Corporation shall not be obligated
to issue certificates representing shares of any class or series unless it
shall receive a written request therefor from the record holder thereof in
accordance with procedures established in the By-laws or by the Board of
Directors.
VI. DIRECTORS
The number of directors of the Corporation shall be three (3), which
number may be, from time to time, increased or decreased pursuant to the By-Laws
of the Corporation, but shall never be less than the minimum number permitted by
the General Laws of the State of Maryland now or hereafter in force. The names
of the directors who shall serve until the first annual shareholders meeting or
until their successors are elected and qualify are as follows:
Herbert M. Sandler
Marion O. Sandler
Richard A. Crane
VII.
PROVISIONS FOR DEFINING, LIMITING AND REGULATING CERTAIN
POWERS OF THE CORPORATION AND OF THE DIRECTORS
AND SHAREHOLDERS
<PAGE>
The following provisions are hereby adopted for the purpose of
defining, limiting and regulating the powers of the Corporation and of the
directors and shareholders:
(a) No holder of any stock or any other securities of the
Corporation, whether now or hereafter authorized, shall have any preemptive
right to subscribe for or purchase any stock or any other securities of the
Corporation other than such, if any, as the Board of Directors, in its sole
discretion, may determine and at such price or prices and upon such other terms
as the Board of Directors, in its sole discretion, may fix. Any stock or other
securities which the Board of Directors may determine to offer for subscription
may, as the Board of Directors in its sole discretion shall determine, be
offered to the holders of any class, series or type of stock or other securities
at the time outstanding to the exclusion of the holders of any or all other
classes, series or types of stock or other securities at the time outstanding.
(b) The Board of Directors of the Corporation shall have power from
time to time and in its sole discretion to determine, in accordance with sound
accounting practice, what constitutes annual or other net income, profits,
earnings, surplus, or net assets; to fix and vary from time to time the amount
to be reserved as working capital, or determine that retained earnings or
surplus shall remain in the hands of the Corporation; to set apart out of any
funds of the Corporation such reserve or reserves in such amount or amounts and
for such proper purpose or purposes as it shall determine and to abolish any
such reserve or any part thereof; to distribute and pay distributions or
dividends in stock, cash or other securities or property, out of surplus or any
other funds or amounts legally available therefor, at such times and to the
shareholders of record on such dates as it may from time to time determine; and
to determine whether and to what extent and at what times and places and under
what conditions and regulations the books, accounts and documents of the
Corporation, or any of them, shall be open to the inspection of shareholders,
except as otherwise provided by statute or by the By-Laws, and, except as so
provided, no shareholder shall have any right to inspect any book, account or
document of the Corporation unless authorized so to do by resolution of the
Board of Directors.
(c) The Board of Directors of the Corporation may establish in its
absolute discretion the basis or method for determining the value of the assets
belonging to any class or series, and the net asset value of each share of
capital stock of each series and class for purposes of sales, redemptions,
repurchases of shares or otherwise. The Board of Directors may determine to
maintain the net asset value per share of any class or series at a designated
constant dollar amount and in connection therewith may adopt procedures not
inconsistent with the 1940 Act for the continuing declarations of income
attributable to that class or series as dividends payable in additional shares
of that class or series at the designated constant dollar amount and for the
handling of any losses attributable to that class or series. Such procedures
may provide that in the event of any loss, each shareholder shall be deemed to
have contributed to the capital of the Corporation attributable to that class or
series his pro rata portion of the total number of shares required to be
cancelled in order to permit the net asset value per share of that class or
series to be maintained, after reflecting such loss, at the designated constant
dollar amount. Each shareholder of the Corporation shall be deemed to have
agreed, by his investment in any class or series with respect to which the Board
of Directors shall have adopted any such procedure, to make the contribution
referred to in the preceding sentence in the event of any such loss.
<PAGE>
(d) Any contract, transaction, or act of the Corporation or of the
Board of Directors which shall be ratified by a majority of a quorum of the
shareholders having voting powers at any annual meeting, or at any special
meeting called for such purpose, shall so far as permitted by law be as valid
and as binding as though ratified by every shareholder of the Corporation.
(e) Unless the By-Laws otherwise provide, any officer or employee of
the Corporation (other than a director) may be removed at any time with or
without cause by the Board of Directors or by any committee or superior officer
upon whom such power of removal may be conferred by the By-Laws or by authority
of the Board of Directors.
(f) Notwithstanding any provision of law requiring the authorization
of any action by a greater proportion than a majority of the total number of
shares of any series or class, or of all classes or series of capital stock, or
by the total number of such shares, such action shall be valid and effective if
authorized by the affirmative vote of the holders of a majority of the total
number of shares outstanding and entitled to vote thereon.
(g) The Corporation shall indemnify (1) its directors to the full
extent provided by the general laws of the State of Maryland and the 1940 Act
now or hereafter in force, including the advance of expenses under the
procedures provided by such laws; (2) its officers to the same extent it shall
indemnify its directors; and (3) its officers who are not directors to such
further extent as shall be authorized by the Board of Directors and be
consistent with law. The foregoing shall not limit the authority of the
Corporation to indemnify other employees and agents consistent with law. Any
indemnification by the Corporation shall be consistent with the requirements of
law, including the 1940 Act. The foregoing shall not be exclusive of any other
rights to which a person seeking indemnification may be entitled under any
insurance policy, agreement or otherwise and shall inure to the benefit of the
heirs, executors and personal representatives of such person.
(h) In addition to the powers and authority hereinbefore, hereinafter
or by statute expressly conferred upon them, the Board of Directors may exercise
all such powers and do all such acts and things as may be exercised or done by
the Corporation, subject, nevertheless, to the express provisions of
the laws of Maryland, of these Articles of Incorporation and of the By-Laws of
the Corporation.
(i) The Corporation reserves the right from time to time to make any
amendments of its Articles of Incorporation which may now or hereafter be
authorized by law, including any amendments changing the terms or contract
rights, as expressly set forth in its Articles of Incorporation, of any of its
outstanding stock by classification, reclassification or otherwise but no such
amendment which changes such terms or contract rights of any of its outstanding
stock shall be valid unless such amendment shall have been authorized by not
less than a majority of the aggregate number of the votes entitled to be cast
thereon, by a vote at a meeting or in writing with or without a meeting.
<PAGE>
(j) The Corporation shall not be required to hold an annual meeting
of shareholders in any year in which the laws of Maryland do not require that
such a meeting be held.
The enumeration and definition of particular powers of the Board of
Directors included in the foregoing shall in no way be limited or restricted by
reference to or inference from the terms of any other clause of this or any
other Article of the Articles of Incorporation of the Corporation, or construed
as or deemed by inference or otherwise in any manner to exclude or limit any
powers conferred upon the Board of Directors under the General Laws of the State
of Maryland nor or hereafter in force.
VIII.
DURATION OF THE CORPORATION
The duration of the Corporation shall be perpetual.
IN WITNESS WHEREOF, I have signed these Articles of Incorporation,
acknowledging the same to be my act, on October 27, 1987.
/s/ Hilary E. O'Brien
------------------------------
Hilary E. O'Brien
WITNESS:
/s/ Don Mark
- -------------------------
Don Mark
- -------------------------
(Print Name)
<PAGE>
CERTIFICATE OF CORRECTION
OF
G.T. GLOBAL INCOME SERIES, INC.
ARTICLES OF INCORPORATION
The undersigned, Hilary E. O'Brien, being the incorporator of G.T.
Global Income Series, Inc., hereby certifies that
1. The Articles of Incorporation of G.T. Global Income Series, Inc.,
filed with the State Department of Assessments and Taxation on October 29, 1987,
contained transcription errors.
2. Article VI of the Articles of Incorporation as previously filed
reads as follows:
VI. DIRECTORS
The number of directors of the Corporation shall be three (3),
which number may be, from time to time, increased or decreased pursuant to
the By-Laws of the Corporation, but shall never be less than the minimum
number permitted by the General Laws of the State of Maryland now or
hereafter in force. The names of the directors who shall serve until the
first annual shareholders meeting or until their successors are elected and
qualify are as follows:
Herbert M. Sandler
Marion O. Sandler
Richard A. Crane
3. Article VI of the Articles of Incorporation as corrected reads as
follows:
VI. DIRECTORS
The number of directors of the Corporation shall be three (3),
which number may be, from time to time, increased or decreased pursuant to
the By-Laws of the Corporation, but shall never be less than the minimum
number permitted by the General Laws of the State of Maryland now or
hereafter in force. The names of the directors who shall serve until the
first annual shareholders meeting or until their successors are elected and
qualify are as follows:
Michael F. O'Neill
David A. Minella
Michele Neureuter
<PAGE>
IN WITNESS WHEREOF, I have signed this Certificate of Correction,
acknowledging the same to be my act, on December 18, 1987.
/s/ Hilary E. O'Brien
------------------------------
Hilary E. O'Brien
Witness:
/s/ Don Mark
- -------------------------
Don Mark
<PAGE>
G.T. GLOBAL INCOME SERIES, INC.
ARTICLES SUPPLEMENTARY
G.T. Global Income Series, Inc., a Maryland corporation, having its
principal office in Baltimore, Maryland (hereinafter called the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: Pursuant to authority expressly vested in the Board of
Directors of the Corporation by Article FIFTH of the Charter of the Corporation,
the Board of Directors has duly classified 100,000,000 shares of the unissued
shares of capital stock of the Corporation into a series designated the G.T.
GLOBAL GOVERNMENT INCOME FUND (the "Government Fund") and has provided for the
issuance of such series.
SECOND: A description of the preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends, qualifications
and terms and conditions of redemption of the Government Fund is as follows:
1. ASSETS BELONGING TO GOVERNMENT FUND. All consideration received
by the Corporation from the issue or sale of shares of the Government Fund,
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 irrevocably belong to the Government Fund for all purposes,
subject only to the rights of creditors, and shall be so recorded upon the books
of account of the Corporation. Such consideration, assets, 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, together
with any General Items allocated to Government Fund as provided in the following
sentence, are herein referred to as "assets belonging to" the Government Fund.
In the event that there are any assets, income, earnings, profits, and proceeds
thereof, funds, or payments which are not readily identifiable as belonging to
any particular class or series (collectively "General Items"), such General
Items shall be allocated by or under the supervision of the Board of Directors
to the Government Fund in such manner and on such basis as the Board of
Directors, in its sole discretion, deems fair and equitable; and any General
Items so allocated to the Government Fund shall belong to that series. Each
such allocation by the Board of Directors shall be conclusive and binding for
all purposes.
1. LIABILITIES BELONGING TO GOVERNMENT FUND. The assets belonging to
the Government Fund shall be charged with the liabilities of the Corporation in
respect of that series and all expenses, costs, charges and reserves
attributable to that series, and any general liabilities, expenses, costs,
charges or reserves of the Corporation which are not readily identifiable as
belonging to any particular class or series shall be allocated and charged by or
under the supervision of the Board of Directors to the Government Fund in such
manner and on such basis
<PAGE>
as the Board of Directors, in its sole discretion, deems fair and equitable.
The liabilities, expenses, costs, charges and reserves allocated and so charged
to the Government Fund are herein referred to as "liabilities belonging to" that
series. Each allocation of liabilities, expenses, costs, charges and reserves
by the Board of Directors shall be conclusive and binding for all purposes.
2. INCOME BELONGING TO THE GOVERNMENT FUND. The Board of Directors
shall have full discretion, to the extent not inconsistent with the Maryland
General Corporation Law and the Investment Company Act of 1940 (the "1940 Act"),
to determine which items shall be treated as income and which items as capital;
and each such determination and allocation shall be conclusive and binding.
Income belonging to the Government Fund includes all income, earnings
and profits derived from assets belonging to the Government Fund less any
expenses, costs, charges or reserves belonging to Government Fund for the
relevant time period, all determined in accordance with generally accepted
accounting principles.
3. DIVIDENDS. Dividends and distributions on shares of the
Government Fund may be paid with such frequency, in such form and in such amount
as the Board of Directors may from time to time determine. Dividends may be
daily or otherwise pursuant to a standing resolution or resolutions adopted only
once or with such frequency as the Board of Directors may determine, after
providing for actual and accrued liabilities belonging to the Government Fund.
All dividends on shares of the Government Fund shall be paid only
out of the income belonging to that series and capital gains distributions on
shares of that series shall be paid only out of the capital gains belonging
to the Government Fund. All dividends and distributions on shares of the
Government Fund 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 in connection with any dividend or distribution
program or procedure, the Board of Directors may determine that no dividend
or distribution shall be payable on shares as to which the Shareholder's
purchase order and/or payment have not been received by the time or times
established by the Board of Directors under such program or procedure.
The Corporation intends to qualify as a "regulated investment company"
under the Internal Revenue Code of 1986, as amended, or any successor or
comparable statute thereto, and regulations promulgated thereunder. Inasmuch as
the computation of net income and gains for federal income tax purposes may vary
from the computation thereof on the books of the Corporation, the Board of
Directors shall have the power, in its sole discretion, to distribute in any
fiscal year as dividends, including dividends designated in whole or in part as
capital gains distributions, amounts sufficient, in the opinion of the Board of
Directors, to enable the Corporation to qualify as a regulated investment
company and to avoid liability of the Corporation for federal income tax in
respect of that year. However, nothing in the foregoing
<PAGE>
shall limit the authority of the Board of Directors to make distributions
greater than or less than the amount necessary to qualify as a regulated
investment company and to avoid liability of the Corporation for such tax.
Dividends and distributions may be made in cash, property or
additional shares of the Government Fund or another class or series, or a
combination thereof, as determined by the Board of Directors or pursuant to any
program that the Board of Directors may have in effect at the time for the
election by each Shareholder of the mode of the making of such dividend or
distribution to that Shareholder. Any such dividend or distribution paid in
shares will be paid at the net asset value thereof as defined in subsection (9)
below.
4. LIQUIDATION. In the event of the liquidation or dissolution of
the Corporation, the shareholders of the Government Fund shall be entitled to
receive, as a series and in preference to any other series, when and as declared
by the Board of Directors, the excess of the assets belonging to the Government
Fund over the liabilities belonging to that series and such shareholders shall
not be entitled thereby to any distribution upon liquidation of any other class
or series. The assets so distributable to the shareholders of the Government
Fund shall be distributed among such shareholders in proportion to the number of
shares of that series held by them and recorded on the books of the Corporation.
The liquidation of the Government Fund may be authorized by vote of a majority
of the Board of Directors then in office, subject to the approval of a majority
of the outstanding securities of that series, as defined in the 1940 Act, and
without the vote of the holders of any other class or series. The liquidation or
dissolution of the Government Fund may be accomplished, in whole or in part, by
the transfer of assets of such series to another class or series or by the
exchange of shares of such series for the shares of another class or series.
5. VOTING. On each matter submitted to a vote of the shareholders
of the Corporation, each holder of a share of the Government Fund shall be
entitled to one vote for each share of the Government Fund outstanding in his
name on the books of the Corporation, and all shares of all classes or series
shall vote as a single class or series ("Single Class Voting"); provided,
however, that (a) as to any matter with respect to which a separate vote of the
Government Fund is required by the 1940 Act or by the Maryland General
Corporation Law, such requirement as to a separate vote by that series shall
apply in lieu of Single Class Voting as described above; (b) in the event that
the separate vote requirements referred to in (a) above apply with respect to
one or more classes of series, then, subject to (c) below, the shares of all
other classes or series shall vote as a single class or series; and (c) as to
any matter which does not affect the interest of the Government Fund the holders
of shares of the Government Fund shall not be entitled to vote. As to any
matter with respect to which a separate vote of the Government Fund is required
pursuant to proviso (a) above, notwithstanding any provision of law requiring
any action on that matter to be taken or authorized by the holders of a greater
proportion than a majority of the Government Fund entitled to vote thereon, such
action shall be valid and effective if taken or authorized by the affirmative
vote of the holders of a majority of shares of the Government Fund outstanding
and entitled to vote thereon.
<PAGE>
6. REDEMPTION BY SHAREHOLDER. Each holder of shares of the
Government Fund shall have the right at such times as may be permitted by the
Corporation to require the Corporation to redeem all or any part of his shares
of the Government Fund at a redemption price per share equal to the net asset
value per share of the Government Fund next determined (in accordance with
subsection (9)) after the Shares are properly tendered for redemption, less such
redemption charge as is determined by the Board of Directors. Payment of the
redemption price shall be in cash; provided, however, that if the Board of
Directors determines, which determination shall be conclusive, that conditions
exist which make payment wholly in cash unwise or undesirable, the Corporation
may make payment wholly or partly in securities or other assets belonging to the
Government Fund at the value of such securities or assets used in such
determination of net asset value.
Notwithstanding the foregoing, the Corporation may postpone payment of
the redemption price and may suspend the right of the holders of shares of the
Government Fund to require the Corporation to redeem shares of that series
during any period or at any time when and to the extent permissible under the
1940 Act.
7. REDEMPTION BY CORPORATION. The Board of Directors may cause the
Corporation to redeem at net asset value the shares of the Government Fund from
a holder who has, for a period of more than six months, had shares of that
series having an aggregate net asset value (determined in accordance with
subsection (9)) equal to $100 less than the minimum initial investment in the
series or less in his account, provided that at least sixty (60) days' prior
written notice of the proposed redemption has been given to such holder by
postage paid mail to his last known address. Upon redemption of such shares
pursuant to this subsection, the Corporation shall promptly cause payment of the
full redemption price to be made to the holder of such shares so redeemed.
8. NET ASSET VALUE PER SHARE. The net asset value per share of the
Government Fund shall be the quotient obtained by dividing the value of the net
assets of that series (being the value of the assets belonging to that series
less the liabilities belonging to that series) by the total number of shares of
the Government Fund outstanding, all determined by the Board of Directors in
accordance with generally accepted accounting principles and not inconsistent
with the 1940 Act.
The Board of Directors may determine to maintain the net asset value
per share of the Government Fund at a designated constant dollar amount and in
connection therewith may adopt procedures not inconsistent with the 1940 Act for
the continuing declarations of income attributable to that series as dividends
payable in additional shares of the Government Fund at the designated constant
dollar amount and for the handling of any losses attributable to that series.
Such procedures may provide that in the event of any loss, each shareholder
shall be deemed to have contributed to the capital of the Corporation
attributable to the Government Fund his pro rata portion of the total number of
shares required to be cancelled in order to permit the net asset value per share
of the Government Fund to be maintained, after reflecting such loss, at the
designated constant dollar amount. Each shareholder of the Government Fund
shall be deemed
<PAGE>
to have agreed, by his investment in such series, to make the contribution
referred to in the preceding sentence in the event of any such loss.
9. EQUALITY. All shares of the Government Fund shall represent an
equal proportionate interest in the assets belongingto the Government Fund
(subject to the liabilities belonging to that series), and each share of the
Government Fund shall be equal to each other share of that series. The Board of
Directors may from time to time divide or combine the shares of the Government
Fund into a greater or lesser number of shares of that series without thereby
changing the proportionate beneficial interest in the assets belonging to the
Government Fund or in any way affecting the rights of shares of the Government
Fund.
10. CONVERSION OR EXCHANGE RIGHTS. Subject to compliance with the
requirements of the 1940 Act, the Board of Directors shall have the authority to
provide that holders of shares of the Government Fund shall have the right to
convert or exchange said shares into shares of one or more other classes or
series of shares in accordance with such requirements and procedures as may be
established by the Board of Directors.
11. FRACTIONAL SHARES. The Corporation may issue and sell fractions
of shares of the Government Fund having pro rata all the rights of full shares
of the Government Fund, including, without limitation, the right to vote and to
receive dividends, and wherever the words "share" or "shares" are used in the
Articles or in the By-Laws, they shall be deemed to include fractions of shares
of the Government Fund, where the context does not clearly indicate that only
full shares are intended.
12. STOCK CERTIFICATES. The Corporation shall not be obligated to
issue certificates representing shares of the Government Fund unless it shall
receive a written request therefor from the record holder thereof in accordance
with procedures established in the By-Laws or by the Board of Directors.
IN WITNESS WHEREOF, G.T. Global Income Series, Inc. has caused these
presents to be signed in its name and on its behalf by its President and
witnessed by its Secretary on February 17, 1988.
WITNESS: G.T. GLOBAL INCOME SERIES, INC.
/s/ Michele H. Neureuter By: /s/ Michael F. O'Neill
- ------------------------ ----------------------
Michele H. Neureuter, Secretary Michael F. O'Neill, President
THE UNDERSIGNED, President of G.T. Global Income Series, Inc., who
executed on behalf of the Corporation Articles Supplementary of which this
Certificate is made a part, hereby acknowledges in the name and on behalf of
said Corporation the foregoing Articles Supplementary to be the corporate act of
said Corporation and hereby certifies that the matters and facts set forth
herein with respect to the authorization and approval thereof are true in all
material respects under the penalties of perjury.
<PAGE>
/s/ Michael F. O'Neill
- ----------------------
Michael F. O'Neill, President
<PAGE>
G.T. GLOBAL INCOME SERIES, INC.
ARTICLES SUPPLEMENTARY
G.T. Global Income Series, Inc., a Maryland corporation, having its
principal office in Baltimore, Maryland (hereinafter called the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: Pursuant to authority expressly vested in the Board of
Directors of the Corporation by Article FIFTH of the Charter of the Corporation,
the Board of Directors has duly classified 100,000,000 shares of the unissued
shares of capital stock of the Corporation into a series designated the G.T.
Global Bond Fund (the "Bond Fund") and has provided for the issuance of such
series.
SECOND: A description of the preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends, qualifications
and terms and conditions of redemption of the Bond Fund is as follows:
1. ASSETS BELONGING TO BOND FUND. All consideration received by the
Corporation from the issue or sale of shares of Bond Fund, together with all
assets in which such consideration is invested or reinvested, all income,
earning, 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
irrevocably belong to the Bond Fund for all purposes, subject only to the rights
of creditors, and shall be so recorded upon the books of account of the
Corporation. Such consideration, assets, 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, together with
any General Items allocated to Bond Fund as provided in the following sentence,
are herein referred to as "assets belonging to" the Bond Fund. In the event
that there are any assets, income, earnings, profits, and proceeds thereof,
funds, or payments which are not readily identifiable as belonging to any
particular class or series (collectively "General Items"), such General Items
shall be allocated by or under the supervision of the Board of Directors to the
Bond Fund in such manner and on such basis as the Board of Directors, in its
sole discretion, deems fair and equitable; and any General Items so allocated to
the Bond Fund shall belong to that series. Each such allocation by the Board of
Directors shall be conclusive and binding for all purposes.
1. LIABILITIES BELONGING TO BOND FUND. The assets belonging to the
Bond Fund shall be charged with the liabilities of the Corporation in respect of
that series and all expenses, costs, charges and reserves attributable to that
series, and nay general liabilities, expenses, costs, charges or reserves of the
Corporation which are not readily identifiable as belonging to any particular
class or series shall be allocated and charged by or under the supervision of
the Board of Directors to the Bond Fund in such manner and on such basis as the
Board of Directors, in its sole discretion, deems fair and equitable. The
liabilities, expenses, costs, charges and reserves allocated and so charged to
the Bond Fund are herein referred to as "liabilities belonging to" that
<PAGE>
series. Each allocation of liabilities, expenses, costs, charges and reserves
by the Board of Directors shall be conclusive and binding for all purposes.
2. INCOME BELONGING TO THE BOND FUND. The Board of Directors shall
have full discretion, to the extent not inconsistent with the Maryland General
Corporation Law and the Investment Company Act of 1940 (the "1940 Act"), to
determine which items shall be treated as income and which items as capital; and
each such determination and allocation shall be conclusive and binding.
Income belonging to the Bond Fund includes all income, earnings and
profits derived from assets belonging to the Bond Fund less any expenses, costs,
charges or reserves belonging to Bond Fund for the relevant time period, all
determined in accordance with generally accepted accounting principles.
3. DIVIDENDS. Dividends and distributions on shares of the Bond
Fund may be paid with such frequency, in such form and in such amount as the
Board of Directors may from time to time determine. Dividends may be daily or
otherwise pursuant to a standing resolution or resolutions adopted only once or
with such frequency as the Board of Directors may determine, after providing for
actual and accrued liabilities belonging to the Bond Fund.
All dividends on shares of the Bond Fund shall be paid only out of the
income belonging to that series and capital gains distributions on shares of
that series shall be paid only out of the capital gains belonging to the Bond
Fund. All dividends and distributions on shares of the Bond Fund 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 in
connection with any dividend or distribution program or procedure, the Board of
Directors may determine that no dividend or distribution shall be payable on
shares as to which the Shareholder's purchase order and/or payment have not been
received by the time or times established by the Board of Directors under such
program or procedure.
The Corporation intends to qualify as a "regulated investment company"
under the Internal Revenue Code of 1986, as amended, or any successor or
comparable statute thereto, and regulations promulgated thereunder. Inasmuch as
the computation of net income and gains for federal income tax purposes may vary
from the computation thereof on the books of the Corporation, the Board of
Directors shall have the power, in its sole discretion, to distribute in any
fiscal year as dividends, including dividends designated in whole or in part as
capital gains distributions, amounts sufficient, in the opinion of the Board of
Directors, to enable the Corporation to qualify as a regulated investment
company and to avoid liability of the Corporation for federal income tax in
respect of that year. However, nothing in the foregoing shall limit the
authority of the board of Directors to make distributions greater than or less
than the amount necessary to qualify as a regulated investment company and to
avoid liability of the Corporation for such tax.
<PAGE>
Dividends and distributions may be made in cash, property or
additional shares of the Bond Fund or another class or series, or a combination
thereof, as determined by the Board of Directors or pursuant to any program that
the Board of Directors may have in effect at the time for the election by each
Shareholder of the mode of the making of such dividend or distribution to that
Shareholder. Any such dividend or distribution paid in shares will be paid at
the net asset value thereof as defined in subsection (9) below.
4. LIQUIDATION. In the event of the liquidation or dissolution of
the Corporation, the shareholders of the Bond Fund shall be entitled to receive,
as a series and in preference to any other series, when and as declared by the
Board of Directors, the excess of the assets belonging to the Bond Fund over the
liabilities belonging to that series and such shareholders shall not be entitled
thereby to any distribution upon liquidation of any other class or series. The
assets so distributable to the shareholders of the Bond Fund shall be
distributed among such shareholders in proportion to the number of shares of
that series held by them and recorded on the books of the Corporation. The
liquidation of the Bond Fund may be authorized by vote of a majority of the
Board of directors then in office, subject to the approval of a majority of the
outstanding securities of that series, as defined in the 1940 Act, and without
the vote of the holders of any other class or series. The liquidation or
dissolution of the Bond Fund may be accomplished, in whole or in part, by the
transfer of assets of such series to another class
or series or by the exchange of shares of such series for the shares of another
class or series.
5. VOTING. On each matter submitted to a vote of the shareholders of
the Corporation, each holder of a share of the Bond Fund shall be entitled to
one vote for each share of the Bond Fund standing in his name on the books of
the Corporation, and all shares of all classes or series shall vote as a single
class or series ("Single Class Voting"); provided, however, that (a) as to any
matter with respect to which a separate vote of the Bond Fund is required by the
1940 Act or by the Maryland General Corporation Law, such requirement a told
separate vote by that series shall apply in lieu of Single Class Voting as
described above; (b) in the event that the separate vote requirements referred
to in (a) above apply with respect to one or more classes of series, then,
subject to (c) below, the shares of all other classes or series shall vote as a
single class or series; and (c) as to any matter which does not affect the
interest of the Bond Fund the holders of shares of the Bond Fund shall not be
entitled to vote. As to any matter with respect to which a separate vote of the
Bond Fund is required pursuant to proviso (a) above, notwithstanding any
provision of law requiring any action on that matter to be taken or authorized
by the holders of a greater proportion than a majority of the Bond Fund entitled
to vote thereon, such action shall be valid and effective if taken or authorized
by the affirmative vote of the holders of a majority of shares of the Bond Fund
outstanding and entitled to vote thereon.
6. REDEMPTION BY SHAREHOLDER. Each holder of shares of the Bond Fund
shall have the right at such times as may be permitted by the Corporation, but
no less frequently than once each week, to require the Corporation to redeem all
or any part of his shares of the Bond Fund at a redemption price per share equal
to the net asset value per share of the Bond Fund next determined (in accordance
with subsection (9)) after the Shares are properly tendered for redemption, less
such redemption charge as is determined by the Board of Directors. Payment of
<PAGE>
the redemption price shall be in cash; provided, however, that if the Board of
Directors determines, which determination shall be conclusive, that conditions
exist which make payment wholly in cash unwise or undesirable, the Corporation
may make payment wholly or partly in securities or other assets belonging to the
Bond Fund at the value of such securities or assets used in such determination
of net asset value.
Notwithstanding the foregoing, the Corporation may postpone payment of
the redemption price and may suspend the right of the holders of shares of the
Bond Fund to require the Corporation to redeem shares of that series during any
period or
at any time when and to the extent permissible under the 1940 Act.
7. REDEMPTION BY CORPORATION. The Board of Directors may cause the
Corporation to redeem at net asset value the shares of the Bond Fund from a
holder who has had shares of that series having an aggregate net asset value
(determined in accordance with subsection (9)) of an amount equal to $100 less
than the minimum initial investment in or less in his account, provided that at
least sixty (60) days' prior written notice of the proposed redemption has been
given to such holder by postage paid mail to his last known address. Upon
redemption of such shares pursuant to this subsection, the Corporation shall
promptly cause payment of the full redemption price to be made to the holder of
such shares so redeemed.
8. NET ASSET VALUE PER SHARE. The net asset value per share of the
Bond Fund shall be the quotient obtained by dividing the value of the net assets
of that series (being the value of the assets belonging to that series less the
liabilities belonging to that series) by the total number of shares of the Bond
Fund outstanding, all determined by the Board of Directors in accordance with
generally accepted accounting principles and not inconsistent with the 1940 Act.
The Board of Directors may determine to maintain the net asset value
per share of the Bond Fund at a designated constant dollar amount and in
connection therewith may adopt procedures not inconsistent with the 1940 Act for
the continuing declarations of income attributable to that series as dividends
payable in additional shares of the Bond Fund at the designated constant dollar
amount and for the handling of any losses attributable to that series. Such
procedures may provide that in the event of any loss, each shareholder shall be
deemed to have contributed to the capital of the Corporation attributable to the
Bond Fund his pro rata portion of the total number of shares required to be
cancelled in order to permit the net asset value per share of the Bond Fund to
be maintained, after reflecting such loss, at the designated constant dollar
amount. Each shareholder of the Bond Fund shall be deemed to have agreed, by
his investment in such series, to make the contribution referred to in the
preceding sentence in the event of any such loss.
9. EQUALITY. All shares of the Bond Fund shall represent an equal
proportionate interest in the assets belonging to the Bond Fund (subject to the
liabilities belonging to that series), and each share of the Bond Fund shall be
equal to each other share of that series. The Board of Directors may from time
to time divide or combine the shares of the Bond Fund into a greater or lesser
number of shares of that series without thereby changing the proportionate
<PAGE>
beneficial interest in the assets belonging to the Bond Fund or in any way
affecting the rights of shares of the Bond Fund.
10. CONVERSION OR EXCHANGE RIGHTS. Subject to compliance with the
requirements of the 1940 Act, the Board of Directors shall have the authority to
provide that holders of shares of the Bond Fund shall have the right to convert
or exchange said shares into shares of one or more other classes or series of
shares in accordance with such requirements and procedures as may be established
by the Board of Directors.
11. FRACTIONAL SHARES. The Corporation may issue and sell fractions
of shares of the Bond Fund having pro rata all the rights of full shares of the
Bond Fund, including, without limitation, the right to vote and to receive
dividends, and wherever the words "share" or "shares" are used in the Articles
or in the By-Laws, they shall be deemed to include fractions of shares of the
Bond Fund, where the context does not clearly indicate that only full shares are
intended.
12. STOCK CERTIFICATES. The Corporation shall not be obligated to
issue certificates representing shares of the Bond Fund unless it shall receive
a written request therefor from the record holder thereof in accordance with
procedures established in the By-Laws or by the Board of Directors.
IN WITNESS WHEREOF, G.T. Global Income Series, Inc. has caused these
presents to be signed in its name and on its behalf by its President and
witnessed by its Secretary on February 17, 1988.
WITNESS: G.T. GLOBAL INCOME SERIES, INC.
/s/ Michele H. Neureuter By: /s/ Michael F. O'Neill
- ------------------------ ----------------------
Michele H. Neureuter, Secretary Michael F. O'Neill, President
THE UNDERSIGNED, President of G.T. Global Income Series, Inc., who
executed on behalf of the Corporation Articles Supplementary of which this
Certificate is made a part, hereby acknowledges in the name and on behalf of
said Corporation the foregoing Articles Supplementary to be the corporate act of
said Corporation and hereby certifies that the matters and facts set forth
herein with respect to the authorization and approval thereof are true in all
material respects under the penalties of perjury.
/s/ Michael F. O'Neill
- ----------------------
Michael F. O'Neill, President
<PAGE>
G.T. GLOBAL INCOME SERIES, INC.
ARTICLES OF AMENDMENT
G.T. GLOBAL INCOME SERIES, INC., a Maryland corporation, having its
principal office in Baltimore, Maryland (hereafter referred to as the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland (the "Department") that:
FIRST: That the below amendment to the Charter of the Corporation was
advised by the Board of Directors and approved by the stockholders of the
Corporation, all in accord with the Maryland General Corporation Law.
SECOND: The Charter of the Corporation is hereby amended by the
addition of the following Article thereto:
VIII.
Subject to the provisions of the 1940 Act, to the
fullest extent permitted by Maryland statutory or decisional
law, as amended or interpreted, no director or officer of
this Corporation shall be personally liable to the
Corporation or its stockholders for money damages. No
amendment of the charter of the Corporation or repeal of any
of its provisions shall limit or eliminate the benefits
provided to directors and officers under this provision with
respect to any act or omission which occurred prior to such
amendment or repeal.
IN WITNESS WHEREOF, G.T. GLOBAL INCOME SERIES, INC. has caused these
presents to be signed in the name and in its behalf by its President and
attested by its Secretary on this 29th day of March, 1988, and its President
acknowledges that these Articles of Amendment are the act and deed of G.T.
GLOBAL INCOME SERIES, INC. and, under the penalties of perjury, that the matters
and facts set forth herein with respect to authorization and approval are true
in all material respects to the best of his knowledge, information and belief.
By /s/ David A. Minella
--------------------
President
ATTEST:
/s/ Michele H. Neureuter
- ------------------------
Michele H. Neureuter
Secretary
<PAGE>
G.T. GLOBAL INCOME SERIES, INC.
ARTICLES SUPPLEMENTARY
G.T. Global Income Series, Inc., a Maryland corporation, having its
principal office in Baltimore, Maryland (hereinafter called the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: Pursuant to authority expressly vested in the Board of
Directors of the Corporation by Article FIFTH of the Charter of Corporation, the
Board of Directors has duly classified 100,000,000 shares of the unissued shares
of capital stock of the Corporation into a series designated the G.T. PORTFOLIO
STRATEGY FUND (the "Strategy Fund") and has provided for the issuance of such
series.
SECOND: A description of the preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends, qualifications
and terms and conditions of redemption of the Strategy Fund is as follows:
1. ASSETS BELONGING TO STRATEGY FUND. All consideration received by
the Corporation from the issue or sale of shares of the Strategy Fund, 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 irrevocably belong to the Strategy Fund for all purposes, subject only to
the rights of creditors, and shall be so recorded upon the books of account of
the Corporation. Such consideration, assets, income, earnings, profits, and
proceeds thereof, including any proceeds derived form 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, together with
any General Items allocated to Strategy Fund as provided in the following
sentence, are herein referred to as "assets belonging to" the Strategy Fund. In
the event that there are any assets, income, earnings, profits, and proceeds
thereof, funds, or payments which are not readily identifiable as belonging to
any particular class or series (collectively "General Items"), such General
Items shall be allocated by or under the supervision of the Board of Directors
to the Strategy Fund in such manner and on such basis as the Board of Directors,
in its sole discretion, deems fair and equitable; and any General Items so
allocated to the Strategy Fund shall belong to that series. Each such
allocation by the Board of Directors shall be conclusive and binding for all
purposes.
2. LIABILITIES BELONGING TO STRATEGY FUND. The assets belonging to
the Strategy Fund shall be charged with the liabilities of the Corporation in
respect of that series and all expenses, costs, charges and reserves
attributable to that series, and any general liabilities, expenses, costs,
charges or reserves of the Corporation which are not readily identifiable as
belonging to any particular class or series shall be allocated and charged by or
under the supervision of the Board of Directors to the Strategy Fund in such
manner and on such basis as
<PAGE>
the Board of Directors, in its sole discretion, deems fair and equitable. The
liabilities, expenses, costs, charges and reserves allocated and so charged to
the Strategy Fund are herein referred to as "liabilities belonging to" that
series. Each allocation of liabilities, expenses, costs, charges and reserves
by the Board of Directors shall be conclusive and binding for all purposes.
3. INCOME BELONGING TO THE STRATEGY FUND. The Board of Directors
shall have full discretion, to the extent not inconsistent with the Maryland
General Corporation Law and the Investment Company Act of 1940 (the "1940 Act"),
to determine which items shall be treated as income and which items as capital;
and each such determination and allocation shall be conclusive and binding.
Income belonging to the Strategy Fund includes all income, earnings
and profits derived from assets belonging to the Strategy Fund less any
expenses, costs, charges or reserves belonging to Strategy Fund for the relevant
time period, all determined in accordance with generally accepted accounting
principles.
4. DIVIDENDS. Dividends and distributions on shares of the Strategy
Fund may be paid with such frequency, in such form and in such amount as the
Board of Directors may from time to time determine. Dividends may be daily or
otherwise pursuant to a standing resolution or resolutions adopted only once or
with such frequency as the Board of Directors may determine, after providing for
actual and accrued liabilities belonging to the Strategy Fund.
All dividends on shares of the Strategy Fund shall be paid only out of
the income belonging to that series and capital gains distributions on shares of
that series shall be paid only out of the capital gains belonging to the
Strategy Fund. All dividends and distributions on shares of the Strategy Fund
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 in connection with any dividend or distribution program or procedure, the
Board of Directors may determine that no dividend or distribution shall be
payable on shares as to which the Shareholder's purchase order and/or payment
have not been received by the time or times established by the Board of
Directors under such program or procedure.
The Corporation intends to qualify as a "regulated investment company"
under the Internal Revenue Code of 1986, as amended, or any successor or
comparable statute thereto, and regulations promulgated thereunder. Inasmuch as
the computation of net income and gains for federal income tax purposes may vary
from the computation thereof on the books of the Corporation, the Board of
Directors shall have the power, in its sole discretion, to distribute in any
fiscal year as dividends, including dividends designated in whole or in part as
capital gains distributions, amounts sufficient, in the opinion of the Board of
Directors, to enable the Corporation to qualify as a regulated investment
company and to avoid liability of the Corporation for federal income tax in
respect of that year. However, nothing in the foregoing shall limit the
authority of the Board of Directors to make distributions greater than or less
than the amount necessary to qualify as a regulated investment company and to
avoid liability of the Corporation for such tax.
<PAGE>
Dividends and distributions may be made in cash, property or
additional shares of the Strategy Fund or another class or series, or a
combination thereof, as determined by the Board of Directors or pursuant to any
program that the Board of Directors may have in effect at the time for the
election by each shareholder of the mode of the making of such dividend or
distribution to that shareholder. Any such dividend or distribution paid in
shares will be paid at the net asset value thereof as defined in subsection (9)
below.
5. LIQUIDATION. In the event of the liquidation or dissolution of
the Corporation, the shareholders of the Strategy Fund shall be entitled to
receive, as a series and in preference to any other series, when and as declared
by the Board of Directors, the excess of the assets belonging to the Strategy
Fund over the liabilities belonging to that series and such shareholders shall
not be entitled thereby to any distribution upon liquidation of any other class
or series. The assets so distributable to the shareholders of the Strategy Fund
shall be distributed among such shareholders in proportion to the number of
shares of that series held by them and recorded on the books of the Corporation.
The liquidation of the Strategy Fund may be authorized by vote of a majority of
the Board of Directors then in office, subject to the approval of a majority of
the outstanding securities of that series, as defined in the 1940 Act, and
without the vote of the holders of any other class or series. The liquidation
or dissolution of the Strategy Fund may be accomplished, in whole or in part, by
the transfer of assets of such series to another class or series or by the
exchange of shares of such series for the shares of another class or series.
6. VOTING. On each matter submitted to a vote of the shareholders
of the Corporation, each holder of a share of the Strategy Fund shall be
entitled to one vote for each share of the Strategy Fund outstanding in the
holder's name on the books of the Corporation, and all shares of all classes or
series shall vote as a single class or series ("Single Class Voting"); provided,
however, that (a) as to any matter with respect to which a separate vote of the
Strategy Fund is required by the 1940 Act or by the Maryland General Corporation
Law, such requirement as to a separate vote by that series shall apply in lieu
of Single Class Voting as described above; (b) in the event that the separate
vote requirements referred to in (a) above apply with respect to one or more
classes of series, then, subject to (c) below, the shares of all other classes
or series shall vote as a single class or series; and (c) as to any matter which
does not affect the interest of the Strategy Fund the holders of shares of the
Strategy Fund shall not be entitled to vote. As to any matter with respect to
which a separate vote of the Strategy Fund is required pursuant to proviso (a)
above, notwithstanding any provision of law requiring any action on that matter
to be taken or authorized by the holders of a greater proportion then a majority
of the Strategy Fund entitled to vote thereon, such action shall be valid and
effective if taken or authorized by the affirmative vote of the holders of a
majority of shares of the Strategy Fund outstanding and entitled to vote
thereon.
7. REDEMPTION BY SHAREHOLDER. Each holder of shares of the Strategy
Fund shall have the right at such times as may be permitted by the Corporation
to require the Corporation to redeem all or any part of his shares of the
Strategy Fund at a redemption price per share equal to the net asset value per
share of the Strategy Fund next determined (in accordance with subsection (9))
after the Shares are properly tendered for redemption, less such redemption
charge as is determined by the Board of Directors. Payment of the redemption
price shall be in cash;
<PAGE>
provided, however, that if the Board of Directors determines, which
determination shall be conclusive, that conditions exist which make payment
wholly in cash unwise or undesirable, the Corporation may make payment wholly or
partly in securities or other assets belonging to the Strategy Fund at the value
of such securities or assets used in such determination of net asset value.
Notwithstanding the foregoing, the Corporation may postpone payment of
the redemption price and may suspend the right of the holders of shares of the
Strategy Fund to require the Corporation to redeem shares of that series during
any period or at any time when and to the extent permissible under the 1940 Act.
8. REDEMPTION BY CORPORATION. The Board of Directors may cause the
Corporation to redeem at net asset value the shares of the Strategy Fund from a
holder who has, for a period of more than six months, had shares of that series
having an aggregate net asset value (determined in accordance with subsection
(9)) equal to $100 less than the minimum initial investment in the series or
less in his account, provided that at least sixty (60) days' prior written
notice of the proposed redemption has been given to such holder by postage paid
mail to his last known address. Upon redemption of such shares pursuant to this
subsection, the Corporation shall promptly cause payment of the full redemption
price to be made to the holder of such shares so redeemed.
9. NET ASSET VALUE PER SHARE. The net asset value per share of the
Strategy Fund shall be the quotient obtained by dividing the value of the net
assets of that series (being the value of the assets belonging to that series
less the liabilities belonging to that series) by the total number of shares of
the Strategy Fund outstanding, all determined by the Board of Directors in
accordance with generally accepted accounting principles and not inconsistent
with the 1940 Act.
The Board of Directors may determine to maintain the net asset value
per share of the Strategy Fund at a designated constant dollar amount and in
connection therewith may adopt procedures not inconsistent with the 1940 Act for
the continuing declarations of income attributable to that series as dividends
payable in additional shares of the Strategy Fund at the designated constant
dollar amount and for the handling of any losses attributable to that series.
Such procedures may provide that in the event of any loss, each shareholder
shall be deemed to have contributed to the capital of the Corporation
attributable to the Strategy Fund his pro rata portion of the total number of
shares required to be cancelled in order to permit the net asset value per share
of the Strategy Fund to be maintained, after reflecting such loss, at the
designated constant dollar amount. Each shareholder of the Strategy Fund shall
be deemed to have agreed, by his investment in such series, to make the
contribution referred to in the preceding sentence in the event of any such
loss.
10. EQUALITY. All shares of the Strategy Fund shall represent an
equal proportionate interest in the assets belonging to the Strategy Fund
(subject to the liabilities belonging to that series), and each share of the
Strategy Fund shall be equal to each other share of that series. The Board of
Directors may from time to time divide or combine the shares of the
<PAGE>
Strategy Fund into a greater or lesser number of shares of that series without
thereby changing the proportionate beneficial interest in the assets belonging
to the Strategy Fund or in any way affecting the rights of shares of the
Strategy Fund.
11. CONVERSION OR EXCHANGE RIGHTS. Subject to compliance with the
requirements of the 1940 Act, the Board of Directors shall have the authority to
provide that holders of shares of the Strategy Fund shall have the right to
convert or exchange said shares into shares of one or more other classes or
series of shares in accordance with such requirements and procedures as may be
established by the Board of Directors.
12. FRACTIONAL SHARES. The Corporation may issue and sell fractions
of shares of the Strategy Fund having pro rata all the rights of full shares of
the Strategy Fund, including, without limitation, the right to vote and to
receive dividends, and wherever the words "share" or "shares" are used in the
Charter or in the By-Laws, they shall be deemed to include fractions of the
Strategy Fund, where the context does not clearly indicate that only full shares
are intended.
13. STOCK CERTIFICATES. The Corporation shall not be obligated to
issue certificates representing shares of the Strategy Fund unless it shall
receive a written request therefor from the record holder thereof in accordance
with procedures established in the By-Laws or by the Board of Directors.
IN WITNESS WHEREOF, G.T. Global Income Series, Inc. has caused these
presents to be signed in its name and on its behalf by its Vice President and
witnessed by its Assistant Secretary on April 27, 1989.
WITNESS: G.T. GLOBAL INCOME SERIES, INC.
/s/ James W. Churm By: /s/ James R. Tufts
- ------------------ ------------------
James W. Churm James R. Tufts
Assistant Secretary Vice President
THE UNDERSIGNED, Vice President of G.T. Global Income Series, Inc.,
who executed on behalf of the Corporation Articles Supplementary of which this
Certificate is made a part, hereby acknowledges in the name and on behalf of
said Corporation the foregoing Articles Supplementary to be the corporate act of
said Corporation and hereby certifies that the matters and facts set forth
herein with respect to the authorization and approval thereof are true in all
material respects under the penalties of perjury.
/s/ James R. Tufts
- ------------------
James R. Tufts, Vice President
<PAGE>
G.T. GLOBAL INCOME SERIES, INC.
ARTICLES SUPPLEMENTARY
G.T. Global Income Series, Inc., a Maryland corporation, having its
principal office in Baltimore, Maryland (hereinafter called the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: Pursuant to authority expressly vested in the Board of
Directors of the Corporation by Article FIFTH of the Charter of the Corporation,
the Board of Directors has duly classified 100,000,000 shares of the unissued
shares of capital stock of the Corporation into a series designated the G.T.
GLOBAL Health Care Fund (the "Health Care Fund") and has provided for the
issuance of such series.
SECOND: A description of the preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends, qualifications
and terms and conditions of redemption of the Health Care Fund is as follows:
1. ASSETS BELONGING TO HEALTH CARE FUND. All consideration received
by the Corporation from the issue or sale of shares of the Health Care Fund,
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 irrevocably belong to the Health Care Fund for all purposes,
subject only to the rights of creditors, and shall be so recorded upon the books
of account of the Corporation. Such consideration, assets, income, earnings,
profits, and proceeds thereof, including any proceeds derived form 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, together
with any General Items allocated to Health Care Fund as provided in the
following sentence, are herein referred to as "assets belonging to" the Health
Care Fund. In the event that there are any assets, income, earnings, profits,
and proceeds thereof, funds, or payments which are not readily identifiable as
belonging to any particular class or series (collectively "General Items"), such
General Items shall be allocated by or under the supervision of the Board of
Directors to the Health Care Fund in such manner and on such basis as the Board
of Directors, in its sole discretion, deems fair and equitable; and any General
Items so allocated to the Health Care Fund shall belong to that series. Each
such allocation by the Board of Directors shall be conclusive and binding for
all purposes.
2. LIABILITIES BELONGING TO HEALTH CARE FUND. The assets belonging
to the Health Care Fund shall be charged with the liabilities of the Corporation
in respect of that series and all expenses, costs, charges and reserves
attributable to that series, and any general liabilities, expenses, costs,
charges or reserves of the Corporation which are not readily identifiable as
belonging to any particular class or series shall be allocated and charged by or
under the supervision of the Board of Directors to the Health Care Fund in such
manner and on such basis as the Board of Directors, in its sole discretion,
deems fair and equitable. The liabilities,
<PAGE>
expenses, costs, charges and reserves allocated and so charged to the Health
Care Fund are herein referred to as "liabilities belonging to" that series.
Each allocation of liabilities, expenses, costs, charges and reserves by the
Board of Directors shall be conclusive and binding for all purposes.
3. INCOME BELONGING TO THE HEALTH CARE FUND. The Board of Directors
shall have full discretion, to the extent not inconsistent with the Maryland
General Corporation Law and the Investment Company Act of 1940 (the "1940 Act"),
to determine which items shall be treated as income and which items as capital;
and each such determination and allocation shall be conclusive and binding.
Income belonging to the Health Care Fund includes all income, earnings
and profits derived from assets belonging to the Health Care Fund less any
expenses, costs, charges or reserves belonging to Health Care Fund for the
relevant time period, all determined in accordance with generally accepted
accounting principles.
4. DIVIDENDS. Dividends and distributions on shares of the Health
Care Fund may be paid with such frequency, in such form and in such amount as
the Board of Directors may from time to time determine. Dividends may be daily
or otherwise pursuant to a standing resolution or resolutions adopted only once
or with such frequency as the Board of Directors may determine, after providing
for actual and accrued liabilities belonging to the Health Care Fund.
All dividends on shares of the Health Care Fund shall be paid only out
of the income belonging to that series and capital gains distributions on shares
of that series shall be paid only out of the capital gains belonging to the
Health Care Fund. All dividends and distributions on shares of the Health Care
Fund 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 in connection with any dividend or distribution program or procedure, the
Board of Directors may determine that no dividend or distribution shall be
payable on shares as to which the Shareholder's purchase order and/or payment
have not been received by the time or times established by the Board of
Directors under such program or procedure.
The Corporation intends to qualify as a "regulated investment company"
under the Internal Revenue Code of 1986, as amended, or any successor or
comparable statute thereto, and regulations promulgated thereunder. Inasmuch as
the computation of net income and gains for federal income tax purposes may vary
from the computation thereof on the books of the Corporation, the Board of
Directors shall have the power, in its sole discretion, to distribute in any
fiscal year as dividends, including dividends designated in whole or in part as
capital gains distributions, amounts sufficient, in the opinion of the Board of
Directors, to enable the Corporation to qualify as a regulated investment
company and to avoid liability of the Corporation for federal income tax in
respect of that year. However, nothing in the foregoing shall limit the
authority of the Board of Directors to make distributions greater than or less
than the amount necessary to qualify as a regulated investment company and to
avoid liability of the Corporation for such tax.
<PAGE>
Dividends and distributions may be made in cash, property or
additional shares of the Health Care Fund or another class or series, or a
combination thereof, as determined by the Board of Directors or pursuant to any
program that the Board of Directors may have in effect at the time for the
election by each shareholder of the mode of the making of such dividend or
distribution to that shareholder. Any such dividend or distribution paid in
shares will be paid at the net asset value thereof as defined in subsection (9)
below.
5. LIQUIDATION. In the event of the liquidation or dissolution of
the Corporation, the shareholders of the Health Care Fund shall be entitled to
receive, as a series and in preference to any other series, when and as declared
by the Board of Directors, the excess of the assets belonging to the Health Care
Fund over the liabilities belonging to that series and such shareholders shall
not be entitled thereby to any distribution upon liquidation of any other class
or series. The assets so distributable to the shareholders of the Health Care
Fund shall be distributed among such shareholders in proportion to the number of
shares of that series held by them and recorded on the books of the Corporation.
The liquidation of the Health Care Fund may be authorized by vote of a majority
of the Board of Directors then office, subject to the approval of a majority of
the outstanding securities of that series, as defined in the 1940 Act, and
without the vote of the holders of any other class or series. The liquidation
or dissolution of the Health Care Fund may be accomplished, in whole or in part,
by the transfer of assets of such series to another class or series or by the
exchange of shares of such series for the shares of another class or series.
6. VOTING. On each matter submitted to a vote of the shareholders
of the Corporation, each holder of a share of the Health Care Fund shall be
entitled to one vote for each share of the Health Care Fund outstanding in the
holder's name on the books of the Corporation, and all shares of all classes or
series shall vote as a single class or series ("Single Class Voting"); provided,
however, that (a) as to any matter with respect to which a separate vote of the
Health Care Fund is required by the 1940 Act or by the Maryland General
Corporation Law, such requirement as to a separate vote by that series shall
apply in lieu of Single Class Voting as described above; (b) in the event that
the separate vote requirements referred to in (a) above apply with respect to
one or more classes of series, then, subject to (c) below, the shares of all
other classes or series shall vote as a single class or series; and (c) as to
any matter which does not affect the interest of the Health Care Fund the
holders of shares of the Health Care Fund shall not be entitled to vote. As to
any matter with respect to which a separate vote of the Health Care Fund is
required pursuant to proviso (a) above, notwithstanding any provision of law
requiring any action on that matter to be taken or authorized by the holders of
a greater proportion than a majority of the Health Care Fund entitled to vote
thereon, such action shall be valid and effective if taken or authorized by the
affirmative vote of the holders of a majority of shares of the Health Care Fund
outstanding and entitled to vote thereon.
7. REDEMPTION BY SHAREHOLDER. Each holder of shares of the Health
Care Fund shall have the right at such times as may be permitted by the
Corporation to require the Corporation to redeem all or any part of his shares
of the Health Care Fund at a redemption price per share equal to the net asset
value per share of the Health Care Fund next determined (in accordance with
subsection (9)) after the Shares are properly tendered for redemption, less such
redemption charge as is determined by the Board of Directors. Payment of the
redemption price
<PAGE>
shall be in cash; provided, however, that if the Board of Directors determines,
which determination shall be conclusive, that conditions exist which make
payment wholly in cash unwise or undesirable, the Corporation may make payment
wholly or partly in securities or other assets belonging to the Health Care Fund
at the value of such securities or assets used in such determination of net
asset value.
Notwithstanding the foregoing, the Corporation may postpone payment of
the redemption price and may suspend the right of the holders of shares of the
Health Care Fund to require the Corporation to redeem shares of that series
during any period or at any time when and to the extent permissible under the
1940 Act.
8. REDEMPTION BY CORPORATION. The Board of Directors may cause the
Corporation to redeem at net asset value the shares of the Health Care Fund from
a holder who has, for a period of more than six months, had shares of that
series having an aggregate net asset value (determined in accordance with
subsection (9)) equal to $100 less than the minimum initial investment in the
series or less in his account, provided that at least sixty (60) days' prior
written notice of the proposed redemption has been given to such holder by
postage paid mail to his last known address. Upon redemption of such shares
pursuant to this subsection, the Corporation shall promptly cause payment of the
full redemption price to be made to the holder of such shares so redeemed.
9. NET ASSET VALUE PER SHARE. The net asset value per share of the
Health Care Fund shall be the quotient obtained by dividing the value of the net
assets of that series (being the value of the assets belonging to that series
less the liabilities belonging to that series) by the total number of shares of
the Health Care Fund outstanding, all determined by the Board of Directors in
accordance with generally accepted accounting principles and not inconsistent
with the 1940 Act.
The Board of Directors may determine to maintain the net asset value
per share of the Health Care Fund at a designated constant dollar amount and in
connection therewith may adopt procedures not inconsistent with the 1940 Act for
the continuing declarations of income attributable to that series as dividends
payable in additional shares of the Health Care Fund at the designated constant
dollar amount and for the handling of any losses attributable to that series.
Such procedures may provide that in the event of any loss, each shareholder
shall be deemed to have contributed to the capital of the Corporation
attributable to the Health Care Fund his pro rata portion of the total number of
shares required to be cancelled in order to permit the net asset value per share
of the Health Care Fund to be maintained, after reflecting such loss, at the
designated constant dollar amount. Each shareholder of the Health Care Fund
shall be deemed to have agreed, by his investment in such series, to make the
contribution referred to in the preceding sentence in the event of any such
loss.
10. EQUALITY. All shares of the Heath Care Fund shall represent an
equal proportionate interest in the assets belonging to the Health Care Fund
(subject to the liabilities belonging to that series), and each share of the
Health Care Fund shall be equal to each other share of that series. The Board
of Directors may from time to time divide or combine the shares of the Health
Care Fund into a greater or lesser number of shares of that series without
thereby
<PAGE>
changing the proportionate beneficial interest in the assets belonging to the
Health Care Fund or in any way affecting the rights of shares of the Health Care
Fund.
11. CONVERSION OR EXCHANGE RIGHTS. Subject to compliance with the
requirements of the 1940 Act, the Board of Directors shall have the authority to
provide that holders of shares of the Health Care Fund shall have the right to
convert or exchange said shares into shares of one or more other classes or
series of shares in accordance with such requirements and procedures as may be
established by the Board of Directors.
12. FRACTIONAL SHARES. The Corporation may issue and sell fractions
of shares of the Health Care Fund having pro rata all the rights of full shares
of the Health Care Fund, including, without limitation, the right to vote and to
receive dividends, and wherever the words "share" or "shares" are used in the
Charters or in the By-Laws, they shall be deemed to include fractions of shares
of the Health Care Fund, where the context does not clearly indicate that only
full shares are intended.
13. STOCK CERTIFICATES. The Corporation shall not be obligated to
issue certificates representing shares of the Health Care Fund unless it shall
receive a written request therefor from the record holder thereof in accordance
with procedures established in the By-Laws or by the Board of Directors.
IN WITNESS WHEREOF, G.T. Global Income Series, Inc. has caused these
presents to be signed in its name and on its behalf by its Vice President and
witnessed by its Assistant Secretary on April 27, 1989.
WITNESS: G.T. GLOBAL INCOME SERIES, INC.
/s/ James W. Churm By: James R. Tufts
- ------------------ --------------
James W. Churm James R. Tufts
Assistant Secretary Vice President
THE UNDERSIGNED, Vice President of G.T. Global Income Series, Inc.,
who executed on behalf of the Corporation Articles Supplementary of which this
Certificate is made a part, hereby acknowledges in the name and on behalf of
said Corporation the foregoing Articles Supplementary to be the corporate act of
said Corporation and hereby certifies that the matters and facts set forth
herein with respect to the authorization and approval thereof are true in all
material respects under the penalties of perjury.
/s/ James R. Tufts
- ------------------
James R. Tufts, Vice President
<PAGE>
G.T. GLOBAL INCOME SERIES, INC.
ARTICLES OF AMENDMENT
G.T. Global Income Series, Inc., a Maryland corporation, having its
principal office at c/o The Corporation Trust Incorporated, 32 South Street,
Baltimore, Maryland 21202 (which is hereinafter called the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: The Charter of the Corporation is hereby amended as follows:
(a) Article FIRST of the Charter is amended in its entirety to
read as follows:
FIRST: The name of the Corporation (hereinafter called the
"Corporation") is:
G.T. Investment Funds, Inc.
SECOND: The amendment does not increase the authorized stock of the
Corporation.
THIRD: The foregoing amendment to the Charter of the Corporation has
been advised by the Board of Directors and approved by the stockholders of the
Corporation.
IN WITNESS WHEREOF, G.T. Global Income Series, Inc., has caused these
presents to be signed in its name and on its behalf by its Vice President and
witnessed by its Assistant Secretary on April 27, 1989.
WITNESS: G.T. GLOBAL INCOME SERIES, INC.
/s/ James W. Churm By /s/ James R. Tufts
- ------------------ ------------------
James W. Churm James R. Tufts
Assistant Secretary Vice President
THE UNDERSIGNED, Vice President of G.T. Global Income Series, Inc.,
who executed on behalf of the Corporation the foregoing Articles of Amendment of
which this certificate is made a part, hereby acknowledges in the name and on
behalf of said Corporation the foregoing Articles of Amendment to be the
corporate act of said knowledge, information, and belief the matter and facts
set forth herein with respect to the authorization and approval thereof are true
in all material respects under the penalties of perjury.
/s/ James R . Tufts
- -------------------
James R. Tufts, Vice President
<PAGE>
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
OF
G.T. INVESTMENT FUNDS, INC.
FIRST: G.T. Investment Funds, Inc., a Maryland Corporation
("Corporation") organized on November 5, 1987, is authorized to issue one
billion (1,000,000,000) shares of capital stock.
By action of the Board of Directors of the Corporation, one hundred
million (100,000,000) shares that the Corporation is authorized to issue have
been classified as a newly-created series known as G.T. Latin America Fund; one
hundred million (100,000,000) shares that the Corporation is authorized to issue
have been classified as newly-created series known as G.T. Global Small
companies Fund; and one hundred million (100,000,000) shares that the
Corporation is authorized to issue have been classified as a newly-created
series known as G.T. Global Currency Fund. The par value of the shares of
capital stock remains 1/100th of one cent ($.0001) per share. The aggregate par
value of the shares of G.T. Latin America Fund is $10,000; the aggregate par
value of the shares of G.T. Global Small companies Fund is $10,000; and the
aggregate par value of the shares of G.T. Global Currency Fund is $10,000.
SECOND: The Corporation is registered with the U.S. Securities and
Exchange commission as an open-end investment company under the Investment
Company Act of 1940.
IN WITNESS WHEREOF, the undersigned President of G.T. Investment
Funds, Inc. hereby executes these Articles Supplementary on behalf of the
Corporation, and hereby acknowledges these Articles Supplementary to be the act
of the Corporation and further states
<PAGE>
under the penalties of perjury that, to the best of his knowledge, information
and belief, the matters and facts set forth herein are true in all material
respects.
Date: July 18, 1991 /s/ David A. Minella
--------------------
David A. Minella
President
Attest: /s/ James W. Churm
------------------
James W. Churm
Vice President and Secretary
<PAGE>
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION OF
G.T. INVESTMENT FUNDS, INC.
G.T. INVESTMENT FUNDS, INC., a Maryland corporation (hereinafter
called the "Corporation") hereby certifies to the State Department of
Assessments and Taxation of Maryland, that:
FIRST: The Charter of the Corporation is hereby amended as follows:
By changing the name of the G.T. Latin America Fund, a series of the
Corporation created via Articles Supplementary to the Corporation's Articles of
Incorporation filed with the State Department of Assessments and Taxation of
Maryland on July 19, 1991, to the G.T. Latin America Growth Fund (the "Fund").
SECOND: The foregoing amendment does not increase the authorized
capital stock of the Corporation or alter the par value of such capital stock.
THIRD: The amendment to the charter of the Corporation herein made
was duly approved by written consent of the sole holder of shares of capital
stock of the Fund.
IN WITNESS WHEREOF, G.T. Investment Funds, Inc. has caused these
Articles to be signed in its name and on its behalf by its President and
attested by its Secretary on July 31, 1991.
G.T. INVESTMENT FUNDS, INC.
By /s/ David A. Minella
--------------------
David A. Minella, President
Attest:
/S/ James W. Churm
- ------------------
James W. Churm, Secretary
<PAGE>
THE UNDERSIGNED, President of G.T. Investment Funds, Inc., who
executed on behalf of said corporation the foregoing Articles of Amendment, of
which this certificate is made a part, hereby acknowledges, in the name and on
behalf of said corporation and further certifies that, to the best of his
knowledge, information and belief, the matters and facts set
forth therein with respect to the approval thereof are true in all material
respects, under the penalties of perjury.
/s/ David A. Minella
- --------------------
David A. Minella
President
<PAGE>
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
OF
G.T. INVESTMENT FUNDS, INC.
FIRST: G.T. Investment Funds, Inc., a Maryland Corporation
("Corporation") organized on October 29, 1987, is authorized to issue one
billion (1,000,000,000) shares of capital stock.
By action of the Board of Directors of the Corporation, one hundred
million (100,000,000) shares that the Corporation is authorized to issue have
been classified as a newly-created series known as G.T. Global
Telecommunications Fund and one hundred million (100,000,000) shares that the
Corporation is authorized to issue have been classified as newly-created series
known as G.T. Global Financial Services Fund. The par value of the shares of
capital stock remains 1/100th of one cent ($.0001) per share. The aggregate par
value of the shares of G.T. Global Telecommunications Fund is $10,000 and the
aggregate par value of the shares of G.T. Global Financial Services Fund is
$10,000.
SECOND: Corporation is registered with the U.S. Securities and
Exchange Commission as an open-end investment company under the Investment
Company Act of 1940.
IN WITNESS WHEREOF, the undersigned President of G.T. Investment
Funds, Inc., hereby executes these Articles Supplementary on behalf of the
Corporation, and hereby acknowledges these Articles Supplementary to be the act
of the Corporation and further
<PAGE>
states under the penalties of perjury that, to the best of his knowledge,
information and belief, the matters and facts set forth herein are true in all
material respects.
Date: December 31, 1991 /s/ David A. Minella
--------------------
David A. Minella
President
Attest: /s/ James W. Churm
------------------
James W. Churm
Vice President and Secretary
<PAGE>
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
OF
G.T. INVESTMENT FUNDS, INC.
FIRST: G.T. Investment Funds, Inc., a Maryland Corporation
("Corporation") organized on October 29, 1987, is authorized to issue one
billion (1,000,000,000) shares of capital stock.
By action of the Board of Directors of the Corporation, one hundred
million (100,000,000) shares that the Corporation is authorized to issue have
been classified as a newly-created series known as G.T. Global Emerging Markets
Fund. The par value of the shares of capital stock remains 1/100th of one cent
($.0001) per share. The aggregate par value of the shares of G.T. Global
Emerging Markets Fund is $10,000.
SECOND: Corporation is registered with the U.S. Securities and
Exchange Commission as an open-end investment company under the Investment
Company Act of 1940.
IN WITNESS WHEREOF, the undersigned President of G.T. Investment
Funds, Inc., hereby executes these Articles Supplementary on behalf of the
Corporation, and hereby acknowledges these Articles Supplementary to be the act
of the Corporation and further states under the penalties of perjury that, to
the best of his knowledge, information and belief, the matters and facts set
forth herein are true in all material respects.
Date: March 11, 1992 /s/ David A. Minella
--------------------
David A. Minella
President
Attest: /s/ James W. Churm
------------------
James W. Churm
Vice President and Secretary
<PAGE>
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
OF
G.T. INVESTMENT FUNDS, INC.
G.T. Investment funds, Inc. ("Company"), a Maryland corporation,
having its principal office in Baltimore, Maryland, organized on October 29,
1987, hereby certifies to the State Department of Assessments and Taxation of
Maryland that:
FIRST: Pursuant to authority expressly vested in the Board of
Directors of the Company by Article V of the Charter of the Company, the Board
of Directors has duly increased the number of shares of capital stock which the
Company is authorized to issue in accordance with Maryland Corporations and
Associations Code Annotated Section 2-105 (Supp. 1991).
Immediately before said increase, the Company was authorized to issue
one billion (1,000,000,000) shares of capital stock (par value $.0001 per share)
amounting in the aggregate to a par value of one hundred thousand dollars
($100,000).
The Company is hereby authorized to issue an additional two billion
(2,000,000,000) shares of capital stock (par value $.0001 per share) amounting
in the aggregate to a par value of two hundred thousand dollars ($200,000),
thereby increasing the total number of shares of capital stock which the Company
is authorized to issue to three billion (3,000,000,000) shares amounting in the
aggregate to a par value of three hundred thousand dollars ($300,000).
<PAGE>
SECOND: The Company is registered with the Securities and Exchange
Commission as an open-end investment company under the Investment Company Act of
1940, as amended.
IN WITNESS WHEREOF, the undersigned President of the Company hereby
executes these Articles Supplementary on behalf of the Company and further
states under the penalties of perjury that, to the best of his knowledge,
information and belief, the matters and facts set forth herein are true in all
material respects.
Date: August 31, 1992 /s/ David A. Minella
--------------------
David A. Minella
President
Attest: /s/ James W. Churm
------------------
James W. Churm
Vice President and Secretary
<PAGE>
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
OF
G.T. INVESTMENT FUNDS, INC.
G.T. Investment Funds, Inc. ("Company"), a Maryland corporation,
having its principal office in Baltimore, Maryland, organized on October 29,
1987, hereby certifies to the State Department of Assessments and Taxation of
Maryland that:
FIRST: The Company is authorized to issue three billion
(3,000,000,000) shares of capital stock. One billion (1,000,000,000) shares
have previously been classified as shares of the following ten series, each with
one hundred million (100,000,000) shares: G.T. Global Government Income Fund;
G.T. Global Bond Fund; G.T. Global Growth and Income Fund; G.T. Global Health
Care Fund; G.T. Global Small Companies Fund; G.T. Global Currency Fund; G.T.
Latin America Growth Fund; G.T. Global Telecommunications Fund; G.T. Global
Financial Services Fund; and G.T. Global Emerging Markets Fund. By action of
the Board of Directors of the Company in accordance with the Company's charter,
the shares of capital stock of each such series, including all currently issued
and outstanding shares of capital stock of each such series, are hereby
reclassified as Class A capital stock of each such series, respectively.
SECOND: By action of the Board of Directors of the Company in
accordance with the Company's charter, one hundred million (100,000,000) shares
of capital stock that the Company is authorized to issue are hereby classified
as Class B capital stock of each of the Company's ten existing series (G.T.
Global Government Income Fund; G.T. Global Bond Fund;
<PAGE>
G.T. Global Growth and Income Fund; G.T. Global Health Care Fund; G.T. Global
Small Companies Fund; G.T. Global Currency Fund; G.T. Latin America Growth Fund;
G. T. Global Telecommunications Fund; G.T. Global Financial Services Fund; and
G.T. Global Emerging Markets Fund) representing a total of one billion
(1,000,000,000) shares of the Company's capital stock.
THIRD: By action of the Board of Directors of the Company in
accordance with the Company's charter, two hundred million (200,000,000) shares
of capital stock that the Company is authorized to issue have been classified as
a newly created series known as G.T. Global New World Income Fund, or such other
name as the officers of the Company may determine, one hundred million
(100,000,000) of such shares are hereby classified as Class A capital stock, and
one hundred million (100,000,000) of such shares are hereby classified as Class
B capital stock of the G.T. Global New World Income Fund. The par value of the
shares of capital stock remains 1/100th of one cent ($.0001) per share. The
aggregate par value of the shares of G.T. Global New World Income Fund is twenty
thousand dollars ($20,000).
FOURTH: The Class A capital stock and Class B capital stock of each
of the Funds represents interests in the same investment portfolio of each such
Fund. Shares of Class B capital stock of a Fund shall be subject to all
provisions of Article V in the Company's Articles of Incorporation relating to
stock of the Company generally and shall have the same preferences, conversion
and other rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption as shares of Class A
capital stock of such Fund except as follows:
(1) Expenses related to the distribution of each class of shares of
a Fund shall be borne solely by such class;
<PAGE>
(2) The bearing of such expenses solely by shares of each class of a
Fund shall be appropriately reflected (in the manner determined by the Board of
Directors) in the net asset value, dividends, distribution and liquidation
rights of the shares of such class;
(3) The Class A capital stock of each Fund shall be subject to a
front-end sales load and a Rule 12b-1 service and distribution fee as
determined by the Board of Directors from time to time prior to issuance of
such stock;
(4) The Class B capital stock of each Fund shall be subject to a
contingent deferred sales charge and a Rule 12b-1 service and distribution fee
as determined by the Board of Directors from time to time prior to issuance of
such stock; and
(5) Unless otherwise expressly provided in the Articles of
Incorporation, including any Articles Supplementary creating any class or
series of capital stock, on each matter submitted to a vote of stockholders
of the Company, each holder of a share of capital stock of the Company shall
be entitled to one vote for each share standing in such holder's name on the
books of the Company, irrespective of the class or series thereof, and all
shares of all classes and series shall vote together as a single class;
provided, however, that
(a) as to any matter with respect to which a separate vote of any
class or series is required by the Investment Company Act of 1940, as amended
and in effect from time to time, or any rules, regulations or orders issued
thereunder, or by the Maryland General Corporation Law, such requirement as to
a separate vote by that class or series shall apply in lieu of a general vote
of all classes and series as described above;
(b) in the event that the separate vote requirements referred to in
(a) above apply with respect to one or more classes or series, then subject to
paragraph (c) below, the
<PAGE>
shares of all other classes and series not entitled to a separate vote shall
vote together as a single class; and
(c) as to any matter which in the judgment of the Board of Directors
(which shall be conclusive) does not affect the interest of a particular class
or series, such class or series shall not be entitled to any vote and only the
holders of shares of the one or more affected classes and series shall be
entitled to vote.
All shares of each particular class of a Fund shall represent
an equal proportionate interest in that class and each share of any particular
class of a Fund shall be equal to each other share of the class of that Fund.
FIFTH: The Company is registered with the Securities and Exchange
Commission as an open-end investment company under the Investment Company Act of
1940.
IN WITNESS WHEREOF, the undersigned President of the Company hereby
executes these Articles Supplementary on behalf of the Company and further
states under the penalties of perjury that, to the best of his knowledge,
information and belief, the matters and facts set forth herein are true in all
material respects.
Date: August 31, 1992 /s/ David A. Minella
--------------------
David A. Minella
President
Attest: /s/ James W. Churm
------------------
James W. Churm
Vice President and Secretary
<PAGE>
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION OF
G.T. INVESTMENT FUNDS, INC.
G.T. INVESTMENT FUNDS, INC., a Maryland Corporation (hereinafter called the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland, that:
FIRST: The Charter of the Corporation is hereby amended as follows: By
changing the name of the G.T. Global Bond Fund, a series of the Corporation
created via Articles Supplementary to the Corporation's Articles of
Incorporation filed with the State Department of Assessments and Taxation of
Maryland on February 18, 1988, to the G.T. GLOBAL STRATEGIC INCOME FUND (the
"Fund").
SECOND: The foregoing amendment does not increase the authorized capital
stock of the Corporation or alter the par value of such capital stock.
THIRD: The amendment to the charter of the Corporation herein made was
advised by the Board of Directors of the Corporation on August 12, 1992 and duly
approved by the stockholders of the Corporation on October 16, 1992.
<PAGE>
IN WITNESS WHEREOF, G.T. Investment Funds, Inc. has caused these Articles
of Amendment to be signed in its name and on its behalf by its President and
attested by its Secretary on January 25, 1993.
G.T. INVESTMENT FUNDS, INC.
BY: /s/ David A. Minella
--------------------
David A. Minella, President
Attest:
/s/ James W. Churm
- ------------------
James W. Churm, Secretary
THE UNDERSIGNED, President of G.T. Investment Funds, Inc., who executed on
behalf of said Corporation the foregoing Articles of Amendment, of which this
certificate is made a part, hereby acknowledges, in the name and on behalf of
said Corporation and further certifies that, to the best of his knowledge,
information and belief, the matters and facts set forth therein with respect to
the approval thereof are true in all material respects, under the penalties of
perjury.
/s/ David A. Minella
--------------------
David A. Minella
President
<PAGE>
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
OF
G.T. INVESTMENT FUNDS, INC.
G.T. Investment Funds, Inc. ("Company"), a Maryland corporation,
organized on October 29, 1987, having its principal office in Maryland in
Baltimore, Maryland, hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: By action of the Board of Directors of the Company in
accordance with the Company's Articles of Incorporation, an additional two
hundred million (200,000,000) shares of capital stock that the Company is
authorized to issue have been classified as G.T. Global Telecommunications Fund,
one hundred million (100,000,000) of such shares are hereby classified as
additional Class A shares of capital stock and one hundred million (100,000,000)
of such shares are hereby classified as additional Class B shares of capital
stock of the G.T. Global Telecommunications Fund. The par value of the shares
of capital stock remains 1/100th of one cent ($.0001) per share. The aggregate
par value of the additional shares of G.T. Global Telecommunications Fund is
twenty thousand dollars ($20,000).
SECOND: By action of the Board of Directors of the Company in
accordance with the Company's Articles of Incorporation, an additional two
hundred million (200,000,000) shares of capital stock that the Company is
authorized to issue have been classified as G.T. Global Government Income Fund,
one hundred million (100,000,000) of such shares are hereby classified as
additional Class A shares of capital stock and one hundred million (100,000,000)
of
<PAGE>
such shares are hereby classified as additional Class B shares of capital
stock of the G.T. Global Government Income Fund. The par value of the shares of
capital stock remains 1/100th of one cent ($.0001) per share. The aggregate par
value of the additional shares of G.T. Global Government Income Fund is twenty
thousand dollars ($20,000).
THIRD: By action of the Board of Directors of the Company in
accordance with the Company's Articles of Incorporation, two hundred million
(200,000,000) shares of capital stock that the Company is authorized to issue
have been classified as shares of G.T. Global Infrastructure Fund (or such other
name as the officers of the Company may determine), a newly created series, one
hundred million (100,000,000) of such shares are hereby classified as Class A
shares of capital stock and one hundred million (100,000,000) of such shares are
hereby classified as Class B shares of capital stock of the such Fund. The par
value of the shares of capital stock remains 1/100th of one cent ($.0001) per
share. The aggregate par value of the shares of G.T. Global Infrastructure Fund
(or such other name as the officers of the Company may determine) is twenty
thousand dollars ($20,000).
FOURTH: The Company is registered with the Securities and Exchange
Commission as an open-end investment company under the Investment Company Act of
1940.
<PAGE>
IN WITNESS WHEREOF, the undersigned President of the Company hereby
executes these Articles Supplementary of behalf of the Company and further
states under penalties of perjury that, to the best of his knowledge,
information and belief, the matters and facts set forth herein are true in all
material respects.
Dated: November 15, 1993 /s/ David A. Minella
--------------------
David A. Minella
President
Attest: /s/ James W. Churm
------------------
James W. Churm
Vice President and Secretary
<PAGE>
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
OF
G.T. INVESTMENT FUNDS, INC.
G.T. Investment Funds, Inc. ("Company"), a Maryland corporation,
organized on October 29, 1987, having its principal office in Maryland in
Baltimore, Maryland, hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: Pursuant to authority expressly vested in the Board of
Directors of the Articles of Incorporation, the Board of Directors has duly
increased the number of shares of capital stock which the Company is authorized
to issue in accordance with Maryland Corporations and Associations Code
Annotated Section 2-105(c) (Supp. 1993).
Immediately before said increase, the Company was authorized to issue
three billion (3,000,000,000) shares of capital stock (par value $.001 per
share) amounting in the aggregate to a par value of three hundred thousand
dollars ($300,000.00). The shares of capital stock have been classified among
the twelve series of the Company as follows:
G.T. Global Government Income Fund (400 million shares)
G.T. Global Strategic Income Fund (200 million shares)
G.T. Global Growth and Income Fund (200 million shares)
G.T. Global Health Care Fund (200 million shares)
G.T. Global Small Companies Fund (200 million shares)
G.T. Global Currency Fund (200 million shares)
G.T. Latin America Growth Fund (200 million shares)
G.T. Global Telecommunications Fund (400 million shares)
G.T. Global Financial Services Fund (200 million shares)
G.T. Global Emerging Markets Fund (200 million shares)
G.T. Global Infrastructure Fund (200 million shares)
G.G. Global High Income Fund (200 million shares)
Within each series of the Company, the capital stock has been divided
equally into two classes: Class A and Class B capital stock.
The Company is hereby authorized to issue an additional three billion
(3,000,000,000) shares of capital stock (par value $.0001 per share) amounting
in the aggregate to a par value of an additional three hundred thousand dollars
($300,000.00), thereby increasing the total number of shares of capital stock
which the Company is authorized to issue to six billion
<PAGE>
(6,000,000,000) shares amounting in the aggregate to a par value of six hundred
thousand dollars ($600,000.00). The newly authorized shares will remain
unclassified until further action by the Board of Directors.
SECOND: The Company is registered with the Securities and Exchange
Commission as an open-end investment company under the Investment Company Act of
1940, as amended.
IN WITNESS WHEREOF, the undersigned President of the Company hereby
executes these Articles Supplementary on behalf of the Company and further
states under the penalties of perjury that, to the best of his knowledge,
information and belief, the matters and facts set forth herein are true in all
material respects.
Dated: January 26, 1994 /s/ James W. Churm
------------------
James W. Churm
Vice President and Secretary
Attest: /s/ Peter R. Guarino
--------------------
Peter R. Guarino
Assistant Secretary
<PAGE>
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
OF
G.T. INVESTMENT FUNDS, INC.
G.T. Investment Funds, Inc. ("Company"), a Maryland corporation,
organized on October 29, 1987, having its principal office in Maryland in
Baltimore, Maryland, hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: By action of the Board of Directors of the Company in
accordance with the Company's Articles of Incorporation, two hundred million
(200,000,000) shares of capital stock that the Company is authorized to issue
have been classified as shares of G.T. Global Natural Resources Fund (or such
other name as the officers of the Company may determine), a newly created
series, one hundred million (100,000,000) of such shares have been classified as
Class A shares of capital stock and one hundred million (100,000,000) of such
shares have been classified as Class B shares of capital stock of the G.T.
Global Natural Resources Fund. The par value of the shares of capital stock
remains 1/100th of one cent ($.0001) per share. The aggregate par value of the
shares of G.T. Global Natural Resources Fund is twenty thousand dollars
($20,000).
SECOND: The Company is registered with the Securities and Exchange
Commission as an open-end investment company under the Investment Company Act of
1940, as amended.
IN WITNESS WHEREOF, the undersigned President of the Company hereby
executes these Articles Supplementary of behalf of the Company and further
states under penalties of perjury that, to the best of his knowledge,
information and belief, the matters and facts set forth herein are true in all
material respects.
Dated: January 26, 1994 /s/ James W. Churm
------------------
James W. Churm
Vice President and Secretary
Attest: /s/ Peter R. Guarino
--------------------
Peter R. Guarino
Assistant Secretary
<PAGE>
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
OF
G.T. INVESTMENT FUNDS, INC.
G.T. Investment Funds, Inc. ("Company"), a Maryland corporation,
organized on October 29, 1987, having its principal office in Maryland in
Baltimore, Maryland, hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: By action of the Board of Directors of the Company in
accordance with the Company's Articles of Incorporation, two hundred million
(200,000,000) shares of capital stock that the Company is authorized to issue
have been classified as shares of G.T. Global Consumer Products and Services
Fund (or such other name as the officers of the Company may determine), a newly
created series, one hundred million (100,000,000) of such shares have been
classified as Class A shares of capital stock and one hundred million
(100,000,000) of such shares have been classified as Class B shares of capital
stock of the G.T. Global Consumer Products and Services Fund. The par value of
the shares of capital stock remains 1/100th of one cent ($.0001) per share. The
aggregate par value of the shares of G.T. Global Consumer Products and Services
Fund is twenty thousand dollars ($20,000).
SECOND: The Company is registered with the Securities and Exchange
Commission as an open-end investment company under the Investment Company Act of
1940, as amended.
IN WITNESS WHEREOF, the undersigned Vice President of the Company
hereby executes these Articles Supplementary on behalf of the Company and
further states under penalties of perjury that, to the best of his knowledge,
information and belief, the matters and facts set forth herein are true in all
material respects.
Dated: September 23, 1994 /s/ Helge K. Lee
----------------
Helge K. Lee
Vice President and Secretary
Attest: /s/ Peter R. Guarino
--------------------
Peter R. Guarino
Assistant Secretary
<PAGE>
BY-LAWS
OF
G.T. GLOBAL INCOME SERIES, INC.
ARTICLE I
SHAREHOLDERS
SECTION 1.01. ANNUAL MEETINGS. The annual meeting of
shareholders shall be held during the month of _____, at such date and time
as may be designated from time to time by the Board of Directors for the
election of Directors and the transaction of any business within the powers
of the Corporation, except that the Corporation shall not be required to hold
an annual meeting in any year in which none of the following matters is
required to be acted upon by shareholders under the Investment Company Act of
1940: election of Directors, approval of the investment advisory and service
agreement, ratification of the selection of independent public accountants or
approval of the distribution agreement. Any business of the Corporation may
be transacted at an annual meeting without being specifically designated in
the notice, except such business as is specifically required by statute or by
the Articles of Incorporation to be stated in the notice. Failure to hold an
annual meeting at the designated time shall not, however, invalidate the
corporate existence or affect otherwise valid corporate acts.
SECTION 1.02. SPECIAL MEETINGS. At any time in the interval
between annual meetings, special meetings of the shareholders may be called
by the Chairman of the Board or the President or by a majority of the Board
by vote at a meeting or in writing (addressed to the Secretary of the
Corporation) with or without a meeting.
SECTION 1.03. PLACE OF MEETINGS. Meetings of the shareholders
for the election of Directors shall be held at such place either within or
without the State of Maryland or elsewhere in the United States as shall be
designated from time to time by the Board of Directors and stated in the
notice of the meeting. Meetings of shareholders for any other purpose may be
held at such time and place, within the State of Maryland or elsewhere in the
United States, as shall be stated in the notice of the meeting or in a duly
executed waiver of notice thereof.
SECTION 1.04. NOTICE OF MEETINGS. Not less than ten days nor
more than ninety days before the date of every shareholders' meeting, the
Secretary shall give to each shareholder entitled to vote at such meeting,
written or printed notice stating the time and place of the meeting and, if
the meeting is a special meeting or notice of the purpose is required by
statute, the purpose or purposes for which the meeting is called, either by
mail or by presenting it to the shareholder personally or by leaving it at
the shareholders residence or usual place of business. If mailed, such
notice shall be deemed to be given when deposited in the United States mail
addressed to the shareholder at his post office address as it appears on the
records of the Corporation, with postage thereon prepaid.
<PAGE>
Notwithstanding the foregoing provision, a waiver of notice in writing,
signed by the person or persons entitled to such notice and filed with the
records of the meeting, whether before or after the holder thereof, or actual
attendance at the meeting in person or by proxy, shall be deemed equivalent
to the giving of such notice to such persons. Any meeting of shareholders,
annual or special, may adjourn from time to time to reconvene at the same or
some other place, and no notice need be given of any such adjourned meeting
other than by announcement at the meeting.
SECTION 1.05. QUORUM. At any meeting of shareholders the
presence in person or by proxy of a majority of all the votes entitled to be
cast at the meeting shall constitute a quorum; but this Section shall not
affect any requirement under statute or under the Articles for the vote
necessary for the adoption of any measure. In the absence of a quorum no
business may be transacted; provided, however, that at any meeting of
shareholders whether or nor a quorum is present, the holders of a majority of
the shares of capital stock present in person or by proxy and entitled to
vote may adjourn the meeting from time to time, without notice other than
announcement at the meeting except as otherwise required by the Articles and
these By-Laws, until the holders of the requisite amount of shares of capital
stock shall be present to constitute a quorum or to transact the business to
be transacted, or for any other lawful purpose. At any such adjourned
meeting at which a quorum shall be present, any business may be transacted
which might have been transacted at the meeting as originally called. The
absence from any meeting, in person or by proxy, of holders of the number of
shares of capital stock of the Corporation in excess of a majority thereof
which may be required by the General Laws of the State of Maryland, the
Investment Company Act of 1940, these By-Laws, or the Articles of
Incorporation, for action upon any given matter shall not prevent action at
such meeting upon any other matter or matters which may properly come before
the meeting, if there shall be present at the meeting, in person or by proxy,
holders of the number of shares of capital stock of the Corporation required
for action in respect of such other matter or matters.
SECTION 1.06. VOTES REQUIRED. A majority of the votes cast at a
meeting of shareholders, duly called and at which a quorum is present, shall
be sufficient to take or authorize action upon any matter which may properly
come before the meeting, unless more than a majority of votes cast is
required by statute or by the Articles. Each outstanding share of stock
shall be entitled to one vote on each matter submitted to a vote at a meeting
of shareholders and fractional shares shall be entitled to corresponding
fractions of one vote on such matters, except that a plurality of all the
votes cast at a meeting at which a quorum is present is sufficient to elect a
director.
SECTION 1.07. PROXIES. A shareholder may vote the shares owned
of record by him either in person or by proxy executed in writing by the
shareholder or by the shareholder's duly authorized attorney-in-fact. No
proxy shall be valid after eleven months from its date, unless otherwise
provided in the proxy. Every proxy shall be in writing, subscribed by the
shareholder or the shareholder's duly authorized attorney, and dated, but
need not be sealed, witnessed or acknowledged.
<PAGE>
SECTION 1.08. LIST OF SHAREHOLDERS. At each meeting of
shareholders, a full, true and complete list in alphabetical order of all
shareholders entitled to vote at such meeting, certifying the number and
class or series of shares held by each, shall be made available by the
Secretary.
SECTION 1.09 VOTING. In all elections for Directors every
shareholder shall have the right to vote, in person or by proxy, the shares
owned of record by the shareholder for as many persons as there are Directors
to be elected and for whose election the shareholder has a right to vote. At
all meetings of shareholder, unless the voting is conducted by inspectors,
the proxies and ballots shall be received, and all questions regarding the
qualification of voters and the validity of proxies and the acceptance or
rejection of votes shall be decided by, the chairman of the meeting. If
demanded by shareholders, present in person or by proxy, entitled to cast 10%
in number of votes, or if ordered by the chairman, the vote upon any election
or questions shall be taken by ballot. Upon like demand or order, the voting
shall be conducted by two inspectors in which event the proxies and ballots
shall be received, and all questions regarding the qualification of voters
and the validity of proxies and the acceptance or rejection of votes shall be
decided, by such inspectors. Unless so demanded or ordered, no vote need be
by ballot, and voting need not be conducted by inspectors. Inspectors may be
elected by the shareholders at their annual meeting, to serve until the close
of the next annual meeting and their election may be held at the same time as
the election of Directors. In case of a failure to elect inspectors, or in
case an inspector shall fail to attend, or refuse or be unable to serve, the
shareholders at any meeting may choose an inspector or inspectors to act at
such meeting, and in default of such election the chairman of the meeting may
appoint an inspector or inspectors.
SECTION 1.10. ACTION BY SHAREHOLDERS OTHER THAN AT A MEETING.
Any action required or permitted to be taken at any meeting of shareholders
may be taken without a meeting, if a consent in writing, setting forth such
action, is signed by all the shareholders entitled to vote on the subject
matter thereof and any other shareholders entitled to notice of a meeting of
shareholders (but not to vote thereat) have waived in writing any rights
which they may have to dissent from such action, and such consent and waiver
are filed with the records of the Corporation.
ARTICLE II.
BOARD OF DIRECTORS
SECTION 2.01. POWERS. The Board may exercise all the powers of
the Corporation, except such as are conferred upon or reserved to the
shareholders by the Articles of Incorporation, these By-Laws, the Investment
Company Act of 1940 or the Maryland General Corporation Law. The Board shall
keep full and fair accounts of its transactions.
<PAGE>
SECTION 2.02. NUMBER OF DIRECTORS. The Corporation shall have
at least three directors; provided that, if there is no stock outstanding,
the number of Directors may be less than three but not less than one, and,
if there is stock outstanding and so long as there are less than three
stockholders, the number of Directors may be less than three but not less
than the number of stockholders. The Corporation shall have the number of
Directors provided in the Articles of Incorporation until changed as herein
provided. A majority of the entire board of directors may alter the number
of Directors set by the Articles of Incorporation to not exceeding 25 nor
less than the minimum number then permitted herein, but the action may not
affect the tenure of office of any Director.
SECTION 2.03. ELECTION OF DIRECTORS. Until the first annual
meeting of shareholder and until successors or additional Directors are duly
elected and qualify, the Board shall consist of the persons named as such in
the Articles of Incorporation. When and as required at each annual meeting
that may be held by the Corporation beginning with the first annual meeting,
the shareholders hall elect Directors to hold office until the next annual
meeting and until their successors are elected and qualify. At any meeting
of shareholders, duly called and at which quorum is present, the shareholders
may, by the affirmative vote of the holders of a majority of the votes
entitled to be cast thereon, remove any Director or Directors from office and
may elect a successor or successors to fill any resulting vacancies for the
unexpired terms of removed Directors.
SECTION 2.04. REGULAR MEETINGS. After each meeting of
shareholders at which a Board of Directors shall have been elected, the Board
so elected shall meet for the purpose of organization and the transaction of
other business. No notice of such first meeting shall be necessary if held
immediately after the adjournment, and at the site, of such meeting of
shareholders. Other regular meetings of the Board shall be held without
notice on such dates and at such places within or without the State of
Maryland as may be designated from time to time by the Board.
SECTION 2.05. SPECIAL MEETINGS. Special meetings of the Board
may be called at any time by the Chairman of the Board, the President or the
Secretary of the Corporation, or by a majority of the Board by vote at a
meeting, or in writing with or without a meeting. Such special meetings
shall be held at such place or places within or without the State of Maryland
as may be designated from time to time by the Board. In the absence of such
designation such meetings shall be held at such places as may be designated
in the calls.
SECTION 2.06. NOTICE OF MEETINGS. Except as provided in Section
2.04, notice of the place, day and hour of all meetings shall be given to
each Director two days (or more) before the meeting, by delivering the same
personally, or by sending the same by telegraph, or by leaving the same at
the Director's residence or usual place of business, or, in the alternative,
by mailing such notice three days (or more) before the meeting, postage
prepaid, and addressed to the Director at the Director's last known business
or residence post office address, according to the records of the
Corporation. Unless required by these By-Laws or by resolution of the Board,
no notice of any meeting of the
<PAGE>
Board need state the business to be transacted thereat. No notice of any
meeting of the Board need be given to any Director who attends, or to any
Director who in writing executed and filed with the records of the meeting
either before or after the holding thereof, waives such notice. Any meeting
of the Board, regular or special, may adjourn from time to time to reconvene
at the same or some other place, and no notice need be given of any such
adjourned meeting other than by announcement at the adjourned meeting.
SECTION 2.07. QUORUM. At all meetings of the Board, a majority
of the entire Board (but in no event fewer than two Directors) shall
constitute a quorum for the transaction of business. Except in cases in
which it is by statute, by the Articles of Incorporation or by these By-Laws
otherwise provided, the vote of a majority of such quorum at a duly
constituted meeting shall be sufficient to elect and pass any measure. In
the absence of a quorum, the Directors present by majority vote and without
notice other than by announcement at the meeting may adjourn the meeting from
time to time until a quorum shall attend. At any such adjourned meeting at
which a quorum shall be present, any business may be transacted which might
have been transacted at the meeting as originally noticed.
SECTION 2.08. VACANCIES. Any vacancies occurring in the Board
of Directors for any cause other than reason of an increase in the number of
Directors may be filled by a majority of the remaining members of the Board
of Directors, although such majority is less than a quorum. Any vacancy
occurring by reason of an increase in the number of Directors may be filled
by action of a majority of the entire Board of Directors. If at any time
after the first annual meeting of shareholders of the Corporation a majority
of the Directors in office shall consist of Directors elected by the Board of
Directors, a meeting of the shareholders shall be called forthwith for the
purpose of electing the entire Board of Directors and the terms of office of
the Directors then in office shall terminate upon the election and
qualification of such Board of Directors. A Director elected by the Board of
Directors or the shareholders to fill a vacancy shall be elected to hold
office until the next annual meeting of shareholders and until his successor
is elected and qualifies.
SECTION 2.09. COMPENSATION AND EXPENSES. Directors may,
pursuant to resolution of the Board, be paid fees for their services, which
fees may consist of an annual fee or retainer and/or a fixed fee for
attendance of meetings. In addition, Directors may in the same manner be
reimbursed for expenses incurred in connection with their attendance at
meetings or otherwise in performing their duties as Directors. Members of
committees may be allowed like compensation and reimbursement. Nothing
herein contained shall preclude any Director from serving the Corporation in
any other capacity and receiving compensation therefor.
SECTION 2.10. ACTION BY DIRECTORS OTHER THAN AT A MEETING. Any
action required or permitted to be taken at any meeting of the Board, or of
any committee thereof, may be taken without a meeting, if a written consent
to such action is signed by
<PAGE>
all members of the Board or of such committee, as the case may be, and such
written consent is filed with the minutes of proceedings of the Board or
committee.
SECTION 2.11. COMMITTEES. The Board of Directors may appoint
from among its members an Executive Committee, Audit Committee or other
committees composed of two or more directors and delegate to these committees
any of the powers of the Board of Directors to the extent permitted by the
General Laws of the State of Maryland. If the Board of Directors has given
general authorization for the issuance of stock, a committee of the Board, in
accordance with a general formula or method specified by the Board by
resolution, may fix the terms of stock subject to classification or
reclassification and the terms on which any stock may be issued, including
all terms and conditions required or permitted to be established or
authorized by the Board of Directors.
SECTION 2.12. COMMITTEE PROCEDURE. Each committee may fix rules
of procedure for its business. A majority of the members of a committee
shall constitute a quorum for the transaction of business and the act of a
majority of those present at a meeting at which a quorum is present shall be
the act of the committee. The members of a committee present at any meeting,
whether or not they constitute a quorum, may appoint a director to act in the
place of an absent member. Any action required or permitted to be taken at a
meeting of a committee may be taken without a meeting, if an unanimous
written consent which sets forth the action is signed by each member of the
committee and filed with the minutes of the committee. The members of a
committee may conduct any meeting thereof by conference telephone in
accordance with the provisions of Section 2.14.
SECTION 2.13. EMERGENCY. In the event of a state of disaster of
sufficient severity to prevent the conduct and management of these affairs
and business of the Corporation by its directors and officers as contemplated
by the Articles of Incorporation and these By-Laws, any two or more available
members of the then incumbent Executive Committee shall constitute a quorum
of that Committee for the full conduct and management of the affairs and
business of the Corporation. In the event of the unavailability, at such
time, of a minimum of two members of the then incumbent Executive Committee,
the available directors shall elect an Executive Committee consisting of any
two members of the Board of Directors, whether or not they be officers of the
Corporation, which two members shall constitute the Executive Committee for
the full conduct and management of the affairs of the Corporation in
accordance with the foregoing provisions of this Section. This Section shall
be subject to implementation by resolution of the Board of Directors passed
from time to time for that purpose, and any provisions of the By-Laws (other
than this Section) and any resolutions which are contrary to the provisions
of this Section or to the provisions of any such implementary resolutions
shall be suspended until it shall be determined by any interim Executive
Committee acting under this Section that it shall be to the advantage of the
Corporation to resume the conduct and management of its affairs and business
under all the other provisions of the By-Laws.
<PAGE>
SECTION 2.14. HOLDING OF MEETINGS BY CONFERENCE TELEPHONE CALL.
At any regular or special meeting of the Board or any committee thereof,
members thereof may participate in such meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other. Participation in a meeting
pursuant to this section shall constitute presence in person at such meeting.
ARTICLE III.
OFFICERS
SECTION 3.01. EXECUTIVE OFFICERS. The Board of Directors may
choose a Chairman of the Board and a Vice Chairman of the Board from among
the Directors, and shall choose a President, a Secretary and a Treasurer who
need not be Directors. The Board of Directors shall designate as principal
executive officer of the Corporation either the Chairman of the Board, or the
Vice Chairman of the Board. The Board of Directors may choose an Executive
Vice President, one or more Senior Vice Presidents, one or more Vice
Presidents, one or more Assistant Secretaries and one or more Assistant
Treasurers, none of whom need be a Director. Any two or more of the
above-mentioned offices, except those of President and a Vice President, may
be held by the same person, but no officer shall execute, acknowledge or
verify any instrument in more than one capacity if such instrument be
required by law, by the Articles of Incorporation, by these By-Laws or by
resolution of the Board of Directors to be executed by any two or more
officers. Each such officer shall hold office until his successor shall have
been duly chosen and qualified, or until he shall have resigned or shall have
been removed. Any vacancy in any of the above offices may be filled for the
unexpired portion of the term of the Board of Directors at any regular or
special meeting.
SECTION 3.02. CHAIRMAN AND VICE CHAIRMAN OF THE BOARD. The
Chairman of the Board, if one be elected, shall preside at all meetings of
the Board of Directors and of the shareholders at which he is present. He
shall have and may exercise such powers as are, from time to time, assigned
to him by the Board of Directors. The Vice Chairman of the Board, if one be
elected, shall, when present and in the absence of the Chairman of the Board,
preside at all meetings of the shareholders and Directors, and he shall
perform such other duties as may from time to time be assigned to him by the
Board of Directors or as may be required by law.
SECTION 3.03. PRESIDENT. In the absence of the Chairman or Vice
Chairman of the Board, the President shall preside at all meetings of the
shareholders and of the Board at which the President is present; and in
general, shall perform all duties incident to the office of a president of a
Maryland Corporation, and such other duties, as from time to time, may be
assigned to him by the Board.
SECTION 3.04. VICE PRESIDENTS. The Vice President or Vice
Presidents, including any Executive or Senior Vice President(s), at the
request of the President, or in
<PAGE>
the President's absence or during the President's inability or refusal to
act, shall perform the duties and exercise the functions of the President,
and when so acting shall have the powers of the President. If there be more
than one Vice President, the Board 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, the President
may make such determination. The Vice President or Vice Presidents shall
have such other powers and perform such other duties as may be assigned by
the Board, the Chairman of the Board, or the President.
SECTION 3.05. SECRETARY AND ASSISTANT SECRETARIES. The
Secretary shall keep the minutes of the meetings of the shareholders, of the
Board and of any committees, in books provided for the purpose; shall see
that all notices are fully given in accordance with the provisions of these
By-Laws or as required by law; be custodian of the records of the
Corporation; see that the corporate seal is affixed to all documents the
execution of which, on behalf of the Corporation, under its seal, is duly
authorized, and when so affixed may attest the same; and in general perform
all duties incident to the office of a secretary of a Maryland Corporation,
and such other duties as, from time to time, may be assigned to him by the
Board, the Chairman of the Board, or the President.
The Assistant Secretary, or if there be more than one, the Assistant
Secretaries in the order determined by the Board, the President or the
Chairman of the Board, shall, in the absence of the Secretary or in the event
of the Secretary's inability or refusal to act, perform the duties and
exercise the power of the Secretary and shall perform such other duties and
have such other powers as the Board may from time to time prescribe.
SECTION 3.06. TREASURER AND ASSISTANT TREASURERS. The Treasurer
shall have charge of and be responsible for all funds, securities, receipt s
and disbursements of the Corporation, and shall deposit, or cause to be
deposited in the name of the Corporation, all moneys or other valuable
effects in such banks, trust companies or other depositories as shall, from
time to time, be selected by the Board in accordance with Section 5.04 of
these By-Laws; render to the President, the Chairman of the Board and to the
Board, whenever requested, an account of the financial condition of the
Corporation; and in general, perform all the duties incident to the office of
a treasurer of a corporation, such other duties as may be assigned to him by
the Board, the President or the Chairman of the Board.
The Assistant Treasurer, or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board, the President or
the Chairman of the Board shall, in the absence of the Treasurer or in the
event of the Treasurer's 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 may from time to time prescribe.
SECTION 3.07. SUBORDINATE OFFICERS. The Board may from time to
time appoint such subordinate officers as it may deem desirable. Each such
officer shall hold office
<PAGE>
for such period and perform such duties as the Board, the President or the
Chairman of the Board may prescribe. The Board may, from time to time,
authorize any committee or officer to appoint and remove subordinate officers
and prescribe the duties thereof.
SECTION 3.08. REMOVAL. Any officer or agent of the Corporation
may be removed by the Board whenever, in its judgment, the best interest of
the Corporation will be served thereby, but such removal shall be without
prejudice to the contractual rights, if any, of the person so removed.
SECTION 3.09. COMPENSATION. The Board of Directors shall have
power to fix the salaries and other compensation and remuneration, of
whatever kind, of all officers of the Corporation. It may authorize any
committee or officer, upon whom the power of appointing assistant and
subordinate officers may have been conferred, to fix the salaries,
compensation and remuneration of such assistant and subordinate officers.
SECTION 3.10. ANNUAL STATEMENT OF AFFAIRS. The President shall
prepare annually a full and correct statement of the affairs of the
Corporation, to include a balance sheet and a financial statement of the
operations for the preceding fiscal year. The statement of affairs shall be
submitted at the annual meeting of stockholders, if any, within twenty days
after the meeting (or, in the absence of an annual meeting within twenty days
after the end of the second month following the close of the fiscal year),
placed on file at the Corporation's principal office.
ARTICLE IV.
STOCK
SECTION 4.01. CERTIFICATES. Each shareholder shall be entitled
to a certificate or certificates which shall represent and certify the number
of shares of stock owned by him in the Corporation. Such certificate shall
be signed by the President, the Chairman of the Board or a Vice President and
countersigned by the Secretary or an Assistant Secretary or the Treasurer or
an Assistant Treasurer, and sealed with the seal of the Corporation. The
signatures may be either manual or facsimile signatures and the seal may be
either facsimile or any other form of seal. No certificates shall be issued
for fractional shares. Such certificates shall be in such form, not
inconsistent with law or with the Articles of Incorporation, as shall be
approved by the Board. In case any officer of the Corporation who has signed
any certificate ceases to be an officer of the Corporation, whether because
of death, resignation or otherwise, before such certificate is issued, the
certificate may nevertheless be issued and delivered by the Corporation as if
the officer had not ceased to be such officer as of the date of its issue.
Certificates need not be issued except to shareholders who request such
issuance in writing. A certificate is valid and may be issued whether or not
an officer who signed it is still an officer when it is issued.
SECTION 4.02. TRANSFER. The Board of Directors shall have power
and authority to make such rules and regulations as it may deem necessary or
expedient concerning the
<PAGE>
issue, transfer and registration of certificates of stock; and may appoint
transfer agents and registrars thereof. The duties of transfer agent and
registrar, if any, may be combined.
SECTION 4.03. STOCK LEDGERS. A stock ledger, containing the
names and addresses of the shareholders of the Corporation and the number of
shares of each class or series held by them, respectively, shall be kept by
the Transfer Agent of the Corporation. The stock ledger may be in written
form or in any other form which can be converted within a reasonable time
into written form for visual inspection.
SECTION 4.04. RECORD DATES. The Board is hereby empowered to
fix, in advance, a date as the record date for the purpose of determining
shareholders entitled to notice of, or to vote at, any meeting of
shareholders, or shareholders entitled to receive payment of any dividend ,
capital gains distribution or the allotment of any rights, or in order to
make a determination of shareholders for any other proper purpose. Such date
in any case shall be not more than ninety (90) days, and in case of a meeting
of shareholders, not less than ten (10) days, prior to the date on which the
particular action, requiring such determining of shareholders, is to be
taken; the transfer books may not be closed for a period longer than twenty
(20) days.
SECTION 4.05. REPLACEMENT CERTIFICATES. The Board of Directors
may direct a new stock certificate or certificates to be issued in place of
any certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon such conditions as the Board shall determine. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative to advertise the same in such
manner as it shall require and/or to give the Corporation a bond in such sum
as it may direct as indemnity against any claim that may be made against the
Corporation with respect to the Certificate alleged to have been lost, stolen
or destroyed.
SECTION 4.06. CERTIFICATION OF BENEFICIAL OWNERS. The Board of
Directors may adopt by resolution a procedure by which a shareholder of the
Corporation may certify in writing to the Corporation that any shares of
stock registered in the name of the shareholder are held for the account of a
specified person other than the shareholder. The resolution shall set forth
the class of shareholders who may certify; the purpose for which the
certification may be made; the form of certification and the information to
be contained in it; if the certification is with respect to a record date or
a closing of the stock transfer books, the time after the record date or
closing of the stock transfer books within which the certification must be
received by the Corporation; and any other provisions with respect to the
procedure which the Board considers necessary or desirable. On receipt of a
certification which complies with the procedure adopted by the Board in
accordance with this Section, the person specified in the certification is,
for the purpose
<PAGE>
set forth in the certification, the holder of record of the
specified stock in place of the shareholder who makes the certification.
ARTICLE V.
GENERAL PROVISIONS
SECTION 5.01. DIVIDENDS. Dividends or distributions upon the
capital stock of the Corporation, subject to provisions of the Articles of
Incorporation, if any, may be declared by the Board of Directors at any
regular or special meeting, pursuant to law. Dividends or distributions may
be paid only in cash or in shares of the capital stock, subject to the
provisions of the Articles of Incorporation.
Before payment of any dividend or distribution there may be set aside
out of any funds of the Corporation available for dividends or distributions
such sum of sums as the directors from time to time, in their absolute
discretion, thick proper as a reserve or reserves to meet contingencies, or
for equalizing dividends or distributions or for maintaining any property of
the Corporation, or for such other purpose as the Directors shall think
conducive to the interest of the Corporation, and the Directors may modify or
abolish any such reserve in the manner in which it was created,
SECTION 5.02. CHECKS. All checks or demands for money and notes
of the Corporation shall be signed by such officer or officers or such other
person or persons as the Board may from time to time designate.
SECTION 5.03. FISCAL YEAR. The fiscal year of the Corporation
shall be fixed by resolution of the Board of Directors.
SECTION 5.04. CUSTODIAN. All securities and cash of the
Corporation shall be placed in the custody of a bank or trust company
("Custodian") having (according to its last published report) not less than
$2,000,000 aggregate capital, surplus and undivided profits, provided such a
Custodian can be found ready and willing to act (or maintained in such other
manner as is consistent with Section 17(f) of the Investment Company Act of
1940 and the rules and regulations promulgated thereunder). The Corporation
shall enter into a written contract with the Custodian regarding the powers,
duties and compensation of the Custodian with respect to the cash and
securities of the Corporation held by the Board of Directors of the
Corporation. The Corporation shall upon the resignation or inability to
serve of the Custodian use its best efforts to obtain a successor custodian;
require that the cash and securities owned by the Corporation be delivered
directly to the successor custodian; and in the event that no successor
custodian can be found, submit to the shareholders, before permitting
delivery of the cash and securities owned by the Corporation to other than a
successor custodian, the question whether or not the Corporation shall be
liquidated or shall function without a custodian.
<PAGE>
SECTION 5.05. SEAL. The Board of Directors shall provide a
suitable seal, bearing the name of the Corporation, which shall be in the
custody of the Secretary. The Board of Directors may authorize one or more
duplicate seals and provide for the custody thereof. If the Corporation is
required to place its corporate seal to a document, it is sufficient to meet
the requirements of any law, rule, or regulation relating to a corporate seal
to place the word "Seal" adjacent to the signature of the person authorized
to sign the document on behalf of the Corporation.
SECTION 5.06. REPRESENTATION OF SHARES. Any officer of the
Corporation is authorized to vote, represent and exercise for the Corporation
any and all rights incident to any shares of any corporation or other
business enterprise owned by the Corporation.
SECTION 5.07. BONDS. The Board of Directors may require any
officer, agent or employee of the Corporation to give a bond to the
Corporation, conditioned upon the faithful discharge of his duties, with one
or more sureties and in such amount as may be satisfactory to the Board of
Directors. The Board of Directors shall, in any event, require the
Corporation to provide and maintain a bond issued by a reputable fidelity
insurance company, against larceny and embezzlement, covering each officer
and employee of the Corporation who may singly, or jointly with others, have
access to securities or funds of the Corporation, either directly or through
authority to draw upon such funds, or to direct generally the disposition of
such securities, such bond or bonds to be in such reasonable amount as a
majority of the Board of Directors who are not such officers or employees of
the Corporation shall determine with due consideration to the value of the
aggregate assets of the Corporation to which any such officer or employee may
have access, or in any amount or upon such terms as the Securities and
Exchange Commission may prescribe by order, rule or regulations.
ARTICLE VI.
AMENDMENT OF BY-LAWS
These By-Laws of the Corporation may be altered, amended, added to or
repealed by majority vote of the shareholders or by majority vote of the
entire Board.
<PAGE>
G. T. GLOBAL INCOME SERIES, INC.
BY-LAWS
I N D E X
SECTION AND TITLE PAGE
ARTICLE I SHAREHOLDER 1
1.01 Annual Meetings 1
1.02 Special Meetings 1
1.03 Place of Meetings 1
1.04 Notice of Meetings 1
1.05 Quorum 2
1.06 Votes Required 2
1.07 Proxies 2
1.08 List of Shareholders 3
1.09 Voting 3
1.10 Action by Shareholders Other than at a Meeting 3
ARTICLE II BOARD OF DIRECTORS 3
2.01 Powers 3
2.02 Number of Directors 4
2.03 Election of Directors 4
2.04 Regular Meetings 4
2.05 Special Meetings 4
206. Notice of Meetings 4
2.07 Quorum 5
2.08 Vacancies 5
2.09 Compensation and Expenses 5
2.10 Action by Directors Other than at a Meeting 5
2.11 Committees 6
2.12 Committee Procedure 6
2.13 Emergency 6
2.14 Holding of Meetings by Conference Telephone Call 7
ARTICLE III OFFICERS 7
3.01 Executive Officers 7
3.02 Chairman and Vice Chairman of the Board 7
3.03 President 7
3.04 Vice Presidents 7
<PAGE>
3.05 Secretary and Assistant Secretaries 8
3.06 Treasurer and Assistant Treasurers 8
3.07 Subordinate Officers 8
3.08 Removal 9
3.09 Compensation 9
3.10 Annual Statement of Affairs 9
ARTICLE IV STOCK 9
4.01 Certificates 9
4.02 Transfer 9
4.03 Stock Ledger 10
4.04 Record Dates 10
4.05 Replacement Certificates 10
4.06 Certification of Beneficial Owners 10
ARTICLE V GENERAL PROVISIONS 11
5.01 Dividends 11
5.02 Checks 11
5.03 Fiscal year 11
5.04 Custodian 11
5.05 Seal 12
5.06 Representation of Shares 12
5.07 Bonds 12
ARTICLE VI AMENDMENT OF BY-LAWS 12
<PAGE>
EXHIBIT 5A
INVESTMENT MANAGEMENT AND ADMINISTRATION CONTRACT
BETWEEN
G.T. INVESTMENT FUNDS, INC. AND G.T. CAPITAL MANAGEMENT, INC.
Contract made as of April 19, 1989, between G. T. Investment Funds,
Inc. a Maryland corporation ("Company") and G.T. Capital Management, Inc.
("G.T."), a California corporation.
WHEREAS the Company is registered under the Investment Company Act of
1940, as amended ("1940 Act") as an open-end management investment company,
and intends to offer for public sale shares of G.T. Global Government Income
Fund, G.T. Global Bond Fund, G.T. Portfolio Strategy Fund and G.T. Global
Health Care Fund each being a series of the Company's common stock; and
WHEREAS the Company hereafter may establish additional series of its
common stock (any such additional series, together with the G.T. Global
Government Income Fund, G.T. Global Bond Fund, G.T. Portfolio Strategy Fund
and G.T. Global Health Care Fund, are collectively referred to herein as the
"Funds", and singly may be referred to as a "Fund"); and
WHEREAS the Company desires to retain G.T. as investment manager and
administrator to furnish certain administrative, investment advisory and
portfolio management services to the Company and the Funds, and G. T. is
willing to furnish such services.
NOW, THEREFORE in consideration of the premises and the mutual
covenants herein contained, it is agreed between the parties hereto as
follows:
1. APPOINTMENT. The Company hereby appoints G.T. as investment
manager and administrator of each Fund for the period and on the terms set
forth in this Contract. G.T. accepts such appointment and agrees to render
the services herein set forth, for the compensation herein provided.
2. DUTIES AS INVESTMENT MANAGER.
(a) Subject to the supervision of the Company's Board of Directors
("Board"), G.T. will provide a continuous investment program for each Fund,
including investment research and management with respect to all securities
and investments and cash equivalents of the Fund. G.T. will determine from
time to time what securities and other investments will be purchased,
retained or sold by each Fund, and the brokers and dealers through whom
trades will be executed.
(b) G.T. agrees that in placing orders with brokers and dealers it
will attempt to obtain the best net results in terms of price and execution.
Consistent with this obligation G.T. may, in its discretion, purchase and
sell portfolio securities to and from brokers and
1
<PAGE>
dealers who sell shares of the Funds or provide the Funds or G.T.'s other
clients with research analysis, advice and similar services. G.T. may pay to
brokers and dealers, in return for research and analysis, a higher commission
or spread than may be charged by other brokers and dealers, subject to G.T.'s
determining in good faith that such commission or spread is reasonable in
terms either of the particular transaction or of the overall responsibility
of G.T. to the Funds and its other clients and that the total commissions or
spreads paid by each Fund will be reasonable in relation to the benefits to
the Fund over the long term. In no instance will portfolio securities be
purchased from or sold to G.T. or any affiliated person thereof except in
accordance with the federal securities laws and the rules and regulations
thereunder. Wherever G.T. simultaneously places orders to purchase or sell
the same security on behalf of a Fund and one or more other accounts advised
by G.T., such orders will be allocated as to price and amount among all such
accounts in a manner believed to be equitable to each account. The Company
recognizes that in some cases this procedure may adversely affect the results
obtained for each Fund.
(c) G.T. will oversee the maintenance of all books and records
with respect to the securities transactions of the Funds, and will furnish
the Board with such periodic and special reports as the Board reasonably may
request. In compliance with the requirements of Rule 31a-3 under the 1940
Act, G.T. hereby agrees that all records which it maintains for the Company
are the property of the Company, agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act any records which it maintains
for the Company and which are required to be maintained by Rule 31a-1 under
the 1940 Act, and further agrees to surrender promptly to the Company any
records which it maintains for the Company upon request by the Company.
(d) G.T. will oversee the computation of the net asset value and
the net income of each Fund as described in the currently effective
registration statement of the Company under the Securities Act of 1933, as
amended, and 1940 Act and any supplements thereto ("Registration Statement")
or as more frequently requested by the Board.
3. DUTIES AS ADMINISTRATOR. G.T. will administer the affairs of
each Fund subject to the supervision of the Board and the following
understandings:
(a) G.T. will supervise all aspects of the operations of each
Fund, including the oversight of transfer agency, custodial, pricing and
accounting services, excepts as hereinafter set forth; provided, however,
that nothing herein contained shall be deemed to relieve or deprive the Board
of its responsibility for control of the conduct of the affairs of the Funds.
(b) At G.T.'s expense, G.T. will provide the Company and the Funds
with such corporate, administrative and clerical personnel (including
officers of the Company) and services as are reasonably deemed necessary or
advisable by the Board.
2
<PAGE>
(c) G.T. will arrange, but not pay, for the periodic preparation,
updating, filing and dissemination (as applicable) of each Fund's prospectus,
statement of additional information, proxy material, tax returns and required
reports with or to the Fund's shareholders, the Securities and Exchange
Commission and other appropriate federal or state regulatory authorities.
(d) G.T. will provide the Company and the Funds with, or obtain
for them, adequate office space and all necessary office equipment and
services, including telephone service, heat, utilities, stationery supplies
and similar items.
4. FURTHER DUTIES. In all matters relating to the performance
of this Contract, G.T. will act in conformity with the Articles of
Incorporation, By-Laws and Registration Statement of the Company and with the
instructions and directions of the Board and will comply with the
requirements of the 1940 Act, the rules thereunder and all other applicable
federal and state laws and regulations.
5. DELEGATION OF G.T.'S DUTIES AS INVESTMENT MANAGER AND
ADMINISTRATOR. With respect to one or more of the Funds, G.T. may enter
into one or more contracts ("Sub-Advisory or Sub-Administration Contract")
with a sub-adviser or sub-administrator in which G.T. delegates to such
sub-advisor or sub-administrator the performance of any or all of the
services specified in Paragraph 2 and 3 of this Contract, provided that: (i)
each Sub-Advisory and Sub-Administration Contract imposes on the sub-adviser
or sub-administrator bound thereby all the duties and conditions to which G.
T. is subject with respect to the delegated services under Paragraphs 2, 3,
and 4 of this Contract; (ii) each Sub-Advisory or Sub-Administration Contract
meets all requirements of the 1940 Act and rules thereunder; and (iii) G.T.
shall not enter into a Sub-Advisory or Sub-Administration Contract unless it
is approved by the Board prior to implementation.
6. SERVICES NOT EXCLUSIVE. The services furnished by G.T.
hereunder are not to be deemed exclusive and G. T. shall be free to furnish
similar services to others so long as its services under this Contract are
not impaired thereby. Nothing in this Contract shall limit or restrict the
right of any director, officer or employee of G.T., who may also be a
Director, officer or employee of the Company, to engage in any other business
or to devote his or her time and attention in part to the management or other
aspects of any other business, whether of a similar nature or a dissimilar
nature.
7. EXPENSES.
(a) During the term of this Contract, each Fund will bear all
expenses, not specifically assumed by G.T., incurred in its operations and
the offering of its shares.
3
<PAGE>
(b) Expenses borne by each Fund will include but not be limited to
the following (i) the cost (including brokerage commissions, if any) of
securities purchased or sold by the Fund and any losses incurred in
connection therewith; (ii) fees payable to and expenses incurred on behalf of
the Fund by G.T. under this Contract; (iii) expenses of organizing the
Company and the Fund; (iv) filing fees and expenses relating to the
registration and qualification of the Fund's shares and the Company under
federal and/or state securities laws and maintaining such registrations and
qualifications; (v) fees and salaries payable to the Company's Directors who
are not parties to this Contract or interested persons of any such party
("Independent Directors"); (vi) all expenses incurred in connection with the
Independent Directors' services, including travel expenses; (vii) taxes
(including any income or franchise taxes) and governmental fees; (viii) costs
of any liability, uncollectible items of deposit and other insurance and
fidelity bonds; (ix) any costs, expenses or losses arising out of a liability
or claim for damages or other relief asserted against the Company or the Fund
for violation of any law; (x) legal, accounting and auditing expenses,
including legal fees of special counsel for the Independent Directors; (xi)
charges of custodians, transfer agents, pricing agents and other agents;
(xii) costs of preparing share certificates; (xiii) with respect to existing
shareholders, expenses of setting in type, printing and mailing prospectuses
and supplements thereto, statements of additional information and supplements
thereto, reports and proxy materials for existing shareholders; (xiv) any
extraordinary expenses (including fees and disbursements of counsel, costs of
actions, suits or proceedings to which the Company is a party and the
expenses the Company may incur as a result of its legal obligations to
provide indemnification to its officer, Directors, employees and agents)
incurred by the Company or the Fund; (xv) fees, voluntary assessments and
other expenses incurred in connection with membership in investment company
organizations; (xvi) costs of mailing and tabulating proxies and costs of
meetings of shareholders, the Board and any committees thereof; (xvii) the
costs of investment company literature and other publications provided by the
Company to its Directors and officers; and (xviii) costs of mailing,
stationery and communications equipment.
(c) All general expenses of the Company and joint expenses of the
Funds shall be allocated among each Fund on a basis deemed fair and equitable
by G.T., subject to the Board's supervision.
(d) G.T. will assume the cost of any compensation for services
provided to the Company received by the officers of the Company and by the
Directors of the Company who are not Independent Directors.
(e) The payment or assumption by G. T. of any expense of the
Company or any Fund that G.T. is not required by this Contact to pay or
assume shall not obligate G.T. to pay or assume the same or any similar
expense of the Company or any Fund on any subsequent occasion.
4
<PAGE>
8. COMPENSATION.
(a) For the services provided under this Agreement, G.T. Global
Government Income Fund and G.T. Global Bond Fund each will pay G.T. a fee,
computed daily and paid monthly, at the annualized rate of 0.75% of the
Fund's average daily net assets.
(b) For the services provided under this Agreement, G.T. Health
Care Fund and G.T. Portfolio Strategy Fund each will pay to G. T. a fee,
computed daily and paid monthly, at the annualized rate of 1.00% of the
Fund's average daily net assets.
(c) For the services provided under this Agreement, each Fund as
hereafter may be established will pay to G.T. a fee in an amount to be agreed
upon in a written fee agreement ("Fee Agreement") executed by the Company on
behalf of such Fund and by G.T. All such Fee Agreements shall provide that
they are subject to all terms and conditions of this Contract.
(d) The fee shall be computed daily and paid monthly to G.T. on or
before the last business day of the next succeeding calendar month.
(e) G.T. agrees to reduce the fee payable to it under this
Contract by the amount by which the ordinary operating expenses of a Fund for
any fiscal year, excluding interest, taxes, distribution and extraordinary
expenses, shall exceed the most stringent limits prescribed by any state in
which Fund shares are offered for sale. Costs incurred in connection with
the purchase or sale of portfolio securities, including brokerage fees and
commissions, which are capitalized in accordance with generally accepted
accounting principles applicable to investment companies, shall be accounted
for as capital items and not expenses. Property accruals shall be made for a
Fund for any projected reduction hereunder and corresponding amounts shall be
withheld from the fees paid by that Fund to G.T. Any additional reduction
computed as being necessary at the end of the fiscal year shall be deducted
from the fee for the last month of such fiscal year. If the amount of the
fee payable by a Fund to G.T. is less than the amount by which the Fund's
expenses exceeds an applicable expense limitation, G.T. shall reimburse the
Fund's expenses in an amount sufficient to enable the Fund to meet such
limitation.
(f) If this Contract becomes effective or terminates before the
end of any month, the fee for the period from the effective date to the end
of the month or from the beginning of such month to the date of termination,
as the case may be, shall be prorated according to the proportion which such
period bears to the full month in which such effectiveness or termination
occurs.
9. LIMITATION OF LIABILITY OF G. T. AND INDEMNIFICATION. G.T.
shall not be liable, and each Fund shall indemnify G.T. and its directors,
officers and employees, for any costs or liabilities arising from any error
of judgment or mistake of law or any loss suffered by the Fund or the Company
in connection with the matters to which this Contract relates except a loss
resulting from willful misfeasance, bad faith or gross
5
<PAGE>
negligence or the part of G.T. in the performance by G.T. of its duties or
from reckless disregard by G.T. of its obligations and duties under this
Contract. Any person, even though also an officer, partner, employee or
agent of G.T., who may be or become an officer, Director, employee or agent
of the Company shall be deemed, when rendering services to a Fund or the
Company or acting with respect to any business of a Fund or the Company, to
be rendering such service to or acting solely for the Fund or the Company and
not as an officer, partner, employee, or agent or one under the control or
direction of G.T. even though paid by it.
10. DURATION AND TERMINATION.
(a) This Contract shall become effective on the date hereabove
written, provided that this Contract shall not take effect with respect to
any Fund unless it has first been approved (i) by a vote of a majority of the
Independent Directors, cast in person at a meeting called for the purpose of
voting or such approval, and (ii) by vote of a majority of that Fund's
outstanding voting securities.
(b) Unless sooner terminated as provided herein, this Contract
shall continue in effect for two years from the above written date.
Thereafter, if not terminated, with respect to each Fund, this Contract shall
continue automatically for successive periods not to exceed twelve months
each, provided that such continuance is specifically approved at least
annually (i) by a vote of a majority of the Independent Directors, cast in
person at a meeting called for the purpose of voting on such approval and
(ii) by the Board or by vote of a majority of the outstanding voting
securities of that Fund.
(c) Notwithstanding the foregoing, with respect to any Fund this
Contract may be terminated at any time, without the payment of any penalty,
by vote of the Board or by a vote of a majority of the outstanding voting
securities of the Fund on sixty days' written notice to G.T. or by G.T. at
any time, without the payment of any penalty, on sixty days' written notice
to the Company. Termination of this Contract with respect to one Fund shall
not affect the continued effectiveness of this Contract with respect to any
other Fund. This Contract will automatically terminate in the event of its
assignment.
11. AMENDMENT OF THIS CONTRACT. No provision of this Contract
may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought, and no amendment of this
Contract shall be effective until approved by vote of a majority of the
Fund's outstanding voting securities.
12. GOVERNING LAW. This Contract shall be construed in
accordance with the laws of the State of California and the 1940 Act. To the
extent that the applicable laws of the State of California conflict with the
applicable provisions of the 1940 Act, the latter shall control.
6
<PAGE>
13. MISCELLANEOUS. The captions in this Contract are included
for convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be
affected thereby. This Contract shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors. As used in
this Contract, the terms "majority of the outstanding voting securities,"
"interested person," "assignment," "broker," "dealer," "investment adviser,"
"national securities exchange," "net assets," "prospectus," "sale," "sell,"
and "security" shall have the same meaning as such terms have in the 1940 Act
subject to such exemption as may be granted by the Securities and Exchange
Commission by any rule, regulation or order. Where the effect of a
requirement of the 1940 Act reflected in any provision of this Contract is
made less restrictive by a rule, regulation or order of the Securities and
Exchange Commission, whether of special or general application such provision
shall be deemed to incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF the parties hereto have caused this instrument to
be executed by their officers designated as of the day and year first above
written.
Attest: G. T. INVESTMENT FUNDS, INC.
/s/ Carol Sullivan By: /s/ James W. Churm
- --------------------------------- ----------------------------
Attest: G.T. CAPITAL MANAGEMENT, INC.
/s/ Carol Sullivan By: /s/ James R. Tufts
- --------------------------------- ----------------------------
<PAGE>
September 25, 1990
G. T. Capital Management, Inc.
50 California Street
San Francisco, CA 94111
RE: Investment Management and Administration Fee
Agreement of G.T. Global Growth & Income Fund
---------------------------------------------
Ladies and Gentlemen:
G.T. Investment Funds, Inc. ("Company") has appointed G.T. Capital
Management, Inc. ("G.T. Capital") to act as investment manager and
administrator to a new fund organized as a series of the Company, G.T.
Global Growth and Income Fund (formerly G.T. Portfolio Strategy Fund) (the
"Fund"), pursuant to the terms of the Investment Management and
Administration Contract between the Company and G. T. Capital currently in
effect ("Management Contract"). For providing services to the Fund pursuant
to the Management Contract, the Fund will pay G.T. Capital investment
management and administration fees at the annualized rate of 1.00% of the
Fund's average daily net assets. Such fees are to be calculated daily and
paid monthly by the Fund.
Please indicate your agreement with the provisions of the foregoing
paragraph by executing this letter in the space set forth for such execution
below.
Sincerely,
G.T. INVESTMENT FUNDS, INC.
By: /s/ Jeffrey S. Bartfeld
------------------------
Jeffrey S. Bartfeld
Vice President and Principal
Accounting Officer
AGREED AND ACCEPTED:
G.T. CAPITAL MANAGEMENT, INC.
By: /s/ James W. Churm
-------------------
James W. Churm
Vice President and
General Counsel
<PAGE>
July 17, 1991
G.T. Capital Management, Inc.
50 California Street
San Francisco, California 94111
RE: Investment Management and Administration Fee
Agreement for G.T. Latin America Fund and
G.T. Global Small Companies Fund
----------------------------------------------
Ladies and Gentlemen:
G.T. Investment Funds, Inc. ("Company") has appointed G.T. Capital
Management, Inc. ("G.T. Capital") to act as investment manager and
administrator to two new funds organized as series of the Company, G.T.
Latin America Fund and G.T. Global Small Companies Fund (collectively, "New
Funds"), pursuant to the terms of the Investment Management and
Administration Contract between the Company and G. T. Capital currently in
effect ("Management Contract"). For providing services to each of the New
Funds pursuant to the Management Contract, each New Fund will pay G.T.
Capital investment management and administration fees at the annualized rate
of 1.00% of the New Fund's average daily net assets. Such fees are to be
calculated daily and paid monthly by each New Fund.
Please indicate your agreement with the provisions of the foregoing
paragraph by executing this letter in the space set forth for such execution
below.
Sincerely,
G.T. INVESTMENT FUNDS, INC.
By: /s/ Jeffrey S. Bartfeld
-----------------------
Jeffrey S. Bartfeld
Vice President and Principal
Accounting Officer
AGREED AND ACCEPTED:
G.T. CAPITAL MANAGEMENT, INC.
By: /s/ James W Churm
-------------------
James W. Churm
Vice President and General Counsel
<PAGE>
January 15, 1992
G.T. Capital Management, Inc.
50 California Street
27th Floor
San Francisco, CA 94111
Re: Investment Management and Administration Fee
Agreement for G.T. Global Telecommunications Fund
Ladies and Gentlemen:
G.T. Investment Funds, Inc. ("Company") has appointed G.T. Capital
Management, Inc. ("G.T Capital") to act as investment manager and
administrator to a new fund organized as a series of the Company, G.T.
Global Telecommunications Fund (the "Fund"), pursuant to the terms of the
Investment Management and Administration Contract between the Company and
G.T. Capital currently in effect ("Management Contract"). For providing
services to the Fund pursuant to the Management Contract, the Fund will pay
G.T. Capital investment management and administration fees at the annualized
rate of 1.00% of the Fund's average daily net assets. Such fees are to be
calculated daily and paid monthly by the Fund.
Please indicate your agreement with the provisions of the foregoing
paragraph by executing this letter in the space set forth for such execution
below.
Sincerely,
G.T. INVESTMENT FUNDS, INC.
By: /s/ Jeffrey S. Bartfeld
-----------------------
Jeffrey S. Bartfeld
Vice President and Principal
Accounting Officer
AGREED AND ACCEPTED:
G.T. CAPITAL MANAGEMENT, INC.
By: /s/ James W. Churm
-------------------
James W. Churm
Vice President and General Counsel
<PAGE>
May 4, 1992
G. T. Capital Management, Inc.
50 California Street
27th Floor
San Francisco, CA 94111
Re: Investment Management and Administration Fee
Agreement for G.T. Global Emerging Markets Fund
Ladies and Gentlemen:
G.T. Investment Funds, Inc. ("Company") has appointed G.T. Capital
Management, Inc. ("G.T. Capital") to act as investment manager and
administrator to a new fund organized as a series of the Company, G.T.
Global Emerging Markets Fund (the "Fund"), pursuant to the terms of the
Investment Management and Administration Contract between the Company and
G.T. Capital currently in effect ("Management Contract"). For providing
services to the Fund pursuant to the Management Contract, the Fund will pay
G.T. Capital investment management and administration fees at the annualized
rate of 1.00% of the Fund's average daily net assets. Such fees are to be
calculated daily and paid monthly by the Fund.
Please indicate your agreement with the provisions of the foregoing
paragraph by executing this letter in the space set forth for such execution
below.
Sincerely,
G.T. INVESTMENT FUNDS, INC.
By: /s/ James R. Tufts
----------------------
James R. Tufts
Vice President and Principal
Financing and Accounting Officer
AGREED AND ACCEPTED:
G.T. CAPITAL MANAGEMENT, INC.
By: /s/ James W. Churm
--------------------
James W. Churm
Vice President and
General Counsel
<PAGE>
ADMINISTRATION CONTRACT
BETWEEN
G.T. INVESTMENT FUNDS, INC. AND G.T. CAPITAL MANAGEMENT, INC.
Contract made as of October 22, 1992, between G.T. Investment Funds,
Inc., a Maryland corporation ("Company"), with respect to G.T. Global High
Income Fund, (the "Fund"), a series of the Company, and G.T. Capital
Management, Inc. ("G.T."), a California corporation.
WHEREAS the Company is registered under the Investment Company Act of
1940, as amended ("1940 Act"), as an open-end management investment company,
and intends to offer for public sale shares of the Funds; and
WHEREAS the Company has previously established series of common stock
for which G.T. serves as investment manager and administrator pursuant to a
separate Investment Management and Administration Agreement and the Company
hereafter may establish additional series of its common stick to which this
contract shall apply (any such additional series, together with the Fund are
collectively referred to herein as the "Funds," and singly may be referred to
as a "Fund"); and
WHEREAS the Company desires to retain G.T. as administrator to
furnish certain administrative services to the Funds and to the Company and
the Funds, and G.T. is willing to furnish such services;
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, it is agreed between the parties hereto as
follows:
1. APPOINTMENT. The Company hereby appoints G.T. as
administrator of each Fund for the period and on the terms set forth in this
Contract. G.T. accepts such appointment and agrees to render the services
herein set forth, for the compensation herein provided.
2. DUTIES AS ADMINISTRATOR. G.T. will administer of the affairs
of each Fund subject to the supervision of the Company's Board of Directors
("Board") and the following understandings:
(a) G.T. will supervise all aspects of the operations of
each Fund, including the oversight of transfer agency, custodial, pricing and
accounting services, except as hereinafter set forth; provided, however, that
nothing herein contained shall be deemed to relieve or deprive the Board of
its responsibility for control of the conduct of the affairs of the Funds.
(b) At G.T.'s expense, G.T. will provide the Company and
the Funds with such corporate, administrative and clerical personnel
(including officers of the Company) and services as are reasonably deemed
necessary or advisable by the Board.
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<PAGE>
(c) G.T. will arrange, but not pay, for the periodic
preparation, updating, filing and dissemination (as applicable) of each
Fund's prospectus, statement of additional information, proxy material, tax
returns and required reports with or to the Fund's shareholders, the
Securities and Exchange Commission and other appropriate federal or state
regulatory authorities.
(d) G.T. will provide the Company and the Funds with, or
obtain for them, adequate office space and all necessary office equipment and
services, including telephone service, heat, utilities, stationery supplies
and similar items.
3. FURTHER DUTIES. In all matters relating to the performance
of this Contract, G.T. will act in conformity with the Articles of
Incorporation, By-Laws and Registration Statement of the Company and with the
instructions and directions of the Board and will comply with the
requirements of the 1940 Act, the rules thereunder, and all other applicable
federal and state laws and regulations.
4. DELEGATION OF G.T.'S DUTIES AS ADMINISTRATOR. With respect
to one or more of the Funds, G.T. may enter into one or more contracts
("Sub-Administration Contract") with a sub-administrator in which G.T.
delegates to such sub-administrator the performance of any or all of the
services specified in Paragraph 2 of this Contract, provided that (i) each
Sub-Administration Contract imposes on the sub-administrator bound thereby
all the duties and conditions to which G.T. is subject with respect to the
delegated services under Paragraphs 2 and 3 of this Contract; (ii) each
Sub-Administration Contract meets all requirements of the 1940 Act and rules
thereunder; and (iii) G.T. shall not enter into a Sub-Administration Contract
unless it is approved by the Board prior to implementation.
5. SERVICES NOT EXCLUSIVE. The services furnished by G.T.
hereunder are not to be deemed exclusive and G.T. shall be free to furnish
similar services to others so long as its services under this Contract are
not impaired thereby. Nothing in this Contract shall limit or restrict the
right of any director, officer or employee of G.T., who may also be a
Director, officer or employee of the Company, to engage in any other business
or to devote his or her time and attention in part to the management or other
aspects of any other business, whether of a similar nature or a dissimilar
nature.
6. EXPENSES.
(a) During the term of this Contract, each Funs will bear
all expenses, not specifically by G.T., incurred in its operations and the
offering of its shares.
(b) Expenses borne by each Fund will include but not be
limited to the following: (i) the cost (including brokerage commissions, if
any) of securities purchased or sold by the Fund and any losses incurred in
connection therewith; (ii) fees payable to and expenses incurred on behalf of
the Fund by G.T. under this Contract; (iii) expenses of organizing the Fund;
(iv) filing fees and expenses relating to the registration and qualification
of the Fund's share under federal and/or state securities laws and
maintaining such registrations and qualifications; (v) fees and salaries
payable to the company's Directors who are not parties to this Contract or
interested
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<PAGE>
persons of any such party ("Independent Directors"); (vi) all expenses
incurred in connection with the Independent Directors'services, imcluding
travel expenses; (vii) taxes (including any income or franchise taxes) and
governmental fees; (viii) costs of any liability, uncollectible items of
deposit and other insurance and fidelity bonds; (ix) any costs, expenses or
losses arising out of a liability of or claim for damages or other relief
asserted against the Company or the Fund for violation of any law; (x) legal,
accounting and auditing expenses, including legal fees of special counsel
for the Independent Directors; (xi) charges of custodians, transfer agents,
pricing agents and other agents; (xii) costs of preparing share certificates;
(xiii) with respect to existing shareholders, expenses of setting in type,
printing and mailing prospectuses and supplements thereto, statements of
additional information and supplements thereto, reports and proxy materials
for existing shareholders; (xiv) any extraordinary expenses (including fees
and disbursements of counsel, costs of actions, suits or proceedings to which
the Company is a party and the expenses the Company may incur as a result of
its legal obligation to provide indemnification to its officers, Directors,
employees and agents) incurred by the Company or the Fund; (xv) fees,
voluntary assessments and other expenses incurred in connection with
membership in investment company organizations; (xvi) costs of mailing and
tabulating proxies and costs of meetings of shareholders, the Board and any
committees thereof; (xvii) the cost of investment company literature and
other publications provided by the Company to its Directors and officers; and
(xviii) costs of mailing, stationery and communications equipment.
(c) G.T. will assume the cost of any compensation for
services provided to the Company received by the officers of the Company and
by the Directors of the Company who are not Independent Directors.
(d) The payment or assumption by G.T. of any expense of
any Fund that G.T. is not required by this Contract to pay or assume shall
not obligate G.T. to pay or assume the same or any similar expense of any
Fund on any subsequent occasion.
7. COMPENSATION.
(a) For the services provided under this Contract, the
Fund will pay G.T. a fee, computed daily and paid monthly, at the annualized
rate of 0.25% of the Fund's average daily net assets.
(b) For the services provided under this Contract, each
Fund as hereafter may be established and become subject to this Contract,
will pay to G.T. a fee in an amount to be agreed upon in a written fee
agreement ("Fee Agreement") executed by the Company on behalf of such Fund
and by G.T. All such Fee Agreements shall provide that they are subject to
all terms and conditions of this Contract.
(c) The fee shall be computed daily and paid monthly to
G.T. on or before the last business day of the next succeeding calendar month.
(d) G.T. agrees to reduce the fee payable to it under
this Contract by the amount by which the ordinary operating expenses of a
Fund for any fiscal year, excluding interest, taxes, distribution and
extraordinary expenses, together with the Fund's PRO RATA portion of the
ordinary
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<PAGE>
operating expenses of any investment company in which the Fund invests ,
shall exceed the most stringent limits prescribed by any state in which Fund
shares are offered for sale. Costs incurred in connection with the purchase
or sale of portfolio securities, which are capitalized in accordance with
generally accepted accounting principles applicable in investment companies ,
shall be accounted for as capital items and not expenses. Proper accruals
shall be made for a Fund for any projected reduction hereunder and
corresponding amounts shall be withheld from the fees paid by that Fund to
G.T. Any additional reduction computed as being necessary at the end of the
fiscal year shall be deducted from the fee for the last month of such fiscal
year. If the amount of the fee payable by a Fund to G.T. is less that the
amount by which the Fund's expenses exceeds an applicable expense limitation,
G.T. shall reimburse the Fund's expenses in an amount sufficient to enable
the Fund to meet such limitation.
(e) If this Contract becomes effective or terminates
before the end of any month, the fee for the period from the effective date
to the end of the month or from the beginning of such month to the date of
termination, as the case may be, shall be prorated according to the
proportion which such period bears to the full month in which such
effectiveness or termination occurs.
8. LIMITATION OF LIABILITY OF G.T. AND INDEMNIFICATION. G.T.
shall not be liable, and each Funds shall indemnify G.T. and its directors,
officers and employees for any costs or liabilities arising from any error of
judgment or mistake of law or any loss suffered by the Fund or the Company in
connection with the matters to which this Contract relates except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part
of G.T. in the performance by G.T. of its duties or from reckless disregard
by G.T. of its obligations and duties under this Contract. Any person, even
though also an officer, partner, employee, or agent of G.T., who may be or
become an officer, Director, employee or agent of the Company, shall be
deemed, when rendering services to a Fund or the Company or acting with
respect to any business of a Fund or the Company, to be rendering such
service to or acting solely for the Fund or the Company and not as an
officer, partner, employee, or agent or one under the control or direction of
G.T. even though paid by it.
9. DURATION AND TERMINATION.
(a) This Contract shall become effective upon the date
hereabove written, provided that this Contract shall not take effect with
respect to any Fund unless it has first been approved (i) by a vote of a
majority of the Independent Directors, cast in person at a meeting called for
the purpose of voting on such approval, and (ii) by vote of a majority of
that Fund's outstanding voting securities.
(b) Unless sooner terminated as provided herein, this
Contract shall continue in effect for two years from the above written date.
Thereafter, if not terminated, with respect to each Fund, this Contract shall
continue automatically for successive periods not to exceed twelve months
each, provided that such continuance is specifically approved at least
annually (i) by a vote of a majority of the Independent Directors, cast in
person at a meeting called for the purpose of voting on such approval, and
(ii) by the Board or by vote of a majority of the outstanding voting
securities of that Fund.
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<PAGE>
(c) Notwithstanding the foregoing, with respect to any
Fund this Contract may be terminated at any time, without the payment of any
penalty, by vote of the Board or by a vote of a majority of the outstanding
voting securities of the Fund on sixty days' written notice to G.T. or by
G.T. at any time, without the payment of any penalty, on sixty days' written
notice to the Company. Termination of this Contract with respect to one Fund
shall not effect the continued effectiveness of this Contract with respect to
any other Fund. This Contract will automatically terminate in the event of
its assignment.
10. AMENDMENT OF THIS CONTRACT. No provision of this Contract
may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought, and no amendment of this
Contract shall be effective until approved by vote of a majority of the
Fund's outstanding voting securities.
11. GOVERNING LAW. This Contract shall be construed in
accordance with the laws of the State of California and the 1940 Act. To the
extent that the applicable laws of the State of California conflict with the
applicable provisions of the 1940 Act, the latter shall control.
12. MISCELLANEOUS. The captions in this Contract are included
for convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be
affected thereby. This Contract shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors. As used in
this Contract, the terms "majority of the outstanding voting securities,"
"interested person," "assignment," "broker," "dealer," "investment adviser,"
"national securities exchange," "net assets," "prospectus," "sale," "sell"
and "security" shall have the same meaning as such terms have in the 1940
Act, subject to such exemption as may be granted by the Securities and
Exchange Commission by any rule, regulation or order. Where the effect of a
requirement of the 1940 Act reflected in any provision of this Contract is
made less restrictive by a rule, regulation or order of the Securities and
Exchange Commission, whether of special or general application, such
provision shall be deemed to incorporate the effect of such rule, regulation
or order.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated as of the day and year first above
written.
Attest: G.T. INVESTMENT FUNDS, INC.
/s/ Peter S. Guarino By: /s/ James W. Churm
- ----------------------------- --------------------------
Peter R. Guarino James W. Churm
Attest: G.T. CAPITAL MANAGEMENT, INC.
/s/ Peter R. Guarino By: /s/ James R. Tufts
- ----------------------------- --------------------------
Peter R. Guarino James R. Tufts
- 6 -
<PAGE>
ADMINISTRATION CONTRACT
BETWEEN
G.T. INVESTMENT FUNDS, INC. AND G.T. CAPITAL MANAGEMENT, INC.
Contract made as of January 11, 1994, between G.T. Investment Funds, Inc.,
a Maryland corporation ("Company"), with respect to G.T. Global Infrastructure
Fund, G.T. Global Natural Resources Fund and G.T. Global Financial Services Fund
("Funds"), each a series of the Company, and G.T. Capital Management, Inc.
("G.T."), a California corporation.
WHEREAS the Company is registered under the Investment Company Act of 1940,
as amended ("1940 Act"), as an open-end management investment company, and
intends to offer for public sale shares of the Funds; and
WHEREAS the Company hereafter may establish additional series of its
common stock to which this contract shall apply (any such additional series,
together with the Funds are collectively referred to herein as the "Funds"); and
WHEREAS G.T. provides investment management and administration services to
Global Investment Portfolio ("Master Portfolio") pursuant to an Investment
Management and Administration Contract between G.T. and the Master Portfolio,
the Master Portfolio having established subtrusts in which the Funds invest all
of their investable assets; and
WHEREAS the Company desires to retain G.T. as administrator to furnish
certain administrative services to the Funds and to the Company with respect to
and the Funds, and G.T. is willing to furnish such services;
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Company hereby appoints G.T. as administrator of
each Fund for the period and on the terms set forth in this Contract. G.T.
accepts such appointment and agrees to render the services herein set forth, for
the compensation herein provided.
2. Duties as Administrator. G.T. will administer the affairs of each
Fund subject to the supervision of the Company's Board of Directors ("Board")
and the following understandings:
(a) G.T. will supervise all aspects of the non-investment operations
of each Fund, including the oversight of transfer agency, custodial, pricing and
accounting services, except as hereinafter set forth; provided, however, that
nothing herein contained shall be deemed to relieve or deprive the Board of its
responsibility for control of the conduct of the affairs of the Funds.
(b) At G.T.'s expense, G.T. will provide the Company and the Funds
with such corporate, administrative and clerical personnel (including officers
of the Company) and services as are reasonably deemed necessary or advisable by
the Board.
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<PAGE>
(c) G.T. will arrange but not pay for the periodic preparation,
updating, filing and dissemination (as applicable) of each Fund's prospectus,
statement of additional information, proxy material, tax returns and required
reports with or to the Fund's shareholders, the Securities and Exchange
Commission and other appropriate federal or state regulatory authorities.
(d) G.T. will provide the Company and the Funds with, or obtain for
them, adequate office space and all necessary office equipment and services,
including telephone service, heat, utilities, stationery supplies and similar
items.
3. Further Duties. In all matters relating to the performance of this
Contract, G.T. will act in conformity with the Articles of Incorporation, By-
Laws and Registration Statement of the Company and with the instructions and
directions of the Board and will comply with the requirements of the 1940 Act,
the rules thereunder, and all other applicable federal and state laws and
regulations.
4. Delegation of G.T.'s Duties as Administrator. With respect to one or
more of the Funds, G.T. may enter into one or more contracts ("Sub-
Administration Contract") with a sub-administrator in which G.T. delegates to
such sub-administrator the performance of any or all of the services specified
in Paragraph 2 and 3 of this Contract, provided that (i) each Sub-Administration
Contract imposes on the sub-administrator bound thereby all the duties and
conditions to which G.T. is subject with respect to the delegated services under
Paragraphs 2 and 3 of this Contract; (ii) each Sub-Administration Contract meets
all requirements of the 1940 Act and rules thereunder; and (iii) G.T. shall not
enter into a Sub-Administration Contract unless it is approved by the Board
prior to implementation.
5. Services Not Exclusive. The services furnished by G.T. hereunder are
not to be deemed exclusive and G.T. shall be free to furnish similar services to
others so long as its services under this Agreement are not impaired thereby.
Nothing in this Contract shall limit or restrict the right of any director,
officer or employee of G.T., who may also be a Director, officer or employee of
the Company, to engage in any other business or to devote his or her time and
attention in part to the management or other aspects of any other business,
whether of a similar or a dissimilar nature.
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<PAGE>
6. Expenses.
(a) During the term of this Agreement, each Fund will bear all
expenses, not specifically assumed by G.T., incurred in its operation and the
offering of its shares.
(b) Expenses borne by each Fund will include but not be limited to
the following: (i) fees payable to and expenses incurred on behalf of the Fund
by G.T. under this Contract; (ii) expenses of organizing the Fund; (iii) filing
fees and expenses relating to the registration and qualification of the Fund's
shares under federal and/or state securities laws and maintaining such
registrations and qualifications; (iv) fees and salaries payable to the
Company's Directors who are not parties to this Contract or interested persons
of any such party ("Independent Directors"); (v) all expenses incurred in
connection with the Independent Directors' services, including travel expenses;
(vi) taxes (including any income or franchise taxes) and governmental fees;
(vii) costs of any liability, uncollectible items of deposit and other insurance
and fidelity bonds; (viii) any costs, expenses or losses arising out of a
liability of or claim for damages or other relief asserted against the Company
or the Fund for violation of any law; (ix) legal, accounting and auditing
expenses, including legal fees of special counsel for the Independent Directors;
(x) charges of custodians, transfer agents, pricing agents and other agents;
(xi) costs of preparing share certificates; (xii) with respect to existing
shareholders, expenses of setting in type, printing and mailing prospectuses and
supplements thereto, statements of additional information and supplements
thereto, reports and proxy materials; (xiii) any extraordinary expenses
(including fees and disbursements of counsel, costs of actions, suits or
proceedings to which the Company is a party and the expenses the Company may
incur as a result of its legal obligation to provide indemnification to its
officers, Directors, employees and agents) incurred by the Company or the Fund;
(xiv) fees, voluntary assessments and other expenses incurred in connection with
membership in investment company organizations; (xv) costs of mailing and
tabulating proxies and costs of meetings of shareholders, the Board and any
committees thereof; (xvi) the cost of investment company literature and other
publications provided by the Company to its Directors and officers; and
(xvii) costs of mailing, stationery and communications equipment.
(c) G.T. will assume the cost of any compensation for services
provided to the Funds received by the officers of the Company and by the
Directors of the Company who are not Independent Trustees.
(d) The payment or assumption by G.T. of any expense of any Fund that
G.T. is not required by this Contract to pay or assume shall not obligate G.T.
to pay or assume the same or any similar expense of any Fund on any subsequent
occasion.
7. Compensation.
(a) For the services provided under this Contract, each Fund will pay
G.T. a fee, computed daily and paid monthly, at the annualized rate of 0.25% of
such Fund's average daily net assets.
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<PAGE>
(b) For the services provided under this Contract, each Fund as
hereafter may be established and become subject to this Contract, will pay to
G.T. a fee in an amount to be agreed upon in a written fee agreement ("Fee
Agreement") executed by the Company on behalf of such Fund and by G.T. All such
Fee Agreements shall provide that they are subject to all terms and conditions
of this Contract.
(c) The fee shall be computed daily and paid monthly to G.T. on or
before the last business day of the next succeeding calendar month.
(d) G.T. agrees to reduce the fee payable to it under this Contract
by the amount by which the ordinary operating expenses of a Fund for any fiscal
year, excluding interest, taxes, distribution and extraordinary expenses,
together with the Fund's PRO RATA portion of the ordinary operating expenses of
any investment company in which the Fund invests (collectively, "Fund
Expenses"), shall exceed the most stringent limits prescribed by any state in
which a Fund's shares are offered for sale. Proper accruals shall be made for a
Fund for any projected reduction hereunder and corresponding amounts shall be
withheld from the fees paid by that Fund to G.T. Any additional reduction
computed as being necessary at the end of the fiscal year shall be deducted from
the fee for the last month of such fiscal year. If the amount of the fee
payable by a Fund to G.T. is less that the amount by which the Fund Expenses
exceeds an applicable expenses limitation, G.T. shall reimburse the Fund in an
amount sufficient to enable the Fund to meet such limitation.
(e) If this Contract becomes effective or terminates before the end
of any month, the fee for the period from the effective date to the end of the
month or from the beginning of such month to the date of termination, as the
case may be, shall be prorated according to the proportion which such period
bears to the full month in which such effectiveness or termination occurs.
8. Limitation of Liability of G.T. and Indemnification.
G.T. shall not be liable, and the Funds shall indemnify G.T. and its
directors, officers, employees, and agents for any costs or liabilities arising
from any error of judgment or mistake of law or any loss suffered by the Funds
or the Company in connection with the matters to which this Agreement relates
except a loss resulting from willful misfeasance, bad faith or gross negligence
on the part of G.T. in the performance by G.T. of its duties or from reckless
disregard by G.T. of its obligations and duties under this Contract. Any
person, even though also an officer, partner, employee, or agent of G.T., who
may be or become a Director, officer, employee or agent of the Company, shall be
deemed, when rendering services to a Fund or the Company or acting with respect
to any business of a Fund or the Company, to be rendering such service to or
acting solely for the Fund or the Company and not as an officer, partner,
employee, or agent or one under the control or direction of G.T., even though
paid by it.
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<PAGE>
9. Duration and Termination.
(a) This Contract shall become effective upon the date hereabove
written, provided that this Agreement shall not take effect with respect to any
Fund unless it has first been approved (i) by a vote of a majority of the
Independent Directors cast in person at a meeting called for the purpose of
voting on such approval, and (ii) by vote of a majority of that Fund's
outstanding voting securities.
(b) Unless sooner terminated as provided herein, this Contract shall
continue in effect for two years from the above written date or until June 30,
1995, whichever is earlier. Thereafter, if not terminated, with respect to each
Fund, this Agreement shall continue automatically for successive periods not to
exceed twelve months each, provided that such continuance is specifically
approved at least annually (i) by a vote of a majority of the Independent
Directors, cast in person at a meeting called for the purpose of voting on such
approval, and (ii) by the Board or by vote of a majority of the outstanding
voting securities of that Fund.
(c) Notwithstanding the foregoing, with respect to any Fund this
Contract may be terminated at any time, without the payment of any penalty, by
vote of the Board or by a vote of a majority of the outstanding voting
securities of a Fund on sixty days' written notice to G.T. or by G.T. at any
time, without the payment of any penalty, on sixty days' written notice to the
Company. Termination of this Contract with respect to one Fund shall not effect
the continued effectiveness of this Contract with respect to any other Fund.
This Contract will automatically terminate in the event of its assignment.
10. Amendment of this Contract. No provision of this Contract may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, and no amendment of this Agreement shall be
effective until approved by vote of a majority of that Fund's outstanding voting
securities.
11. Governing Law. This Contract shall be construed in accordance with
the laws of the State of California and the 1940 Act. To the extent that the
applicable laws of the State of California conflict with the applicable
provisions of the 1940 Act, the latter shall control.
12. Miscellaneous. The captions in this Contract are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Contract shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Contract shall not be affected
thereby. This Contract shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors. As used in this Contract,
the terms "majority of the outstanding voting securities," "interested person,"
"assignment," "broker," "dealer," "investment adviser," "national securities
exchange," "net assets," "prospectus," "sale," "sell" and "security" shall have
the same meaning as such terms have in the 1940 Act, subject to such exemption
as may be granted by the Securities and Exchange Commission by any rule,
regulation or order. Where the effect of a requirement of the 1940 Act
reflected in any provision of this Agreement is made less restrictive by
- 5 -
<PAGE>
a rule, regulation or order of the Securities and Exchange Commission,
whether of special or general application, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated as of the day and year first above
written.
Attest: G.T. INVESTMENT FUNDS, INC.
_________________________________ By:_________________________________
Peter R. Guarino David A. Minella
Attest: G.T. CAPITAL MANAGEMENT, INC.
_________________________________ By:_________________________________
Peter R. Guarino James R. Tufts
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<PAGE>
DISTRIBUTION CONTRACT
CLASS A SHARES
BETWEEN G.T. INVESTMENT FUNDS, INC.
AND G.T. GLOBAL FINANCIAL SERVICES, INC.
THIS DISTRIBUTION CONTRACT, dated as of October 22, 1992, between G.T.
GLOBAL INVESTMENT FUNDS, INC., a Maryland corporation ("Company"), and G.T.
GLOBAL FINANCIAL SERVICES, INC., a California corporation ("G.T. Global"), is
made with reference to the following facts:
A. The Company is an open-end management investment company.
B. The Company's Board of Directors ("Board") has established Class A and
Class B shares of certain series of the Company.
C. G.T. Global has the facilities to sell and distribute the Class A
shares of common stock of the various series established from time to time by
the Company that have established Class A shares ("Funds").
D. The Company and G.T. Global desire to enter into a distribution
contract with respect to the Class A shares of the Funds.
NOW, THEREFORE, the parties agree as follows:
1. G.T. Global shall be the exclusive principal underwriter for the sale
of Class A shares of each Fund, except as otherwise provided pursuant to
paragraph 20 hereof. The terms "Class A shares of the Fund" or "Class A shares"
as used herein shall mean Class A shares of common stock issued by the Funds.
2. In the sale of Class A shares of each Fund, G.T. Global shall act as
agent of the Company except in any transaction in which G.T. Global sells such
Class A shares as a dealer to the public, in which event G.T. Global shall act
as principal for its own account.
3. The Company shall sell Class A shares only through G.T. Global except
that the Company may at any time:
(a) Issue Class A shares to any corporation,
association, trust, partnership, or other organization, or its,
or their, security holders, beneficiaries, or members, in
connection with a merger, consolidation, or reorganization to
which the Company is a party, or in connection with the
acquisition of all or substantially all the property and assets
of such corporation, association, trust, partnership, or other
organization;
(b) Issue Class A shares of a Fund at net asset value
to the holders of Class A shares of the other Funds or Class A
shares of other investment companies
<PAGE>
managed by G.T. Capital Management, Inc., pursuant to any
exchange or reinvestment option made available as described
in the current Prospectus of the Fund;
(c) Issue Class A shares at net asset value to a
Fund's shareholders in connection with the reinvestment of
dividends and other distributions paid by the Fund;
(d) Issue Class A shares of a Fund at net asset value
to Directors, officers, and employees of the Company, its
investment manager, any principal underwriter of the Company, and
their affiliates, including any trust, pension, profit-sharing,
or other benefit plan established for such persons, registered
representatives and other employees of dealers having Selling
Group Agreements with G.T. Global and with respect to all such
persons listed, their respective spouse, siblings, parents and
children, and to other persons as permitted by applicable rules
adopted by the Securities and Exchange Commission under the
Investment Company Act of 1940 ("1940 Act"), as in effect from
time to time and as described in the current Prospectus of the
Fund;
(e) Issue Class A shares of a Fund at net asset value
to the sponsor organization, custodian or depository of a
periodic or single payment plan, or similar plan for the purchase
of Class A shares of the Fund, purchasing for such plan;
(f) Issue Class A shares of a Fund in the course of
any other transaction specifically provided for in the Prospectus
of the Fund, or upon obtaining the written consent of G.T. Global
thereto; or
(g) Sell Class A shares outside of the North American
continent, Hawaii and Puerto Rico through such other principal
underwriter or principal underwriters as may be designated from
time to time by the Company, pursuant to paragraph 20 hereof.
4. G.T. Global shall devote its best efforts to the sale of Class A
shares of the Funds. G.T. Global shall maintain a sales organization suited
to the sale of Class A shares of the Funds and shall use its best efforts to
effect such sales in countries as to which the Company shall have expressly
waived in writing its right to designate another principal underwriter
pursuant to paragraph 20 hereof, and shall effect and maintain appropriate
qualification to do so in all those jurisdictions in which it sells or offers
Class A shares for sale and in which qualification is required.
5. Within the United States of America, G.T. Global shall offer and
sell Class A shares only to or through such dealers as are members in good
standing of the National Association of Securities Dealers, Inc. ("NASD"), or
to persons legally engaged in dealer activities who are exempt from NASD
membership in accord with applicable law. Class A
-2-
<PAGE>
shares of a Fund sold to dealers shall be for resale by such dealers only at
the public offering price set forth in the effective Prospectus relating to
the Fund which is part of the Company's Registration Statement in effect
under the Securities Act of 1933, as amended ("1933 Act"), at the time of
such offer or sale (herein, the "Prospectus"). G.T. Global may sell Class A
shares of a Fund to dealers at such discounts from said public offering price
as are set forth in the Prospectus, and/or in a Dealer or Selling Group
Agreement between G.T. Global and the Dealer, but neither such discounts nor
commissions shall exceed the sales charge or discounts referred to in the
Prospectus.
6. In its sales to dealers, G.T. Global shall use its best efforts to
determine that such dealers are appropriately qualified to transact business
in securities under applicable laws, rules and regulations promulgated by
such national, state, local or other governmental or quasi-governmental
authorities as may in a particular instance have jurisdiction.
7. The applicable public offering price of Class A shares of a Fund
shall be the price which is equal to the net asset value per Class A share
plus such sales charge as may be provided for in the Prospectus. Net asset
value per Class A share shall be determined for a Fund in the manner and at
the time or times set forth in and subject to the provisions of its
Prospectus.
8. All orders for Class A shares received by G.T. Global shall, unless
rejected by G.T. Global or the Company, be accepted by G.T. Global
immediately upon receipt and confirmed at an offering price determined in
accordance with the provisions of the Prospectus and the 1940 Act, and
applicable rules in effect thereunder. G.T. Global shall not hold orders
subject to acceptance nor otherwise delay their execution. In conformity
with the rules of the NASD, G.T. Global shall not accept conditional orders.
The provisions of this paragraph shall not be construed to restrict the right
of the Company to withhold Class A shares of the Funds from sale under
paragraph 16 hereof.
9. The Company or its transfer agent shall be promptly advised of all
orders received, and shall cause shares of Funds to be issued upon payment
received in accord with policies established by the Company and G.T. Global.
10. G.T. Global shall adopt and follow procedures as approved by the
officers of the Company for the confirmation of sales to dealers, the
collection of amounts payable by dealers on such sales, and the cancellation
of unsettled transactions, as may be necessary to comply with the
requirements of the NASD and the 1940 Act, as such requirements may from time
to time exist.
11. The compensation for the services of G.T. Global as a principal
underwriter under this Contract shall be the sales charge, if any, which is
collected on sales of Class A shares. In addition, G.T. Global is entitled
to fees, if any, payable under the Distribution plan adopted pursuant to Rule
12b-1 under the 1940 Act applicable to the Class A shares (the "Class A
Plan").
12. The Company agrees to use its best efforts to maintain its
registration as an open-end management investment company under the 1940 Act.
-3-
<PAGE>
13. The Company agrees to use its best efforts to maintain an effective
prospectus relating to each Fund under the 1933 Act, and warrants that such
prospectus will contain all statements required by and will conform with the
requirements of the 1933 Act and the rules and regulations thereunder, and
that no part of any such prospectus, at the time the Registration Statement
of which it is a part is ordered effective, will contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein, or necessary to make the statements therein not misleading. G.T.
Global agrees and warrants that it will not in the sale of Class A shares of
the Funds use any prospectus, advertising or sales literature not approved by
the Company or its officers nor make any untrue statement of a material fact
nor omit the stating of a material fact necessary in order to make the
statements made, in the light of the circumstances under which they are made,
not misleading. G.T. Global agrees to indemnify and hold the Company
harmless from any and all loss, expense, damage and liability resulting from
a breach by G.T. Global of the agreements and warranties in this paragraph,
or from the use of any sales literature, information, statistics or other aid
or device employed in connection with the sale of Class A shares not approved
by the Company and its officers.
14. The expense of each printing of each Prospectus and each revision
thereof or addition thereto deemed necessary by the Company's officers to
meet the requirements of applicable laws shall be divided between the
Company, G.T. Global and any other principal underwriter of the Class A
shares of the Funds as they may from time to time agree.
15. The Company agrees to use its best efforts to qualify and maintain
the qualification of an appropriate number of the Class A shares of each Fund
for sale under the securities laws of such states as G.T. Global and the
Company may approve. Any such qualification may be withheld, terminated or
withdrawn by the Company at any time in its discretion. The expense of
qualification and maintenance of qualification shall be borne by the Company,
but G.T. Global shall furnish such information and other materials relating
to its affairs and activities as may be required by the Company or its
counsel in connection with such qualification.
16. The Company and G.T. Global acknowledge that each has the right to
reject any order for the purchase of Class A shares for any reason. In
addition, the Company may withhold Class A shares from sale in any state or
country temporarily or permanently if, in the opinion of its counsel, such
offer or sale would be contrary to law or if the Board of Directors or the
President or any Vice President of the Company determines that such offer or
sale is not in the best interest of the Company. The Company will give
prompt notice to G.T. Global of any withholding and will indemnify it against
any loss suffered by G.T. Global as a result of such withholding by reason of
non-delivery of Fund Class A shares after a good faith confirmation by G.T.
Global of sales thereof prior to receipt of notice of such withholding.
17. Each Fund shall reimburse G.T. Global for a portion of its
expenditures incurred in providing services under this Contract at the rate
and under the terms specified in the Class A Plan, as such Plan may be
amended from time to time.
18. (a) With respect to any Fund, this Contract may be
terminated at any time, without payment of any penalty, by vote
of a majority of the members of
-4-
<PAGE>
the Board of Directors of the Company who are not interested
persons of the Company and have no direct or indirect
financial interest in the operation of the Class A Plan or in
any agreements related to the Class A Plan or by vote of a
majority of the outstanding voting securities of the Company
on thirty (30) days' written notice to G.T. Global, or by G.T.
Global on like notice to the Company. Termination of this
Contract with respect to Class A shares of one Fund shall not
affect its continued effectiveness with respect to Class A
shares of any other Fund.
(b) This Contract may be terminated by either party
upon five (5) days' written notice to the other party in the
event that the Securities and Exchange Commission has issued an
order or obtained an injunction or other court order suspending
effectiveness of the Registration Statement covering the Class A
shares of the Funds.
(c) This Contract may also be terminated by the
Company upon five (5) days' written notice to G.T. Global, should
the NASD expel G.T. Global or suspend its membership in that
organization.
(d) G.T. Global shall inform the Company promptly of
the institution of any proceedings against it by the Securities
and Exchange Commission, the NASD or any state regulatory
authority.
19. This Agreement shall automatically terminate in the event of its
assignment. The term "assignment" shall have the meaning defined in the 1940
Act.
20. With respect to any Fund, upon sixty (60) days' written notice to
G.T. Global, the Company may from time to time designate other principal
underwriters of Class A shares with respect to areas other than the North
American continent, Hawaii, Puerto Rico and such countries as to which the
Company may have expressly waived in writing its right to make such
designation. In the event of such designation, the right of G.T. Global
under this Contract to sell Class A shares in the areas so designated shall
terminate, but this Contract shall remain otherwise in full effect until
terminated in accordance with the provisions of paragraphs 18 and 19 hereof.
21. No provision of this Contract shall protect or purport to protect
G.T. Global against any liability to the Company or holders of Class A shares
of the Funds for which G.T. Global would otherwise be liable by reason of
willful misfeasance, bad faith or negligence.
22. Unless sooner terminated in accordance with the provisions of
paragraphs 18 or 19 hereof, this Contract shall continue in effect with
respect to each Fund for periods of up to one year, but only so long as such
continuance is specifically approved at least annually by (i) vote of a
majority of the Directors of the Company who are not interested persons of
the Company and who have no direct or indirect financial interest in the
Class A Plan or any agreements relating to the Class A Plan, and who are not
parties to this Contract or interested persons of any such party as defined
by the 1940 Act, cast in person at a meeting called for the purpose of voting
on such
-5-
<PAGE>
approval; and (ii) either the Board of Directors of the Company or a vote of
a majority of the outstanding Class A shares of the Company as defined by the
1940 Act.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed in duplicate original by their officers thereunder duly authorized
as of the day and year first written above.
Attest: G.T. INVESTMENT FUNDS, INC.
/s/ Peter R. Guarino By: /s/ James W. Churm
- ------------------------- ------------------------------------
Attest: G.T. GLOBAL FINANCIAL
SERVICES, INC.
/s/ Peter R. Guarino By: /s/ James R. Tufts
- ------------------------- --------------------------------------
<PAGE>
DISTRIBUTION CONTRACT
CLASS B SHARES
BETWEEN G.T. INVESTMENT FUNDS, INC.
AND G.T. GLOBAL FINANCIAL SERVICES, INC.
THIS DISTRIBUTION CONTRACT, dated as of October 22, 1992, between G.T.
GLOBAL INVESTMENT FUNDS, INC., a Maryland corporation ("Company"), and G.T.
GLOBAL FINANCIAL SERVICES, INC., a California corporation ("G.T. Global"), is
made with reference to the following facts:
A. The Company is an open-end management investment company.
B. The Company's Board of Directors ("Board") has established Class A
and Class B shares of certain Series of the Company.
C. G.T. Global has the facilities to sell and distribute the Class B
shares of common stock of the various series established from time to time by
the Company ("Funds") that have established Class B shares.
D. The Company and G.T. Global desire to enter into a distribution
contract with respect to the Class B shares of the Funds.
NOW, THEREFORE, the parties agree as follows:
1. G.T. Global shall be the exclusive principal underwriter for the
sale of Class B shares of each Fund, except as otherwise provided pursuant to
paragraph 20 hereof. The terms "Class B shares of the Fund" or "Class B
shares" as used herein shall mean Class B shares of common stock issued by
the Funds.
2. In the sale of Class B shares of each Fund, G.T. Global shall act
as agent of the Company except in any transaction in which G.T. Global sells
such Class B shares as a dealer to the public, in which event G.T. Global
shall act as principal for its own account.
3. The Company shall sell Class B shares only through G.T. Global
except that the Company may at any time:
(a) Issue Class B shares to any corporation,
association, trust, partnership, or other organization, or its,
or their, security holders, beneficiaries, or members, in
connection with a merger, consolidation, or reorganization to
which the Company is a party, or in connection with the
acquisition of all or substantially all the property and assets
of such corporation, association, trust, partnership, or other
organization;
(b) Issue Class B shares of a Fund to the holders of
Class B shares of the other Funds or Class B shares of other
investment companies managed by G.T.
<PAGE>
Capital Management, Inc., pursuant to any exchange or
reinvestment option made available as described in the
current Prospectus of the Fund;
(c) Issue Class B shares to a Fund's shareholders in
connection with the reinvestment of dividends and other
distributions paid by the Fund;
(d) Issue Class B shares of a Fund to Directors,
officers, and employees of the Company, its investment manager,
any principal underwriter of the Company, and their affiliates,
including any trust, pension, profit-sharing, or other benefit
plan established for such persons, registered representatives and
other employees of dealers having Selling Group Agreements with
G.T. Global and with respect to all such persons listed, their
respective spouse, siblings, parents and children, and to other
persons as permitted by applicable rules adopted by the
Securities and Exchange Commission under the Investment Company
Act of 1940 ("1940 Act"), as in effect from time to time and as
described in the current Prospectus of the Fund;
(e) Issue Class B shares of a Fund to the sponsor
organization, custodian or depository of a periodic or single
payment plan, or similar plan for the purchase of Class B shares
of the Fund, purchasing for such plan;
(f) Issue Class B shares of a Fund in the course of
any other transaction specifically provided for in the Prospectus
of the Fund, or upon obtaining the written consent of G.T. Global
thereto; or
(g) Sell Class B shares outside of the North American
continent, Hawaii and Puerto Rico through such other principal
underwriters or principal underwriters as may be designated from
time to time by the Company, pursuant to paragraph 20 hereof.
4. G.T. Global shall devote its best efforts to the sale of Class B
shares of the Funds. G.T. Global shall maintain a sales organization suited
to the sale of Class B shares of the Funds and shall use its best efforts to
effect such sales in countries as to which the Company shall have expressly
waived in writing its right to designate another principal underwriter
pursuant to paragraph 20 hereof, and shall effect and maintain appropriate
qualification to do so in all those jurisdictions in which it sells or offers
Class B shares for sale and in which qualification is required.
5. Within the United States of America, G.T. Global shall offer and
sell Class B shares only to or through such dealers as are members in good
standing of the National Association of Securities Dealers, Inc. ("NASD"), or
to persons legally engaged in dealer activities who are exempt from NASD
membership in accord with applicable law. Class B shares of a Fund sold to
dealers shall be for resale by such dealers only at the public offering price
set forth in the effective Prospectus relating to the Fund which is part of
the Company's
<PAGE>
Registration Statement in effect under the Securities Act of 1933, as amended
("1933 Act"), at the time of such offer or sale (herein, the "Prospectus").
6. In its sales to dealers, G.T. Global shall use its best efforts to
determine that such dealers are appropriately qualified to transact business
in securities under applicable laws, rules and regulations promulgated by
such national, state, local or other governmental or quasi-governmental
authorities as may in a particular instance have jurisdiction.
7. The applicable public offering price of Class B shares of a Fund
shall be the price which is equal to the net asset value per Class B share.
Net asset value per Class B share shall be determined for a Fund in the
manner and at the time or times set forth in and subject to the provisions of
its Prospectus.
8. All orders for Class B shares received by G.T. Global shall, unless
rejected by G.T. Global or the Company, be accepted by G.T. Global
immediately upon receipt and confirmed at an offering price determined in
accordance with the provisions of the Prospectus and the 1940 Act, and
applicable rules in effect thereunder. G.T. Global shall not hold orders
subject to acceptance nor otherwise delay their execution. In conformity
with the rules of the NASD, G.T. Global shall not accept conditional orders.
The provisions of this paragraph shall not be construed to restrict the right
of the Company to withhold Class B shares of the Funds from sale under
paragraph 16 hereof.
9. The Company or its transfer agent shall be promptly advised of all
orders received, and shall cause shares of Funds to be issued upon payment
received in accord with policies established by the Company and G.T. Global.
10. G.T. Global shall adopt and follow procedures as approved by the
officers of the Company for the confirmation of sales to dealers, the
collection of amounts payable by dealers on such sales, and the cancellation
of unsettled transactions, as may be necessary to comply with the
requirements of the NASD and the 1940 Act, as such requirements may from time
to time exist.
11. The compensation for the services of G.T. Global as a principal
underwriter under this Contract shall be all contingent deferred sales
charges that may be imposed on redemption of Class B shares. In addition,
G.T. Global is entitled to fees, if any, payable under the Distribution Plan
adopted pursuant to Rule 12b-1 under the 1940 Act applicable to Class B
shares ("Class B Plan").
12. The Company agrees to use its best efforts to maintain its
registration as an open-end management investment company under the 1940 Act.
13. The Company agrees to use its best efforts to maintain an effective
prospectus relating to each Fund under the 1933 Act, and warrants that such
prospectus will contain all statements required by and will conform with the
requirements of the 1933 Act and the rules and regulations thereunder, and
that no part of any such prospectus, at the time the Registration Statement
of which it is a part is ordered effective, will contain any untrue statement
of a
<PAGE>
material fact or omit to state a material fact required to be stated therein,
or necessary to make the statements therein not misleading. G.T. Global
agrees and warrants that it will not in the sale of Class B shares of the
Funds use any prospectus, advertising or sales literature not approved by the
Company or its officers nor make any untrue statement of a material fact nor
omit the stating of a material fact necessary in order to make the statements
made, in the light of the circumstances under which they are made, not
misleading. G.T. Global agrees to indemnify and hold the Company harmless
from any and all loss, expense, damage and liability resulting from a breach
by G.T. Global of the agreements and warranties in this paragraph, or from
the use of any sales literature, information, statistics or other aid or
device employed in connection with the sale of Class B shares.
14. The expense of each printing of each Prospectus and each revision
thereof or addition thereto deemed necessary by the Company's officers to
meet the requirements of applicable laws shall be divided between the
Company, G.T. Global and any other principal underwriter of the Class B
shares of the Funds as they may from time to time agree.
15. The Company agrees to use its best efforts to qualify and maintain
the qualification of an appropriate number of the Class B shares of each Fund
for sale under the securities laws of such states as G.T. Global and the
Company may approve. Any such qualification may be withheld, terminated or
withdrawn by the Company at any time in its discretion. The expense of
qualification and maintenance of qualification shall be borne by the Company,
but G.T. Global shall furnish such information and other materials relating
to its affairs and activities as may be required by the Company or its
counsel in connection with such qualification.
16. The Company and G.T. Global acknowledge that each has the right to
reject any order for the purchase of Class B shares for any reason. In
addition, the Company may withhold Class B shares from sale in any state or
country temporarily or permanently if, in the opinion of its counsel, such
offer or sale would be contrary to law or if the Board of Directors or the
President or any Vice President of the Company determines that such offer or
sale is not in the best interest of the Company. The Company will give
prompt notice to G.T. Global of any withholding and will indemnify it against
any loss suffered by G.T. Global as a result of such withholding by reason of
non-delivery of Fund Class B shares after a good faith confirmation by G.T.
Global of sales thereof prior to receipt of notice of such withholding.
17. Each Fund shall reimburse G.T. Global for a portion of its
expenditures incurred in providing services under this Contract at the rate
and under the terms specified in Class B Plan, as such Plan may be amended
from time to time.
18. (a) With respect to any Fund, this Contract may be
terminated at any time, without payment of any penalty, by vote
of a majority of the members of the Board of Directors of the
Company who are not interested persons of the Company and have no
direct or indirect financial interest in the operation of the
Plan or in any agreements related to the Class B Plan or by vote
of a majority of the outstanding voting securities of the Company
on thirty (30) days' written notice to G.T. Global, or by G.T.
Global on
<PAGE>
like notice to the Company. Termination of this Contract with
respect to Class B shares of one Fund shall not affect its
continued effectiveness with respect to Class B shares of any
other Fund.
(b) This Contract may be terminated by either party
upon five (5) days' written notice to the other party in the
event that the Securities and Exchange Commission has issued an
order or obtained an injunction or other court order suspending
effectiveness of the Registration Statement covering the Class B
shares of the Funds.
(c) This Contract may also be terminated by the
Company upon five (5) days' written notice to G.T. Global, should
the NASD expel G.T. Global or suspend its membership in that
organization.
(d) G.T. Global shall inform the Company promptly of
the institution of any proceedings against it by the Securities
and Exchange Commission, the NASD or any state regulatory
authority.
19. This Agreement shall automatically terminate in the event of its
assignment. The term "assignment" shall have the meaning defined in the 1940
Act.
20. With respect to any Fund, upon sixty (60) days' written notice to
G.T. Global the Company may from time to time designate other principal
underwriters of Class B shares with respect to areas other than the North
American continent, Hawaii, Puerto Rico and such countries as to which the
Company may have expressly waived in writing its right to make such
designation. In the event of such designation, the right of G.T. Global
under this Contract to sell Class B shares in the areas so designated shall
terminate, but this Contract shall remain otherwise in full effect until
terminated in accordance with the provisions of paragraphs 18 and 19 hereof.
21. No provision of this Contract shall protect or purport to protect
G.T. Global against any liability to the Company or holders of Class B shares
of the Funds for which G.T. Global would otherwise be liable by reason of
willful misfeasance, bad faith or negligence.
22. Unless sooner terminated in accordance with the provisions of
paragraphs 18 or 19 hereof, this Contract shall continue in effect with
respect to each Fund for periods of up to one year, but only so long as such
continuance is specifically approved at least annually by (i) vote of a
majority of the Directors of the Company who are not interested persons of
the Company and who have no direct or indirect financial interest in the
Class B Plan or any agreements relating to the Class B Plan, and who are not
parties to this Contract or interested persons of any such party as defined
by the 1940 Act, cast in person at a meeting called for the purpose of voting
on such approval; and (ii) either the Board of Directors of the Company or a
vote of a majority of the outstanding Class B shares of the Company as
defined by the 1940 Act.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed in duplicate original by their officers thereunder duly authorized
as of the day and year first written above.
Attest: G.T. INVESTMENT FUNDS, INC.
/s/ Peter R. Guarino By: /s/ James W. Churm
- ------------------------- ------------------------------------
Attest: G.T. GLOBAL FINANCIAL SERVICES, INC.
/s/ Peter R. Guarino By: /s/ James R. Tufts
- ------------------------- ------------------------------------
<PAGE>
Exhibit 8
CUSTODIAN CONTRACT
Between
G.T. GLOBAL INCOME SERIES, INC.
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
PAGE
----
1. Employment of Custodian and Property to be Held By It 1
2. Duties of the Custodian with Respect to Property of the Fund Held
by the Custodian in the United States 2
2.1 Holding Securities 2
2.2 Delivery of Securities 3
2.3 Registration of Securities 7
2.4 Bank Accounts 8
2.5 Availability of Federal Funds 9
2.6 Collection of Income 9
2.7 Payment of Fund Monies 10
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased 12
2.9 Appointment of Agents 13
2.10 Deposit of Fund Assets in Securities System 13
2.10A Fund Assets Held in the Custodian's Direct Paper System 16
2.11 Segregated Account 17
2.12 Ownership Certificates for Tax Purposes 18
2.13 Proxies 18
2.14 Communications Relating to Portfolio Securities 18
3. Duties of Custodian With Respect to Property of the Fund Held
Outside of the United States 19
3.1 Appointment of Foreign Sub-Custodians 19
3.2 Assets to be Held 20
3.3 Foreign Securities Depositories 20
` 3.4 Segregation of Securities 20
3.5 Agreements with Foreign Banking Institutions 21
3.6 Access of Independent Accountants of the Fund 22
3.7 Reports by Custodian 22
3.8 Transactions in Foreign Custody Account 22
3.9 Liability of Foreign Sub-Custodian 23
3.10 Liability of Custodian 24
3.11 Reimbursement for Advances 24
3.12 Monitoring Responsibilities 25
3.13 Branches of U.S. Banks 26
<PAGE>
4. Payments for Sales or Repurchase or Redemptions of Shares
of the Fund 26
5. Proper Instructions 27
6. Actions Permitted Without Express Authority 28
7. Evidence of Authority 28
8. Duties of Custodian With Respect to the Books of Account and
Calculation of Net Asset Value and Net Income 29
9. Records 29
10. Opinion of Fund's Independent Accountants 30
11. Reports to Fund by Independent Public Accountants 30
12. Compensation by Custodian 31
13. Responsibility of Custodian 31
14. Effective Period, Termination and Amendment 33
15. Successor Custodian 34
16. Interpretive and Additional Provisions 36
17. Additional Funds 36
18. Massachusetts Law to Apply 37
19. Prior Contracts 37
<PAGE>
CUSTODIAN CONTRACT
This Contract between G.T. Global Income Series, Inc., a corporation
organized and existing under the laws of Maryland, having its principal place
of business at 50 California Street, San Francisco, California 94111
hereinafter called the "Fund", and State Street Bank and Trust Company, a
Massachusetts trust company, having its principal place of business at 225
Franklin Street, Boston, Massachusetts, 02110, hereinafter called the
"Custodian".
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series, with
each such series representing interests in a separate portfolio of securities
and other assets; and
WHEREAS, the Fund intends to initially offer shares in two series, the
G. T. Global Bond Fund and G. T. Government Income Fund (such series together
with all other series subsequently established by the Fund and made subject
to this Contract in accordance with paragraph 17, being herein referred to as
the "Portfolio(s)");
NOW THEREFOR, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT
The Fund hereby employs the Custodian as the custodian of the assets of
the Portfolios of the Fund, including securities which the Fund, on behalf of
the applicable Portfolio desires to be held in places within the United
States ("domestic securities") and securities it desires to be held outside
the United States ("foreign securities") pursuant to the provisions of the
Articles of Incorporation. The Fund on behalf of the Portfolio(s)
1
<PAGE>
agrees to deliver to the Custodian all securities and cash of the Portfolios,
and all payments of income, payments of principal or capital distributions
received by it with respect to all securities owned by the Portfolio(s) from
time to time, and the cash consideration received by it for such new or
treasury shares of beneficial interest of the Fund representing interests in
the Portfolios, ("Shares") as may be issued or sold from time to time. The
Custodian shall not be responsible for any property of a Portfolio held or
received by the Portfolio and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Article 5),
the Custodian shall on behalf of the applicable Portfolio(s) from time to
time employ one or more sub-custodians, located in the United States but only
in accordance with an applicable vote by the Board of Directors of the Fund
on behalf of the applicable Portfolio(s), and provided that the Custodian
shall have no more or less responsibility or liability to the Fund on account
of any actions or omissions of any sub-custodian so employed than any such
sub-custodian has to the Custodian. The Custodian may employ as
sub-custodian for the Fund's foreign securities on behalf of the applicable
Portfolio(s) the foreign banking institutions and foreign securities
depositories designated in Schedule A hereto but only in accordance with the
provisions of Article 3.
2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD BY THE
CUSTODIAN IN THE UNITED STATES
2.1 HOLDING SECURITIES. The Custodian shall hold and physically segregate
for the account of each Portfolio all non-cash property, to be held by it
in the United States including all domestic securities owned by such
Portfolio, other than (a)
2
<PAGE>
securities which are maintained pursuant to Section 2.10 in a
clearing agency which acts as a securities depository or in a book-entry
system authorized by the U. S. Department of the Treasury, collectively
referred to herein as "Securities System" and (b) commercial paper of an
issuer for which State Street Bank and Trust Company acts as issuing and
paying agent ("Direct Paper") which is deposited and/or maintained in
the Direct Paper System of the Custodian pursuant to Section 2.10A.
2.2 DELIVERY OF SECURITIES. The Custodian shall release and deliver domestic
securities owned by a Portfolio held by the Custodian or in a Securities
System account of the Custodian or in the Custodian's Direct Paper book
entry system account ("Direct Paper System Account") only upon receipt of
Proper Instructions from the Fund on behalf of the applicable Portfolio,
which may be continuing instructions when deemed appropriate by the
parties, and only in the following cases:
1) Upon sale of such securities for the account of the Portfolio and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the
Portfolio;
3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.10 thereof;
4) To the depository agent in connection with tender or other
similar offers for securities of the Portfolio;
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5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable; provided
that, in any such case, the cash or other consideration is to be
delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the name
of the Portfolio or into the name of any nominee or nominees of
the Custodian or into the name or nominee name of any agent
appointed pursuant to Section 2.9 or into the name or nominee
name of any sub-custodian appointed pursuant to Article 1; or for
exchange for a different number of bonds, certificates or other
evidence representing the same aggregate face amount or number of
units; PROVIDED that, in any such case, the new securities are to
be delivered to the Custodian;
7) Upon the sale of such securities for the account of the
Portfolio, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street delivery"
custom; provided that in any such case, the Custodian shall have
no responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for such
securities except as may arise from the Custodian's own
negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment
of
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the securities of the issuer of such securities, or pursuant
to provisions for conversion contained in such securities, or
pursuant to any deposit agreement; provided that, in any such
case, the new securities and cash, if any, are to be delivered to
the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that, in
any such case, the new securities and cash, if any, are to be
delivered to the Custodian;
10) For delivery in connection with any loans of securities made by
the Portfolio, BUT ONLY against receipt of adequate collateral as
agreed upon from time to time by the Custodian and the Fund on
behalf of the Portfolio, which may be in the form of cash or
obligations issued by the United States government, its agencies
or instrumentalities, except that in connection with any loans
for which collateral is to be credited to the Custodian's account
in the book-entry system authorized by the U.S. Department of the
Treasury, the Custodian will not be held liable or responsible
for the delivery of securities owned by the Portfolio prior to
the receipt of such collateral;
11) For delivery as security in connection with any borrowings by the
Fund on behalf of the Portfolio requiring a pledge of assets by
the
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Fund on behalf of the Portfolio, BUT ONLY against receipt of
amounts borrowed;
12) For delivery in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian and a
broker-dealer registered under the Securities Exchange Act of
1934 (the "Exchange Act") and a member of The National
Association of Securities Dealers, Inc. ("NASD"), relating to
compliance with the rules of The Options Clearing Corporation and
of any registered national securities exchange, or of any similar
organization or organizations regarding escrow or other
arrangements in connection with transactions by the Portfolio of
the Fund;
13) For delivery in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian, and a
Futures Commission Merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any Contract Market,
or any similar organization or organizations, regarding account
deposits in connection with transactions by the Portfolio of the
Fund;
14) Upon receipt of instructions from the transfer agent, ("Transfer
Agent") for the Fund, for delivery to such Transfer Agent or to
the
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holders of shares in connection with distributions in kind,
as may be described from time to time in the currently effective
prospectus and statement of additional information of the Fund,
related to the Portfolio ("Prospectus"), in satisfaction of
requests by holders of Shares for repurchase or redemption; and
15) For any other proper corporate purpose, BUT ONLY upon receipt of,
in addition to Proper Instructions from the Fund on behalf of the
applicable Portfolio, a certified copy of a resolution of the
Board of Directors or of the Executive Committee signed by an
officer of the Fund and certified by the Secretary or an
Assistant Secretary, specifying the securities of the Portfolio
to be delivered, setting forth the purpose for which such
delivery is to be made, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to whom
delivery of such securities shall be made.
2.3 REGISTRATION OF SECURITIES. Domestic Securities held by the Custodian
(other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund on behalf of the
Portfolio or of any nominee of the Custodian which nominee shall be
assigned exclusively to the Portfolio, UNLESS the Fund has authorized in
writing the appointment of a nominee to be used in common with other
registered investment companies having the same investment adviser as the
Portfolio, or in the name or nominee name of any agent
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appointed pursuant to Section 2.9 or in the name or nominee name of
any sub-custodian appointed pursuant to Article 1. All securities
accepted by the Custodian on behalf of the Portfolio under the terms of
this Contract shall be in "street name" or other good delivery from.
2.4 BANK ACCOUNTS. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of each Portfolio of
the Fund, subject only to draft or order by the Custodian acting pursuant
to the terms of this Contract, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by it from or for the
account of the Portfolio, other than cash maintained by the Portfolio in a
bank account established and used in accordance with Rule 17f-3 under the
Investment Company Act of 1940. Funds held by the Custodian for a
Portfolio may be deposited by it to its credit as Custodian in the Banking
Department of the Custodian or in such other banks or trust companies as it
may in its discretion deem necessary or desirable; PROVIDED, however, that
every such bank or trust company shall be qualified to act as a custodian
under the Investment Company Act of 1940 and that each such bank or trust
company and the funds to be deposited with each such bank or trust company
shall on behalf of each applicable Portfolio be approved by vote of a
majority of the Board of Directors of the Fund. Such funds shall be
deposited by the Custodian in its capacity as Custodian and shall be
withdrawable by the Custodian only in that capacity.
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2.5 AVAILABILITY OF FEDERAL FUNDS. Upon mutual agreement between the Fund on
behalf of each applicable Portfolio and the Custodian, the Custodian shall,
upon the receipt of Proper Instructions from the Fund on behalf of a
Portfolio, make federal funds available to such Portfolio as of specified
times agreed upon from time to time by the Fund and the Custodian in the
amount of checks received in payment for Shares of such Portfolio which are
deposited into the Portfolio's account.
2.6 COLLECTION OF INCOME. The Custodian shall collect on a timely basis all
income and other payments with respect to registered domestic securities
held hereunder to which each Portfolio shall be entitled either by law or
pursuant to custom in the securities business, and shall collect on a
timely basis all income and other payments with respect to bearer domestic
securities if, on the date of payment by the issuer, such securities are
held by the Custodian or its agent thereof and shall credit such income, as
collected, to such Portfolio's custodian account. Without limiting the
generality of the foregoing, the Custodian shall detach and present for
payment all coupons and other income items requiring presentation as and
when they become due and shall collect interest when due on securities held
hereunder. Income due each Portfolio on securities loaned pursuant to the
provisions of Section 2.2 (10) shall be the responsibility of the Fund.
The Custodian will have no duty or responsibility in connection therewith,
other than to provide the Fund with such information or data as may be
necessary to assist the Fund in arranging
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for the timely delivery to the Custodian of the income to which the
Portfolio is properly entitled.
2.7 PAYMENT OF FUND MONIES. Upon receipt of Proper Instructions from the Fund
on behalf of the applicable Portfolio, which may be continuing instructions
when deemed appropriate by the parties, the Custodian shall pay out monies
of a Portfolio in the following cases only:
1) Upon the purchase of securities, options, futures contracts or
options on futures contracts for the account of the Portfolio but
only (a) against the delivery of such securities or evidence of
title to such options, futures contracts or options on futures
contracts to the Custodian (or any bank, banking firm or trust
company doing business in the United States or abroad which is
qualified under the Investment Company Act of 1940, as amended,
to act as a custodian and has been designated by the Custodian as
its agent for this purpose) registered in the name of the
Portfolio or in the name of a nominee of the Custodian referred
to in Section 2.3 hereof or in proper form for transfer; (b) in
the case of a purchase effected through a Securities System, in
accordance with the conditions set forth in Section 2.10 hereof;
(c) in the case of a purchase involving the Direct Paper System,
in accordance with the conditions set forth in Section 2.10A; (d)
in the case of repurchase agreements entered into between the
Fund on behalf of the Portfolio and the
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Custodian, or another bank, or a broker-dealer which is a
member of NASD, (i) against delivery of the securities either
in certificate form or though an entry crediting the
Custodian's account at the Federal Reserve Bank with such
securities or (ii) against delivery of the receipt evidencing
purchase by the Portfolio of securities owned by the
Custodian along with written evidence of the agreement by the
Custodian to repurchase such securities from the Portfolio or
(e) for transfer to a time deposit account of the Fund in any
bank, whether domestic or foreign; such transfer may be
effected prior to receipt of a confirmation from a broker
and/or the applicable bank pursuant to Proper Instructions
from the Fund as defined in Article 5;
2) In connection with conversion, exchange or surrender of
securities owned by the Portfolio as set forth in Section 2.2
hereof;
3) For the redemption or repurchase of Shares issued by the
Portfolio as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by the
Portfolio, including but not limited to the following payments
for the account of the Portfolio: interest, taxes, management,
accounting, transfer agent and legal fees, and operating expenses
of the Fund whether or not such expenses are to be in whole or
part capitalized or treated as deferred expenses;
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<PAGE>
5) For the payment of any dividends on Shares of the Portfolio
declared pursuant to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, BUT ONLY upon receipt of, in
addition to Proper Instructions from the Fund on behalf of the
Portfolio, a certified copy of a resolution of the Board of
Directors or of the Executive Committee of the Fund signed by an
officer of the Fund and certified by its Secretary or an
Assistant Secretary, specifying the amount of such payment,
setting forth the purpose for which such payment is to be made,
declaring such purpose to be a proper purpose, and naming the
person or persons to whom such payment is to be made.
2.8 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED.
Except as specifically stated otherwise in this Contract, in any and every
case where payment for purchase of domestic securities for the account of a
Portfolio is made by the Custodian in advance of receipt of the securities
purchased in the absence of specific written instructions from the Fund on
behalf of such Portfolio to so pay in advance, the Custodian shall be
absolutely liable to the Fund for such securities to the same extent as if
the securities had been received by the Custodian.
2.9 APPOINTMENT OF AGENTS. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company
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which is itself qualified under the Investment Company Act of 1940,
as amended, to act as a custodian, as its agent to carry out such of the
provisions of this Article 2 as the Custodian may from time to time direct;
PROVIDED, however, that the appointment of any agent shall not relieve the
Custodian of its responsibilities or liabilities hereunder.
2.10 DEPOSIT OF FUND ASSETS IN SECURITIES SYSTEMS. The Custodian may deposit
and/or maintain securities owned by a Portfolio in a clearing agency
registered with the Securities and Exchange Commission under Section 17A of
the Securities Exchange Act of 1934, which acts as a securities depository,
or in the book-entry system authorized by the U. S. Department of the
Treasury and certain federal agencies, collectively referred to herein as
"Securities System" in accordance with applicable Federal Reserve Board and
Securities and Exchange Commission rules and regulations, if any, and
subject to the following provisions:
1) The Custodian may keep securities of the Portfolio in a
Securities System provided that such securities are represented
in an account ("Account") of the Custodian in the Securities
System which shall not include any assets of the Custodian other
than assets held as a fiduciary, custodian or otherwise for
customers;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a Securities System shall
identify by book-entry those securities belonging to the
Portfolio;
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<PAGE>
3) The Custodian shall pay for securities purchased for the account
of the Portfolio upon (i) receipt of advice from the Securities
System that such securities have been transferred to the Account,
and (ii) the making of an entry on the records of the Custodian
to reflect such payment and transfer for the account of the
Portfolio. The Custodian shall transfer securities sold for the
account of the Portfolio upon (i) receipt of advice from the
Securities System that payment for such securities has been
transferred to the Account, and (ii) the making of an entry on
the records of the Custodian to reflect such transfer and payment
for the account of the Portfolio. Copies of all advises from the
Securities System of transfer of securities for the account of
the Portfolio shall identify the Portfolio, be maintained for the
Portfolio by the Custodian and be provided to the Fund at its
request. Upon request, the Custodian shall furnish the Fund on
behalf of the Portfolio confirmation of each transfer to or from
the account of the portfolio in the form of a written advice or
notice and shall furnish to the Fund on behalf of the Portfolio
copies of daily transaction sheets reflecting each day's
transactions in the Securities System for the account of the
Portfolio.
4) The Custodian shall provide the Fund for the Portfolio with any
report obtained by the Custodian on the Securities System's
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accounting system, internal accounting control and procedures for
safeguarding securities deposited in the Securities System;
5) The Custodian shall have received from the Fund on behalf of the
Portfolio the initial or annual certificate, as the case may be,
required by Article 14 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for the benefit of the
Portfolio for any loss or damage to the Portfolio resulting from
use of the Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of its agents
or of any of its or their employees or from failure of the
Custodian or any such agent to enforce effectively such rights as
it may have against the Securities System; at the election of the
Fund, it shall be entitled to be subrogated to the rights of the
Custodian with respect to any claim against the Securities System
or any other person which the Custodian may have as a consequence
of any such loss or damage if and to the extent that the
Portfolio has not been made whole for any such loss or damage.
2.10A FUND ASSETS HELD IN THE CUSTODIAN'S DIRECT PAPER SYSTEM
The Custodian may deposit and/or maintain securities owned by a Portfolio
in the Direct Paper System of the Custodian subject to the following
provisions:
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1) No transaction relating to securities in the Direct Paper System
will be effected in the absence of Proper Instructions from the
Fund on behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the Direct
Paper System only if such securities are represented in an
account ("Account") of the Custodian in the Direct Paper System
which shall not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise for customers;
3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the
Portfolio;
4) The Custodian shall pay for securities purchased for the account
of the Portfolio upon the making of an entry on the records of
the Custodian to reflect such payment and transfer of securities
to the account of the Portfolio. The Custodian shall transfer
securities sold for the account of the Portfolio upon the making
of an entry on the records of the Custodian to reflect such
transfer and receipt of payment for the account of the Portfolio;
5) The Custodian shall furnish the Fund on behalf of the Portfolio
confirmation of each transfer to or from the account of the
Portfolio, in the form of a written advice or notice, of Direct
Paper on the next business day following such transfer and shall
furnish
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<PAGE>
to the Fund on behalf of the Portfolio copies of daily
transaction sheets reflecting each day's transaction in the
Securities System for the account of the Portfolio;
6) The Custodian shall provide the Fund on behalf of the Portfolio
with any report on its system of internal accounting control as
the Fund may reasonably request from time to time.
2.11 SEGREGATED ACCOUNT. The Custodian shall upon receipt of Proper
Instructions from the Fund on behalf of each applicable Portfolio establish
and maintain a segregated account or accounts for and on behalf of each
such Portfolio, into which account or accounts may be transferred cash
and/or securities, including securities maintained in an account by the
Custodian pursuant to Section 2.10 hereof, (i) in accordance with the
provisions of any agreement among the Fund on behalf of the Portfolio, the
Custodian and a broker-dealer registered under the Exchange Act and a
member of the NASD (or any futures commission merchant registered under the
Commodity Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national securities
exchange (or the Commodity Futures Trading Commission or any registered
contract market), or of any similar organization or organizations,
regarding escrow or other arrangements in connection with transactions by
the Portfolio, (ii) for purposes of segregating cash or government
securities in connection with options purchased, sold or written by the
Portfolio or commodity futures contract or options thereon purchased or
sold by the Portfolio, (iii) for the
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purposes of compliance by the Portfolio with the procedures required by
Investment Company Act Release No. 10666, or any subsequent release or
releases of the Securities and Exchange Commission relating to the
maintenance of segregated accounts by registered investment companies
and (iv) for other proper corporate purposes, BUT ONLY, in the case of
clause (iv), upon receipt of, in addition to Proper Instructions from
the Fund on behalf of the applicable Portfolio, a certified copy of a
resolution of the Board of Directors or of the Executive Committee
signed by an officer of the Fund and certified by the Secretary or an
Assistant Secretary, setting forth the purpose or purposes of such
segregated account and declaring such purposes to be proper corporate
purposes.
2.12 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall execute
ownership and other certificates and affidavits for all federal and state
tax purposes in connection with receipt of income or other payments with
respect to domestic securities of each Portfolio held by it and in
connection with transfers of securities.
2.13 PROXIES. The Custodian shall, with respect to the domestic securities
held hereunder, cause to be promptly executed by the registered holder of
such securities, if the securities are registered otherwise than in the
name of the Portfolio or a nominee of the Portfolio, all proxies, without
indication of the manner in which such proxies are to be voted, and shall
promptly deliver to the Portfolio such proxies, all proxy soliciting
materials and all notices relating to such securities.
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2.14 COMMUNICATIONS RELATING TO PORTFOLIO SECURITIES. The Custodian shall
transmit promptly to the Fund for each Portfolio all written information
(including, without limitation, pendency of calls and maturities of
domestic securities and expirations of rights in connection therewith and
notices of exercise of call and put options written by the Fund of behalf
of the Portfolio and the maturity of futures contracts purchased or sold by
the Portfolio) received by the Custodian from issuers of the securities
being held for the Portfolio. With respect to tender or exchange offers,
the Custodian shall transmit promptly to the Portfolio all written
information received by the Custodian from issuers of the securities whose
tender or exchange is sought and from the party (or his agents) making the
tender or exchange offer. If the Portfolio desires to take action with
respect to any tender offer, exchange offer or any other similar
transaction, the Portfolio shall notify the Custodian at least three
business days prior to the date on which the Custodian is to take such
action.
3. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD OUTSIDE
OF THE UNITED STATES
3.1 APPOINTMENT OF FOREIGN SUB-CUSTODIANS. The Fund hereby authorizes and
instructs the Custodian to employ as sub-custodians for the Portfolio's
securities and other assets maintained outside the United States the
foreign banking institutions and foreign securities depositories designated
on Schedule A hereto ("foreign sub-custodians"). Upon receipt of "Proper
Instructions", as defined in Section 5 of this Contract, together with a
certified resolution of the Fund's Board
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of Directors, the Custodian and the Fund may agree to amend
Schedule A hereto from time to time to designate additional foreign
banking institutions and foreign securities depositories to act as
sub-custodian. Upon receipt of Property Instructions, the Fund may
instruct the Custodian to cease the employment of any one or more such
sub-custodians for marinating custody of the Portfolio's assets.
3.2 ASSETS TO BE HELD. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c)(1) of Rule 17f-5 under
the Investment Company Act of 1940, and (b) cash and cash equivalents in
such amounts as the Custodian or the Fund may determine to be reasonably
necessary to effect the Portfolio's foreign securities transactions.
3.3 FOREIGN SECURITIES DEPOSITORIES. Except as may otherwise be agreed upon
in writing by the Custodian and the Fund, assets of the Portfolios shall be
maintained in foreign securities depositories only through arrangements
implemented by the foreign banking institutions serving as sub-custodians
pursuant to the terms hereof. Where possible, such arrangements shall
include entry into agreements containing the provisions set forth in
Section 3.5 hereof.
3.4 SEGREGATION OF SECURITIES. The Custodian shall identify on its books as
belonging to each applicable Portfolio of the Fund, the foreign securities
of such Portfolios held by each foreign sub-custodian. Each agreement
pursuant to which the Custodian employs a foreign banking institution shall
require that such institution establish a custody account for the Custodian
on behalf of the Fund for
20
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each applicable Portfolio of the Fund and physically segregate in each
account, securities and other assets of the Portfolios, and, in the
event that such institution deposits the securities of one or more of
the Portfolios in a foreign securities depository, that it shall
identify on its books as belonging to the Custodian, as agent for each
applicable Portfolio, the securities so deposited.
3.5 AGREEMENTS WITH FOREIGN BANKING INSTITUTIONS. Each agreement with a
foreign banking institution shall be substantially in the form set forth in
Exhibit 1 hereto and shall provide that: (a) the assets of each Portfolio
will not be subject to any right, charge, security interest, lien or claim
of any kind in favor of the foreign banking institution of its creditors or
agent, except a claim of payment for their safe custody or administration;
(b) beneficial ownership for the assets of each portfolio will be freely
transferable without the payment of money or value other than for custody
or administration; (c) adequate records will be maintained identifying the
assets as belonging to each applicable Portfolio; (d) officers of or
auditors employed by, or other representatives of the Custodian, including
to the extent permitted under applicable law the independent public
accountants for the Fund, will be given access to the books and records of
the foreign banking institution relating to its actions under its agreement
with the Custodian; and (e) assets of the Portfolios held by the foreign
sub-custodian will be subject only to the instructions of the Custodian or
its agents.
3.6 ACCESS OF INDEPENDENT ACCOUNTANTS OF THE FUND. Upon request of the
Fund, the Custodian will use its best efforts to arrange for the
independent accountants of
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the Fund to be afforded access to the books and records of any foreign
banking institution employed as a foreign sub-custodian insofar as such
books and records relate to the performance of such foreign banking
institution under its agreement with the Custodian.
3.7 REPORTS BY CUSTODIAN. The Custodian will supply to the Fund from time
to time, as mutually agreed upon, statements in respect of the securities
and other assets of the Portfolio(s) held by foreign sub-custodians,
including but not limited to an identification of entities having
possession of the Portfolio(s) securities and other assets and advises or
notifications of any transfers of securities to or from each custodial
account maintained by a foreign banking institution for the Custodian on
behalf of each applicable Portfolio indicating, as to securities acquired
for a Portfolio, the identity of the entity having physical possession of
such securities.
3.8 TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT.
(a) Except as otherwise provided in paragraph (b) of this Section 3.8, the
provision of Sections 2.2 and 2.7 of this Contract shall apply, MUTATIS
MUTANDIS to the foreign securities of the Fund held outside the United
States by foreign sub-custodians.
(b) Notwithstanding any provision of this Contract to the contrary,
settlement and payment for securities received for the account of each
applicable Portfolio and delivery of securities maintained for the account
of each applicable Portfolio may be affected in accordance with the
customary established securities trading or
22
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securities processing practices and procedures in the jurisdiction or
market in which the transaction occurs, including, without limitation,
delivering securities to the purchaser thereof or to a dealer therefor
(or an agent for such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such securities from such
purchaser or dealer.
(c) Securities maintained in the custody of a foreign sub-custodian may be
maintained in the name of such entity's nominee to the same extent as set
forth in Section 2.3 of this Contract, and the Fund agrees to hold any such
nominee harmless from any liability as a holder of record of such
securities.
3.9 LIABILITY OF FOREIGN SUB-CUSTODIANS. Each agreement pursuant to which
the Custodian employs a foreign banking institution as a foreign sub-
custodian shall require the institution to exercise reasonable care in the
performance of its duties and to indemnify, and hold harmless, the
Custodian and each Fund from and against any loss, damage, cost, expense,
liability or claim arising out of or in connection with the institution's
performance of such obligations. At the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with respect to
any claims against a foreign banking institution as a consequence of any
such loss, damage, cost, expense, liability or claim if and to the extent
that the Fund has not been made whole for any such loss, damage, cost,
expense, liability or claim.
3.10 LIABILITY OF CUSTODIAN. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same standard of care as
set forth in Exhibit 1
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and, regardless of whether assets are maintained in the custody of a
foreign banking institution, a foreign securities depository or a branch
of a U.S. bank as contemplated by paragraph 3.13 hereof. The Custodian
shall not be liable for any loss, damage, cost, expense, liability or
claim resulting from nationalization, expropriation, currency
restrictions, or acts of war or terrorism or any loss where the
sub-custodian has otherwise exercised reasonable care. Notwithstanding
the foregoing provisions of this paragraph 3.10, in delegating custody
duties to State Street London Ltd., the Custodian shall not be relived
of any responsibility to the Fund for any loss due to such delegation,
except such loss as may result from (a) political risk (including, but
not limited to, exchange control restrictions, confiscation,
expropriation, nationalization, insurrection, civil strife or armed
hostilities) or (b) other losses (excluding a bankruptcy or insolvency
of State Street London, Ltd. not caused by political risk) due to acts
of God, nuclear incident or other losses under circumstances where the
Custodian and State Street London Ltd. have exercised reasonable care.
3.11 REIMBURSEMENT FOR ADVANCES. If the Fund requires the Custodian to
advance cash or securities for any purpose for the benefit of a Portfolio
including the purchase or sale of foreign exchange or of contracts for
foreign exchange, or in the event that the Custodian or its nominee shall
incur or be assessed any taxes (excluding any corporate tax liability of
the Custodian), charges, expenses, assessments, claims or liabilities in
connection with the performance of this Contract, except such as may arise
from its or its nominee's own negligent action,
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<PAGE>
negligent failure to act or willful misconduct, any property at any time
held for the account of the applicable Portfolio shall be security
therefor and should the Fund fail to repay the Custodian promptly, the
Custodian shall after five business days written notice be entitled to
utilize available cash and to dispose of such Portfolios assets to the
extent necessary to obtain reimbursement.
3.12 MONITORING RESPONSIBILITIES. The Custodian shall furnish annually to the
Fund, during the month of June, information concerning the foreign sub-
custodians employed by the Custodian. Such information shall be similar in
kind and scope to that furnished to the Fund in connection with the initial
approval of this Contract. In addition, the Custodian will promptly inform
the Fund in the event that the Custodian learns of a material adverse
change in the financial condition of a foreign sub-custodian or any
material loss of the assets of the Fund or in the case of any foreign sub-
custodian not the subject of an exemptive order from the Securities and
Exchange Commission is notified by such foreign sub-custodian that there
appears to be a substantial likelihood that its shareholders' equity will
decline below $200 million (U.S. dollars or the equivalent thereof) or that
its shareholders' equity has declined below $200 million (in each case
computed in accordance with generally accepted U.S. accounting principles).
3.13 BRANCHES OF U.S. BANKING.
(a) Except as otherwise set forth in this Contract, the provisions
hereof shall not apply where the custody of the Portfolios assets are
maintained in a foreign branch of a banking institution which is a
"bank" as defined by Section 2(a)(5) of
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the Investment Company Act of 1940 meeting the qualification set
forth in Section 26(a) of said Act. The appointment of any such branch
as a sub-custodian shall be governed by paragraph 1 of this Contract.
(b) Cash held for each Portfolio of the Fund in the United Kingdom shall
be maintained in an interest bearing account established for the Fund with
the Custodian's London branch, which account shall be subject to the
direction of the Custodian, State Street London Ltd. or both.
4. PAYMENT FOR SALES OR REPURCHASES OR REDEMPTIONS OF SHARES OF THE FUND.
The Custodian shall receive from the distributor for the Shares or from the
Transfer Agent of the Fund and deposit into the account of the appropriate
Portfolio such payments as are received for Shares of that Portfolio issued
or sold from time to time by the Fund. The Custodian will provide timely
notification to the Fund on behalf of each such Portfolio and the Transfer
Agent of any receipt by it of payments for Shares of such Portfolio.
From such funds as may be available for the purpose but subject to the
limitations of the Articles of Incorporation and any applicable votes of the
Board of Directors of the Fund pursuant thereto, the Custodian shall, upon
receipt of instructions from the Transfer Agent, make funds available for
payment to holders of Shares who have delivered to the Transfer Agent a
request for redemption or repurchase of their Shares. In connection with the
redemption or repurchase of shares of a Portfolio, the Custodian is
authorized upon receipt of instructions from the Transfer Agent to wire funds
to or through a commercial bank designated by the redeeming shareholders. In
connection with the redemption or repurchase of Shares of the Fund, the
Custodian shall honor checks drawn
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<PAGE>
on the Custodian by a holder of Shares, which checks have been furnished by
the Fund to the holder of Shares, when presented to the Custodian in
accordance with such procedures and controls as are mutually agreed upon from
time to time between the Fund and the Custodian.
5. PROPER INSTRUCTIONS. Proper Instructions as used throughout this
Contract means a writing signed or initialed by one or more person or persons
as the Board of Directors shall have from time authorized. Each such writing
shall set forth the specific transaction or type of transaction involved,
including a specific statement of the purpose for which such action is
requested. Oral instructions will be considered Proper Instructions if the
Custodian reasonably believes them to have been given by a person authorized
to give such instructions with respect to the transaction involved. The Fund
shall cause all oral instructions to be confirmed in writing. Upon receipt
of a certificate of the Secretary or an Assistant Secretary as to the
authorization by the Board of Directors of the Fund accompanied by a detailed
description of procedures approved by the Board of Directors, Proper
Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the Board of Directors
and the Custodian are satisfied that such procedures afford adequate
safeguards for the Portfolios' assets. For purposes of this Section, Proper
Instructions shall include instructions received by the Custodian pursuant to
any three-party agreement which requires a segregated asset account in
accordance with Section 2.11.
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6. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY. The Custodian may in its
discretion, without express authority from the Fund on behalf of each
applicable Portfolio:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under this Contract,
PROVIDED that all such payments shall be accounted for to the Fund on behalf
of the Portfolio;
2) surrender securities in temporary form for securities in definitive
form;
3) endorse for collection, in the name of the Portfolio, checks,
drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and other dealings
with the securities and property of the Portfolio except as otherwise
directed by the Board of Directors of the Fund.
7. EVIDENCE OF AUTHORITY.
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper believed
by it to be genuine and to have been properly executed by or on behalf of the
Fund. The Custodian may receive and accept a certified copy of a vote of the
Board of Directors of the Fund as conclusive evidence (a) of the authority of
any person to act in accordance with such vote or (b) of any determination or
of any action by the Board of Directors pursuant to the Articles of
Incorporation as described in such vote, and such vote may be considered as
in full force and effect until receipt by the Custodian of written notice to
the contrary.
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8. DUTIES OF CUSTODIAN WITH RESPECT TO THE BOOKS OF ACCOUNT AND CALCULATION
OF NET ASSET VALUE AND NET INCOME.
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of Directors of the Fund to
keep the books of account of each Portfolio and/or compute the net asset
value per share of the outstanding shares of each Portfolio or, if directed
in writing to do so by the Fund on behalf of the Portfolio shall itself keep
such books of account and/or compute such net asset value per share. If so
directed, the Custodian shall also calculate daily the net income of the
Portfolio as described in the Fund's currently effective prospectus related
to such Portfolio and shall advise the Fund and the Transfer Agent daily of
the total amounts of such net income and, if instructed in writing by an
officer of the Fund to do so, shall advise the Transfer Agent periodically of
the division of such net income among its various components. The
calculations of the net asset value per share and the daily income of each
Portfolio shall be made at the time or times described from time to time in
the Fund's currently effective prospectus related to such Portfolio.
9. RECORDS
The Custodian shall with respect to each Portfolio create and maintain
all records relating to its activities and obligations under this Contract in
such manner as will meet the obligations of the Fund under the Investment
Company Act of 1940, with particular attention to Section 31 thereof and
Rules 31a-1 and 31a-2 thereunder, applicable federal and state tax laws and
any other law or administrative rules or procedures which may be applicable
to the Fund. All such records shall be the property of the Fund and shall at
all
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<PAGE>
times during the regular business hours of the Custodian be open for
inspection by duly authorized officers, employees or agents of the Fund and
employees and agents of the Securities and Exchange Commission. The
Custodian shall, at the Fund's request, supply the Fund with a tabulation of
securities owned by each Portfolio and held by the Custodian and shall, when
requested to do so by the Fund and for such compensation as shall be agreed
upon between the Fund and the Custodian, include certificate numbers in such
tabulations.
10. OPINION OF FUND'S INDEPENDENT ACCOUNTANT
The Custodian shall take all reasonable action, as the Fund on behalf of
each applicable Portfolio may from time to time request, to obtain from year
to year favorable opinions from the Fund's independent accountants with
respect to its activities hereunder in connection with the preparation of the
Fund's Form N-1A, and Form N-SAR or other annual reports to the Securities
and Exchange Commission and with respect to any other requirements of such
Commission.
11. REPORTS TO FUND BY INDEPENDENT PUBLIC ACCOUNTANTS
The Custodian shall provide the Fund, on behalf of each of the
Portfolios at such times as the Fund may reasonably require, with reports by
independent public accountants on the accounting system, internal accounting
control and procedures for safeguarding securities, futures contracts and
options on futures contracts, including securities deposited and/or
maintained in a Securities System, relating to the services provided by the
Custodian under this Contract; such reports, shall be of sufficient scope and
in sufficient detail, as may reasonably be required by the Fund to provide
reasonable
30
<PAGE>
assurance that any material inadequacies would be disclosed by such
examination, and, if there are no such inadequacies, the reports shall so
state.
12. COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between
the Fund on behalf of each applicable Portfolio and the Custodian.
13. RESPONSIBILITY OF CUSTODIAN
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in
acting upon any notice, request, consent, certificate or other instrument
reasonably believed by it to be genuine and to be signed by the proper party
or parties, including any futures commission merchant acting pursuant to the
terms of a three-party futures or options agreement. The Custodian shall be
held to the exercise of reasonable care in carrying out the provisions of
this Contract, but shall be kept indemnified by and shall be without
liability to the Fund for any action taken or omitted by it in good faith
without negligence. It shall be entitled to rely on and may act upon advice
of counsel (who may be counsel for the Fund) on all matters, and shall be
without liability for any action reasonably taken or omitted pursuant to such
advice. Notwithstanding the foregoing, the responsibility of the Custodian
with respect to redemptions effected by check shall be in accordance with a
separate Agreement entered into between the Custodian and the Fund.
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<PAGE>
If the Fund on behalf of a Portfolio requires the Custodian to take any
action with respect to securities, which action involves the payment of money
or which action may, in the opinion of the Custodian, result in the Custodian
or its nominee assigned to the Fund or the Portfolio being liable for the
payment of money or incurring liability of some other form, the Fund on
behalf of the Portfolio, as a prerequisite to requiring the Custodian to take
such action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
If the Fund requires the Custodian to advance cash or securities for any
purpose for the benefit of a Portfolio including the purchase or sale of
foreign exchange or of contracts for foreign exchange or in the event that
the Custodian or its nominee shall incur or be assessed any taxes (excluding
any corporate tax liability of the Custodian), charges, expenses,
assessments, claims or liabilities in connection with the performance of this
Contract, except such as may arise from its or its nominee's own negligent
action, negligent failure to act or willful misconduct, any property at any
time held for the account of the applicable Portfolio shall be security
therefor and should the Fund fail to repay the Custodian promptly, the
Custodian shall upon five business days written notice be entitled to utilize
available cash and to dispose of such Portfolio's assets to the extent
necessary to obtain reimbursement. Parties hereby agree that any use of the
term reasonable care shall be given the same meaning as ordinary negligence
under Massachusetts law.
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<PAGE>
14. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT
This Contract shall become effective as of its execution, shall continue
in full force and effect until terminated as hereinafter provided, may be
amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not
sooner than ninety (90) days after the date of such delivery or mailing;
PROVIDED, however that the Custodian shall not with respect to a Portfolio
act under Section 2.10 hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that the Board of
Directors of the Fund has approved the initial use of a particular Securities
System by such Portfolio and the receipt of an annual certificate of the
Secretary or an Assistant Secretary that the Board of Directors has reviewed
the use by such Portfolio of such Securities System, as required in each case
by Rules 17f-4 and 17f-5 under the Investment Company Act of 1940, as amended
and that the Custodian shall not with respect to a Portfolio act under
Section 2.10A hereof in the absence of receipt of an initial certificate of
the Secretary or an Assistant Secretary that the Board of Directors has
approved the initial use of the Direct Paper System by such Portfolio and the
receipt of an annual certificate of the Secretary or an Assistant Secretary
that the Board of Directors has reviewed the use by such Portfolio of the
Direct Paper System; PROVIDED FURTHER, however, that the Fund shall not amend
or terminate this Contract in contravention of any applicable federal or
state regulations, or any provision of the Articles of Incorporation, and
further provided, that the Fund on behalf of one or more of the Portfolios
may at any time by action of its Board of Directors (i) substitute
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<PAGE>
another bank or trust company for the Custodian by giving notice as described
above to the Custodian, or (ii) immediately terminate this Contract in the
event of the appointment of a conservator or receiver for the Custodian by
the Comptroller of the Currency or upon the happening of a like event at the
direction of an appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Contract, the Fund on behalf of each applicable
Portfolio shall pay to the Custodian such compensation as may be due as of
the date of such termination and shall likewise reimburse the Custodian for
its costs, expenses and disbursements.
15. SUCCESSOR CUSTODIAN
If a successor custodian for the Fund, of one or more of the Portfolios
shall be appointed by the Board of Directors of the Fund, the Custodian
shall, upon termination, deliver to such successor custodian at the office of
the Custodian, duly endorsed and in the form for transfer, all securities of
each applicable Portfolio then held by it hereunder and shall transfer to an
account of the successor custodian all of the securities of each such
Portfolio held in a Securities System.
If no such successor custodian shall be appointed, the Custodian shall,
in like manner, upon receipt of a certified copy of a vote of the Board of
Directors of the Fund, deliver at the office of the Custodian and transfer
such securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Directors shall have been delivered
to the Custodian on or
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<PAGE>
before the date when such termination shall become effective, then the
Custodian shall have the right to deliver to a bank or trust company, which
is a "bank" as defined in the Investment Company Act of 1940, doing business
in Boston, Massachusetts, of its won selection, having an aggregate capital,
surplus, and undivided profits, as shown by its last published report, of not
less than $25,00,000, all securities, funds and other properties held by the
Custodian on behalf of each applicable Portfolio and all instruments held by
the Custodian relative thereto and all other property held by it under this
Contract on behalf of each applicable Portfolio and to transfer to an account
of such successor custodian all the securities of each such Portfolio held in
any Securities System. Thereafter, such bank or trust company shall be the
successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or
of the Board of Directors to appoint a successor custodian, the Custodian
shall be entitled to fair compensation for its services during such period as
the Custodian retains possession of such securities, funds and other
properties and the provisions of this Contract relating to the duties and
obligations of the Custodian shall remain in full force and effect.
16. INTERPRETIVE AND ADDITIONAL PROVISIONS
In connection with the operation of this Contract, the Custodian and the
Fund on behalf of each of the Portfolios, may from time to time agree on such
provisions interpretive of or in addition to the provisions of this Contract
as may in their joint
35
<PAGE>
opinion be consistent with the general tenor of this Contract. Any such
interpretive or additional provisions shall be in a writing signed by both
parties and shall be annexed hereto, PROVIDED that no such interpretive or
additional provisions shall contravene any applicable federal or state
regulations or any provision of the Articles of Incorporation of the Fund. No
interpretive or additional provisions made as provided in the preceding
sentence shall be deemed to be an amendment of this Contract.
17. ADDITIONAL FUNDS
In the event that the Fund establishes one or more series of Shares in
addition to G.T. Global Bond Fund and G.T. Government Income Fund with
respect to which it desires to have the Custodian render services as
custodian under the terms hereof, it shall so notify the Custodian in
writing, and if the Custodian agrees in writing to provide such services,
such series of Shares shall become a Portfolio hereunder.
18. MASSACHUSETTS LAW TO APPLY
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
19. PRIOR CONTRACTS
This Contract supersedes and terminates, as of the date hereof, all
prior contracts between the Fund on behalf of each of the Portfolios and the
Custodian relating to the custody of the Fund's assets.
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<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the ______ day of ______________, 1988.
ATTEST: G. T. GLOBAL INCOME SERIES, INC.
/s/ J. Bartfeld By: /s/ Michele H. Neureuter
- ------------------------------- ------------------------------------
Vice President
ATTEST: STATE STREET BANK AND TRUST COMPANY
/s/ J. Farrell By: /s/ Joseph Hooly
- ------------------------------- ------------------------------------
Assistant Secretary Vice President
37
<PAGE>
TRANSFER AGENCY CONTRACT BETWEEN
G.T. INVESTMENT FUNDS, INC.
AND
G.T. GLOBAL INVESTOR SERVICES, INC.
This Transfer Agency Contract ("Contract") is made as of May 25, 1990
between G. T. Investment Funds, Inc. ("Investment Funds"), a Maryland
corporation, and G. T. Global Investor Services, Inc. ("G.T."), a California
corporation.
WHEREAS, Investment Funds is registered under the Investment Company Act
of 1940, as amended ("1940 Act"), as an open-end management investment
company; and
WHEREAS, Investment Funds currently operates three separate mutual
funds, each organized as a separate and distinct series of the common stock
of Investment Funds; and
WHEREAS, Investment Funds may from time-to-time in the future establish
one or more additional funds, each organized as a separate and distinct
series of common stock of Investment Funds (Investment Funds' existing funds
and such funds as may hereafter be established are referred to in this
Contract as the "Funds," and may singly be referred to as a "Fund"); and
WHEREAS, Investment Funds desires to retain G.T. to act as transfer
agent and dividend disbursing agent to each of the Funds, and G.T. is willing
to act in such capacities;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
I. APPOINTMENT
Investment Funds hereby appoints G.T. to act as transfer agent and
dividend disbursing agent of each Fund for the period and on the terms set
forth in this Contract. G.T. accepts such appointment and agrees to render
the services herein set forth for the compensation herein provided.
II. DEFINITIONS
As used in this Contract, the following terms shall have the definition
ascribed to them in this Paragraph.
(A) "Agent" means a broker, dealer or other agent authorized to act on
behalf of a Shareholder in transactions involving Shares.
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<PAGE>
(B) "Agent Firm" means an investment, stock brokerage or other business
firm employing an Agent.
(C) "Authorized Person" means any officer of Investment Funds and any
other person, whether or not any such person is an officer or employee of
Investment Funds, duly authorized by the Board of Directors, the President or
any Vice President of Investment Funds to give Oral and Written Instructions
on behalf of Investment Funds. Investment Funds will provide to G.T. and
keep current a written list of all Authorized Persons.
(D) "Custodian" means the custodian or custodians employed by
Investment Funds to maintain custody of the Funds' assets.
(E) "Distributor" means the principal underwriter of the Shares of each
Fund.
(F) "Governing Corporate Documents" means the Articles of
Incorporation, By-Laws and other applicable governing corporate documents of
Investment Funds, all as may be amended from time-to-time.
(G) "Oral Instructions" means oral instructions actually received by
G.T. from an Authorized Person or from a person reasonably believed by G.T.
to be an Authorized Person.
(H) "Prospectus" means the current prospectus and statement of
additional information of a Fund, taken together.
(I) "Shares" means shares of common stock of any of the Funds.
(J) "Shareholder" means the owner of Shares.
(K) "Written Instructions" means written instructions delivered by
hand, mail, tested telegram or telex, cable, or facsimile sending device,
received by G.T. and signed by an Authorized Person.
III. AUTHORIZED AND REGISTERED SHARES
(A) As of the date if this Contract, Investment Funds represents that
one billion Shares are authorized for issuance under Investment Funds'
Articles of Incorporation, as amended, and that of this amount 100 million
Shares each have been classified as Shares of the G.T. Global Government
Income Fund, G.T. Global Bond Fund, G.T. Global Health Care Fund and G.T.
Portfolio Strategy Fund, respectively. Investment Funds agrees to keep G.T.
apprised, to the extent necessary for G.T. to adequately perform its duties
hereunder, of the number of shares of each Fund authorized for issuance.
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<PAGE>
(B) As of the date of this Contract, Investment Funds has filed a
declaration of its registration under the Securities Act of 1933 ("1933 Act")
of an indefinite number of Shares pursuant to rule 24f-2 under the 1940 Act;
Investment Funds agrees to notify G.T. immediately if this declaration is
terminated, and thereafter to keep G.T. reasonably apprised of the number of
shares registered under the 1933 Act.
IV. COMPLIANCE BY G.T. WITH GOVERNING CORPORATE
DOCUMENTS, PROSPECTUS AND APPLICABLE LAW AND
REGULATION
All of G.T.'s actions in fulfilling its responsibilities under this
Contract shall be made in accordance with the Prospectus, the Governing
Corporate Documents, the rules and regulations of the Securities and Exchange
Commission and the laws and regulations of the State of Maryland relating to
the issuance and transfer of securities such as the Shares.
V. RECORDS
(A) G.T. shall maintain records of the accounts for each Shareholder which
include the following information with respect to each Fund:
(1) name, address and United States Taxpayer Identification Number;
(2) number of Shares held and number of Shares for which
certificates, if any, have been issued, including certificate numbers and
denominations;
(3) historical information regarding the account of each
Shareholder, including dividends and distributions paid and the date and
price of all transactions in a Shareholder's account;
(4) any stop or restraining order placed against a Shareholder's
account;
(5) any correspondence relating to the current maintenance of
shareholder's account;
(6) information with respect to all tax withholdings;
(7) any information required to enable G.T. to perform any
calculations contemplated or required by this Agreement or that may
reasonably be requested by Investment Funds.
(B) The books and records pertaining to Investment Funds which are in
the possession of G.T. shall be the property of Investment Funds. Such books
and records shall be prepared and maintained as required by the 1940 Act and
other applicable laws,
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<PAGE>
rules and regulations. Investment Funds or its authorized representatives
shall have access to such books and records at all times during G.T.'s normal
business hours. Upon the reasonable request of Investment Funds, copies of
any such books and records shall be provided by G.T. to Investment Funds or
its authorized representatives, at Investment Funds' expense.
VI. TRANSACTIONS NOT REQUIRING INSTRUCTIONS
In the absence of contrary Written Instructions, G.T. is authorized to take
the following actions in providing services under this Contract, all in
accordance with the provisions of the Prospectus:
(A) SHARE TRANSACTIONS -- UNCERTIFICATED SHARES
(1) ISSUANCE OF SHARES. Upon receipt by G.T. of a purchase order
for Shares from the Distributor or directly from an investor or an investor's
Agent, upon the further receipt by G.T. of sufficient information necessary
to enable G.T. to establish an account, and after confirmation of receipt of
payment for such Shares, G.T. shall create an account and issue and credit
Shares to such account.
(2) TRANSFERS OF SHARES. When the Distributor, a Shareholder
or a Shareholder's Agent provides G.T. with instructions to transfer Shares
on the books of a Fund, and G.T. further receives such documentation as is
necessary to process the transfer, G.T. shall transfer the registration of
such Shares and if necessary deliver them pursuant to such instructions.
(3) REDEMPTIONS. Upon receipt of a redemption order from the
Distributor, a Shareholder or a Shareholder's Agent, G.T. shall redeem the
number of Shares indicated thereon from the redeeming Shareholder's account
and receive from the pertinent Fund's custodian and disburse to the redeeming
Shareholder or the Shareholder's Agent, if so instructed, the redemption
proceeds therefor.
(B) SHARE TRANSACTIONS -- CERTIFICATED SHARES
(1) Investment Funds shall supply G.T. with a sufficient supply of
certificates representing Shares, in the form approved from time to time by
the Board of Directors or officers of Investment Funds, and, from
time-to-time, shall replenish such supply upon the request of G.T.
Certificates shall be property executed, manually or by facsimile signature,
by the duly authorized officers of Investment Funds. Notwithstanding the
death, resignation or removal of any officer of Investment Funds, such
executed certificates bearing the manual or facsimile signature of such
officer shall remain valid and may be issued to Shareholders until G.T. is
otherwise directed.
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<PAGE>
(2) In the case of the loss or destruction of any certificate
representing Shares, no new certificate shall be issued in lieu thereof,
unless there shall first have been furnished an appropriate bond of indemnity
issued by a surety company approved by G.T.
(3) Upon receipt of written instructions from a Shareholder or a
Shareholder's Agent of uncertificated Shares for a certificate in the number
of shares in the Shareholder's account, G.T. shall issue the requested
certificate and deliver it to the Shareholder in accordance with the
Shareholder's instructions.
(4) G.T. shall process all orders for the purchase, transfer,
redemption and exchange of certificated Shares in the same fashion as it
processes such orders for uncertificated Shares, as specified in subparagraph
VI(A) of this Contract, provided that, as specified in the Prospectus, G.T.
receives properly executed and completed certificates and stock power
transfers or similar documents necessary to effectuate the contemplated
transaction.
(5) Upon receipt of certificates, which shall be in proper form
for transfer, together with Shareholder's instructions to hold such
certificates for safekeeping, G.T. shall reduce such Shares to uncertificated
status, while retaining the appropriate registration in the name of the
Shareholder upon the transfer books.
(C) SPECIAL INVESTMENT AND WITHDRAWAL PLANS. G.T. shall process
transactions of Shareholders participating in any special investment and/or
withdrawal plans or programs established by Investment Funds or the
Distributor with respect to Shares, such as automatic investment plans,
systematic withdrawal plans and dollar cost averaging investing programs, in
accordance with the terms of such plans or programs as provided to G.T.
Investment Funds or the Distributor.
VII. RELIANCE BY G.T. ON INSTRUCTIONS
Unless otherwise provided in this Contract, G.T. shall act only upon
Oral or Written Instructions (collectively, "Instructions"). G.T. shall be
entitled to rely upon any Instructions actually received by it under this
Contract. Investment Funds agrees that G.T. shall incur no liability to
Investment Funds in acting upon Instructions given to G.T. hereunder,
provided that such Instructions reasonably appear to have been received from
an Authorized Person.
VIII. DIVIDENDS AND DISTRIBUTION
(A) Investment Funds shall furnish G.T. with appropriate evidence of
action by Investment Funds' board of directors declaring dividends and
distributions and authorizing their payment as described in the Prospectus.
After deducting any amount required to be withheld by any applicable tax
laws, rules and regulations or other applicable laws, rules and regulations,
in accordance with the instructions in proper form from a Shareholder and the
provisions of the Governing Corporate Documents and
5
<PAGE>
Prospectus, G. T. shall issue and credit the account of the Shareholder with
Shares or pay such dividends for distributions to the Shareholder in cash,
upon the election of the Shareholder as provided for in the Prospectus. In
lieu of receiving from the Custodian and paying to Shareholders cash
dividends or distributions, G.T. may arrange for the direct payment of cash
dividends and distributions to Shareholders by the Custodian, in accordance
with such procedures and controls as are mutually agreed upon from time to
time by and among Investment Funds, G. T. and the Custodian.
(B) G. T. shall prepare and file with the Internal Revenue Service and
other appropriate taxing authorities, and address and mail to Shareholders,
such returns and information relating to dividends and distributions paid by
the Funds as are required to be so prepared, filed and mailed by applicable
laws, rules and regulations, or such substitute form of notice as may from
time to time be permitted or required by the Internal Revenue Service. On
behalf of Investment Funds, G.T. shall mail certain requests for
Shareholders' certifications under penalties of perjury of taxpayer
identification numbers and/or other information and pay on a timely basis to
the appropriate Federal authorities any taxes withheld on dividends and
distributions paid by a Fund, all as required by applicable Federal tax laws
and regulations.
IX. COMMUNICATIONS WITH SHAREHOLDERS
(A) COMMUNICATIONS TO SHAREHOLDERS. G.T. will address and mail all
communications by Investment Funds to the shareholders of the Funds,
including reports to Shareholders, confirmations of purchases and sales of
Shares, periodic account statements, dividend and distribution notices and
proxy materials for meetings of shareholders G. T. will receive and tabulate
the proxy cards for meetings of Shareholders, and if requested by Investment
Funds, attend meetings of Shareholders for purposes of reporting on and
certifying such tabulations.
(B) CORRESPONDENCE. G.T. will answer such correspondence from
Shareholders, Agents and others relating to its duties hereunder and such
other correspondence as may from time to time be mutually agreed upon by
G.T. and Investment Funds.
X. OTHER ONGOING SERVICES
As requested by Investment Funds, G.T. shall also provide the following
services on an ongoing basis:
(A) Furnish to Investment Funds or its designated agent such
state-by-state registration reports reasonably necessary to enable Investment
Funds to keep current the registration of its shares with state securities
authorities.
(B) Provide toll-free phone lines for direct Shareholder use, plus
customer liaison staff with on-line inquiry capacity.
6
<PAGE>
(C) File with the Internal Revenue Service such information on behalf of
each Shareholder as is required by law.
(D) Provide Investment Funds with Shareholder lists and such
statistical information as Investment Funds reasonably may request.
(E) Provide the Custodian with such information as Investment Funds or
the Custodian reasonably may request.
(F) Mail duplicate confirmations and/or statements to Agents with
respect to their clients' accounts and transactions in Shares, whether such
transactions were executed through such Agents or directly through G.T.
(G) Provide detail for confirmations and/or statements to be provided
to Shareholders by Agent Firms, and provide such other Shareholder accounting
information to Agent Firms as may be agreed upon between Investment Funds and
G.T.
(H) Provide to the custodian timely notification of Share transactions
and such other information as may be agreed upon from time to time by
Investment Funds, G.T. and the Custodian.
XI. COOPERATION WITH ACCOUNTANTS
G.T. shall cooperate with Investment Funds' independent public
accountants and shall take all reasonable action in the performance of its
obligations under this Contract to assure that all necessary information is
made available to such accountants for the timely expression of their opinion
with respect to the financial statements of the Funds.
XII. CONFIDENTIALITY
G.T. agrees on behalf of itself and its employees to treat
confidentially all records and other information relative to the Funds and
their prior, present or potential Shareholders, except, after prior
notification to and approval in writing by Investment Funds, which approval
shall not be unreasonably withheld and may not be withheld when G.T. may be
exposed to civil or criminal contempt proceedings for failure to comply, when
requested do divulge such information by duly constituted authorities, or
when so requested by the Fund.
XIII. COMPENSATION
As compensation for the services rendered by G.T. during the term of
this Contract, each Fund will pay to G.T. monthly fees that shall be agreed
to from time to time by Investment Funds and G.T. In addition, as may be
agreed to from time to time by
7
<PAGE>
Investment Funds and G.T., each Fund shall reimburse G.T. for certain
expenses incurred by G.T. in rendering services with respect to that Fund
under this Contract.
XIV. STANDARD OF CARE
(A) In the performance of its duties hereunder, G.T. shall be obligated
to exercise care and diligence and to act in good faith and to use its best
efforts within reasonable limits to ensure the accuracy and completeness of
all services provided under this Contract.
(B) G.T. shall be under no duty to take any action on behalf of
Investment Funds except as specifically set forth herein or as may be
specifically agreed to by G.T. in writing.
(C) G.T. shall be responsible and liable for all losses, damages and
costs (including reasonable attorneys fees) incurred by Investment Funds
which is due to or caused by G.T.'s negligence in the performance of its
duties under this contract or for G.T.'s negligent failure to perform such
duties as are specifically ascribed to G.T. in this Contract; provided that,
to the extent that duties, obligations and responsibilities are not expressly
set forth in this Contract, G.T. shall not be liable for any act or omission
which does not constitute willful misfeasance, bad faith or gross negligence
on the part of G.T. or reckless disregard by G.T. of such duties, obligations
and responsibilities.
(D) Without limiting the generality of the foregoing subparagraphs of
this Paragraph XIV or of any other provision of this Contract, in connection
with G.T.'s duties under this Contract G.T. shall not be under any duty or
obligation to inquire into and shall not be liable for or in respect of:
(1) the validity or invalidity or authority or lack thereof of any
Oral or Written Instruction, notice or other instrument which conforms to the
applicable requirements of this Contract, if any, and which G.T. reasonably
believes to be genuine;
or
(2) delays or errors or loss of data occurring by reason of
circumstances beyond G.T.'s control, including acts of civil or military
authority, national emergencies, labor difficulties, fire, mechanical
breakdown, earthquake, flood or catastrophe, acts of God, insurrection, war,
riots or failure of the mails, transportation, communication or power supply.
XV. RECEIPT OF ADVICE
(A) ADVICE OF INVESTMENT FUNDS. If G.T. is in doubt as to any action
to be taken or omitted by it, G.T. may request and shall receive from
Investment Funds directions or advice including Oral or Written Instructions
where appropriate.
8
<PAGE>
(B) ADVICE OF COUNSEL. If G.T. is in doubt as to any question of law
involved in any action to be taken or omitted by it, G.T. may request advice
from counsel of its own choosing (who may also be counsel for Investment
Funds, the Distributor and/or the investment adviser of Investment Funds).
(C) CONFLICTING ADVICE. In case of conflict between directions,
advice or Oral or Written Instructions received by G.T. pursuant to
subparagraph (A) of this Paragraph and advice received by G.T. pursuant to
subparagraph (b) of this Paragraph, G.T. shall be entitled to rely on and
follow the advice received pursuant to subparagraph (B) alone.
(D) PROTECTION OF G.T.
(1) G.T. shall be protected in any action or inaction which it
takes in reliance on any directions, advice or Oral or Written Instructions
received pursuant to subparagraphs (A) or (B) of this Paragraph which G.T.,
after receipt of any such directions, advice or Oral or Written Instructions,
in good faith believes to be consistent with such directions, advice or Oral
or Written Instructions, as the case may be.
(2) Notwithstanding the foregoing, nothing in this Paragraph shall
be construed as imposing upon G.T. any obligation (a) to seek such
directions, advice or Oral or Written Instructions, or (b) to act in
accordance with such directions advice or Oral or Written Instructions when
received, unless, under the terms of another provision of this Contract, the
same is a condition to G.T.'s properly taking or omitting to take such
actions.
XVI. INDEMNIFICATION OF G.T.
Investment Funds agrees to indemnify and hold harmless G.T. and its
nominees and sub-contractors, if any, from all taxes, charges, expenses,
assessments, claims and liabilities (including, without limitation,
liabilities arising under the 1933 Act, the 1940 Act, the Securities Exchange
Act of 1934, the Commodities Exchange Act, and any state and foreign
securities and blue sky laws, all as or to be amended from time to time) and
expenses, including (without limitation) reasonable attorneys' fees and
disbursements, arising directly or indirectly from any action or thing which
G.T. takes or does or omits to take or do:
(A) at the request or on the direction of or in reliance upon the advice
of Investment Funds;
(B) upon Oral or Written Instructions; or
(C) in the performance by G.T. of its responsibilities under this
Contract;
9
<PAGE>
PROVIDED that G.T. shall not be indemnified against any liability to
Investment Funds or the Shareholders (or any expenses incident to such
liability) arising out of G.T.'s own willful misfeasance, bad faith or
negligence or reckless disregard of its duties in connection with the
performance of its duties and obligations specifically described in this
Contract.
XVII. INDEMNIFICATION OF INVESTMENT FUNDS
G. T. agrees to indemnify and hold harmless Investment Funds from all
taxes, charges, expenses, assessments, claims and liabilities (including,
without limitation, liabilities arising under the 1933 Act, the 1940 Act, the
Securities Exchange Act of 1934, the Commodities Exchange Act, and any state
and foreign securities and blue sky laws, all as or to be amended from time
to time) and expenses, including (without limitation) reasonable attorneys'
fees and disbursements, arising directly or indirectly from any action or
omission of G.T. that does not meet the standard of care to which G.T. is
subject under Paragraph XIV of this Contract.
XVIII. DURATION AND TERMINATION
This Contract shall continue with respect to each Fund until termination
with respect to that Fund by Investment Funds or G.T. on sixty (60) days'
prior written notice.
XIX. REGISTRATION AS A TRANSFER AGENT
G.T. represents that it is currently registered as a transfer agent with
the Securities and Exchange Commission, and that it will remain so registered
for the duration of this Contract. G.T. agrees that it will promptly notify
Investment Funds in the event of any material change in its status as a
registered transfer agent. Should G.T. fail to be registered with the
Securities and Exchange Commission as a transfer agent at any time during the
term of this Contract, Investment Funds may immediately terminate this
Contract, upon written notice to G.T.
XX. NOTICES
All notices and other communications hereunder, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. Notices with respect to a party shall be directed
to such address as may from time to time be designated by that party to the
other.
XXI. FURTHER ACTIONS
Each party agrees to perform such further acts and execute such further
documents as are necessary to effect the purposes of this Contract.
10
<PAGE>
XXII. AMENDMENTS
This Contract or any part hereof may be amended only by an instrument in
writing signed by both parties hereto.
XXIII. COUNTERPARTS
This Contract may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one
and the same instrument.
XXIV. MISCELLANEOUS
This Contract embodies the entire agreement and understanding between
the parties hereto, and supersedes all prior agreements and understandings
relating to the subject matter hereof, provided that the parties may embody
in one or more separate documents their agreement or agreements with respect
to such matters that this Contract provides may be later agreed to by and
between the parties from time to time. The captions in this Contract are
included for convenience of reference only and in no way define or delimit
any of the provisions hereof or otherwise affect their construction or
effect. This Contract shall be governed by and construed in accordance with
California law. If any provision of this Contract shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of
this Contract shall not be affected thereby. This Contract shall be binding
and shall inure to the benefit of the parties hereto and their respective
successors.
IN WITNESS WHEREOF, the parties hereto have caused this Contract to be
executed by their officers designated below on the day and year first written
above.
G.T. INVESTMENT FUNDS, INC.
Attest: /s/ By: /s/ James R. Tufts
--------------------- -------------------------
G.T. GLOBAL INVESTOR
SERVICES, INC.
Attest: By: /s/ James W. Churm
--------------------- -------------------------
11
<PAGE>
BROKER/DEALER SALES CONTRACT SALES CONTRACT
Between: G. T. GLOBAL FINANCIAL SERVICES, INC.
General Distributor of the
G.T. Global Group of Funds
50 California Street, 27th Floor
San Francisco, CA 94111
and: ________________________________
________________________________
________________________________
Phone __________________________
Date ___________________________
As a general distributor of the G. T. Global Group of Funds (the "Funds"),
we agree to sell you, subject to any limitations imposed by any of the Funds and
subject to confirmation by us in each instance, shares issued by the Funds
("Shares"). The Funds shall also include any registered investment company with
which we now have or hereafter have signed an agreement.
1. You will receive a discount from the public offering price on all
Shares purchased by you from us and may receive other compensation, determined
as outlined in the then current Prospectuses of the respective Funds. The range
of current dealer discounts and other compensation may be obtained at any time
upon request.
2. We reserve the right to cancel this agreement at any time without
notice if any Shares shall be offered for sale by you at less than the then
current public offering price determined by or for the respective Funds.
3. We will furnish you, without charge and on request, reasonable
quantities of the Funds' Prospectuses, shareholder reports and sales material.
4. We will furnish you on request with public offering prices for the
Shares in accordance with the then current Prospectuses of the respective Funds,
and you agree to quote such prices subject to confirmation by us on any Shares
offered to you for sale. Your attention is called specifically to the fact that
each price is always subject to confirmation, and will be the price next
computed after receipt of an order.
5. Under this agreement you act as principal and are not employed by us
as a broker, agent or employee; you are not authorized to act for us nor to make
any representation on our behalf; and in purchasing or selling Shares hereunder
you rely only upon the current Prospectus and Statement of Additional
Information and upon such written representations as may hereafter be made by us
to you over our signature. You also agree that every effort shall be made by
you to place Shares on an investment basis.
<PAGE>
Broker/Dealer Sales Contract Sales Contract
Page 2
6. Each party hereto represents that it is a member of the National
Association of Securities Dealers, Inc., and agrees to abide by all of its Rules
of Fair Practice, including, without limitation, the following provisions:
(a) You shall not withhold placing customers' orders for any Shares so as
to profit yourself as a result of such withholding. We shall not purchase any
Shares from the Funds except for the purpose of covering purchase orders already
received, and you shall not purchase any Shares from us other than for
investment except for the purpose of covering purchase orders already received.
(b) If any Shares purchased by you are repurchased by the Fund which
issued the same or by us for the account of such Fund, or are tendered for
redemption, within seven business days after confirmation by us of the original
purchase order for such Shares (1) you agree to forthwith refund to us the full
concession allowed to you on the original sale, such refund to be paid by us to
the Fund whose Shares have been so repurchased upon receipt and (2) we shall
forthwith pay to such Fund that part of the discount retained by us on the
original sale. Notice will be given to you of any such repurchase or
redemption within ten days of the date on which the certificate is delivered to
us or to such Fund.
(c) Neither party to this agreement shall, as principal, purchase any
Shares from a record holder at a price lower than the net asset value next
computed by or for the issuer thereof. Nothing in this subparagraph shall
prevent you from selling Shares for the account of a record holder to us or to
the Fund which issued such Shares at the net asset value then quoted by or for
such Fund and charging the investor a fair commission for handling the
transaction.
7. Either party hereto may cancel this agreement upon ten days' notice.
Furthermore, as a general distributor we reserve the priviledge of revising the
discount or other compensation referred to herein upon ten days' written notice,
which will be deemed given by supplementing or amending the Prospectus or
Statement of Additional Information of a Fund.
8. This agreement shall be binding upon receipt by us in San Francisco,
California, of a counterpart hereof duly accepted and signed by you, and shall
be construed in accordance with the laws of California.
Accepted: G. T. GLOBAL FINANCIAL
---------------------------- SERVICES, INC.
Company Name
By: By: /s/ David A. Minella
---------------------------------- -----------------------------
Signature David A. Minella, President
----------------------------------
Print Name and Date
<PAGE>
BANK SALES CONTRACT SALES CONTRACT
Between: G.T. GLOBAL FINANCIAL SERVICES, INC.
General Distributor of the
G.T. Global Group of Funds
50 California Street, 27th Floor
San Francisco, CA 94111
(415) 392-6181
and _______________________________________
_______________________________________
_______________________________________
(the "Bank")
Date: __________________________________
As a general distributor of the G.T. Global Group of Funds (the "Funds"),
we agree to sell to the Bank's customers, through the Bank as their agent,
subject to any limitations imposed by any of the Funds and subject to
confirmation by us in each instance, shares issued by the Funds ("Shares"). The
Fund shall also include any registered investment company with which we now have
or hereafter have signed a principal underwriter's agreement.
1. The Bank will receive an agency commission, consisting of a portion of
the public offering price on all Shares purchased by the Bank as agent for its
customers from us, determined on the same basis as the "dealer discount"
described in the then current Prospectus and Statement of Additional Information
of the Fund, and such other compensation to dealers as may be described in such
Prospectus and Statement of Additional Information. The range of current dealer
discounts and other compensation may be obtained at any time upon request. On
the settlement date of each transaction, the Bank will remit the full purchase
price less an amount equal to its agency commission. Remittance of the full
purchase price less the Bank's agency commission shall be made to, and received
by us within seven (7) business days after acceptance of its order or such
shorter time as may be required by law or applicable rules of the National
Association of Securities Dealers ("NASD"). If such payment is not received by
us within such period, we reserve the right, with prior notice, forthwith to
cancel the sale, or, at our option, to sell the shares ordered by the Bank back
to the Fund, in which latter case we may hold the Bank responsible for any loss
suffered by us or by the Fund resulting from the Bank's failure to make payment
aforesaid. On any order sent directly to us by a customer of the Bank, we will
remit the Bank's agency commission on such transaction to the Bank.
2. We reserve the right to cancel this agreement at any time without
notice if any Shares shall be offered for sale by the Bank to its customers at
less than the then current public offering prices determined by or for the
respective Funds.
<PAGE>
BANK SALES CONTRACT SALES CONTRACT
Page 2
3. We will furnish the Bank, without charge and on request, reasonable
quantities of the Funds' Prospectuses, shareholder reports and sales material.
4. We will furnish the Bank on request with public offering prices for
the Shares in accordance with the then current Prospectuses of the respective
Funds, and the Bank agrees to quote such prices subject to confirmation by us on
any Shares offered to the Bank for sale. The Bank's attention is called
specifically to the fact that each price is always subject to confirmation, and
will be the price next computed after receipt of an order.
5. Under this agreement the Bank acts as agent for its customers and is
not employed by us as broker, agent or employee; the Bank is not authorized to
act for us nor to make any representations on our behalf; and in purchasing or
selling Shares hereunder the Bank relies only upon the current Prospectus and
Statement of Additional Information and upon such written representations as may
hereafter be made by us to the Bank over our signature. The Bank also agrees
that every effort shall be made by the Bank to place Shares on an investment
basis.
6. The Bank warrants and represents to us that the Bank is a "bank" as
defined in Section 3(a)(6) of the Securities Exchange Act of 1934 (the "Act"),
and that at the time of each transaction in Fund shares under this agreement it
shall not be required to register as a broker or dealer under the Act. The Bank
shall certify to us from time to time at our request that this warranty and
representation continues to be correct. The Bank furthermore agrees to abide by
all of the Rules of Fair Practice of the NASD applicable to the sale of
investment company shares to its customers including, without limitation, the
following provisions:
(a) The Bank shall not withhold placing customers'; orders for any Shares
so as to profit itself as a result of such withholding. We shall not purchase
any Shares from the Funds except for the purpose of covering purchase orders
already received, and the Bank shall not purchase any Shares from us other than
as agent for the purpose of covering purchase orders already received from its
customers.
(b) If any Shares purchased by the Bank as agent for its customers are
repurchased by the Fund which issued the same or by us for the account of such
Fund, or are tendered for redemption, within seven business days after
confirmation by us of the original purchase order for such Shares (1) the Bank
agrees to forthwith refund to us the full agency commission paid to the Bank on
the original sale, such refund to be paid by us to the Fund whose Shares have
been so repurchased upon receipt and (2) we shall forthwith pay to such Fund
that part of the discount retained by us on the original sale. Notice will be
given to the Bank of any such repurchase or redemption within ten days of the
date on which the certificate is delivered to us or to such Fund.
<PAGE>
BANK SALES CONTRACT SALES CONTRACT
Page 3
(c) Neither party to this agreement shall purchase any Shares from a
record holder at a price lower than the net asset value next computed by or for
the issuer thereof. Nothing in this subparagraph shall prevent the Bank from
selling Shares for the account of a record holder to us or to the issuer thereof
at the net asset value then quoted by or for such issuer and charging the
investor a fair commission for handling the transaction.
7. Either party hereto may cancel this agreement upon ten days' written
notice. The Bank will immediately notify us, and terminate this agreement in
the event that it becomes excluded from the definition of "bank" under the Act
or is otherwise required to register as a broker or dealer under the Act.
Furthermore, as a general distributor we reserve the privilege of revising the
commission or other compensation referred to herein, which is the basis for
determining the Bank's agency commission, upon ten days' written notice, which
notice will be deemed given by supplementing or amending the Prospectus or
Statement of Additional Information of a Fund.
8. The customers in question are for all purposes the Bank's customers
and not our customers. We shall execute transactions for each of the Bank's
customers only upon its authorization it being understood in all cases that (a)
the Bank is acting as the agent for the customer; (b) the transactions are
without recourse against the Bank by the customer; (c) as between the Bank and
the customer, the customer will have full beneficial ownership of the shares;
and (d) each transaction is initiated solely upon the order of the customer and
not for the Bank's account.
9. This agreement shall be binding upon receipt by us in San Francisco,
California, of a counterpart hereof duly accepted and signed by the agent, and
shall be construed in accordance with the laws of California.
Accepted: G. T. GLOBAL FINANCIAL
---------------------------- SERVICES, INC.
Bank Name
By: By: /s/ David A. Minella
---------------------------------- -----------------------------
Signature David A. Minella, President
----------------------------------
Print Name and Date
<PAGE>
AGENT SALES CONTRACT SALES CONTRACT
Between: G.T. GLOBAL FINANCIAL SERVICES, INC.
General Distributor of the
G.T. Global Group of Funds
50 California Street, 27th Floor
San Francisco, CA 94111
(415) 392-6181
and _______________________________________
_______________________________________
_______________________________________
(the "Agent")
Date: __________________________________
As a general distributor of the G.T. Global Group of Funds (the "Funds"),
we agree to sell to the Agent's customers, through the Agent as their agent,
subject to any limitations imposed by any of the Funds and subject to
confirmation by us in each instance, shares issued by the Funds ("Shares"). The
Fund shall also include any registered investment company with which we now have
or hereafter have signed a principal underwriter's agreement.
1. The Agent will receive an agency commission, consisting of a portion
of the public offering price on all Shares purchased by the Agent as agent for
its customers from us, determined on the same basis as the "dealer discount"
described in the then current Prospectus and Statement of Additional Information
of the Fund, and such other compensation to dealers as may be described in such
Prospectus and Statement of Additional Information. The range of current dealer
discounts and other compensation may be obtained at any time upon request. On
the settlement date of each transaction, the Agent will remit the full purchase
price less an amount equal to its agency commission. Remittance of the full
purchase price less the Agent's agency commission shall be made to, and receive
by us within seven (7) business days after acceptance of its order or such
shorter time as may be required by law or applicable rules of the National
Association of Securities Dealers ("NASD"). If such payment is not received by
us within such period, we reserve the right, with prior notice, forthwith to
cancel the sale, or, at our option, to sell the shares ordered by the Agent back
to the Fund, in which latter case we may hold the Agent responsible for any loss
suffered by us or by the Fund resulting from the Agent's failure to make payment
aforesaid. On any order sent directly to us by a customer of the Agent, we will
remit the Agent's agency commission on such transaction to the Agent.
2. We reserve the right to cancel this agreement at any time without
notice if any Shares shall be offered for sale by the Agent to its customers at
less than the then current public offering prices determined by or for the
respective Funds.
<PAGE>
AGENT SALES CONTRACT SALES CONTRACT
Page 2
3. We will furnish the Agent, without charge and on request, reasonable
quantities of the Funds' Prospectuses, shareholder reports and sales material.
4. We will furnish the Agent on request with public offering prices for
the Shares in accordance with the then current Prospectuses of the respective
Funds, and the Agent agrees to quote such prices subject to confirmation by us
on any Shares offered to the Agent for sale. The Agent's attention is called
specifically to the fact that each price is always subject to confirmation, and
will be the price next computed after receipt of an order.
5. Under this agreement the Agent acts as agent for its customers and is
not employed by us as broker, agent or employee; the Agent is not authorized to
act for us nor to make any representation on our behalf; and in purchasing or
selling Shares hereunder the Agent relies only upon the current Prospectus and
Statement of Additional Information and upon such written representations as may
hereafter be made by us to the Agent over our signature. The Agent also agrees
that every effort shall be made by the Agent to place Shares on an investment
basis.
6. The Agent represents that it is member of the NASD and agrees to abide
by all of the Rules of Fair Practice of the NASD applicable to the sale of
investment company shares to its customers, including, without limitation , the
following provision:
(a) The Agent shall not withhold placing customers' orders for any Shares
so as to profit itself as a result of such withholding. We shall not purchase
any Shares from the Funds except for the purpose of covering purchase orders
already received, and the Agent shall not purchase any Shares from us other than
as agent for the purpose of covering purchase orders already received from its
customers.
(b) If any Shares purchased by the Agent as agent for its customers are
repurchased by the Fund which issued the same or by us for the account of such
Fund, or are tendered for redemption, within seven business days after
confirmation by us of the original purchase order for such Shares (1) the Agent
agrees to forthwith refund to us the full agency commission paid to the Agent on
the original sale, such refund to be paid by us to the Fund whose Shares have
been so repurchased upon receipt and (2) we shall forthwith pay to such Fund
that part of the discount retained by us on the original sale. Notice will be
given to the Agent of any such repurchase or redemption within ten days of the
date on which the certificate is delivered to us or to such Fund.
(c) Neither party to this agreement shall purchase any Shares from a
record holder at a price lower than the net asset value next computed by or for
the issuer thereof. Nothing in this subparagraph shall prevent the Agent from
selling Shares for the account of a record holder to us or to the issuer thereof
at the net asset value then quoted by or for such issuer and charging the
investor a fair commission for handling the transaction.
<PAGE>
AGENT SALES CONTRACT SALES CONTRACT
Page 3
7. Either party hereto may cancel this agreement upon ten days' written
notice. Furthermore, as a general distributor we reserve the privilege of
revising the commission or other compensation referred to herein, which is the
basis for determining the Agent's agency commission, upon ten days' which
notice, which notice will be deemed given by supplementing or amending the
Prospectus or Statement of Additional Information of a Fund.
8. The customers in question are for all purposes the Agent's customers
and not our customers. We shall execute transactions for each of the Agent's
customers only upon its authorization it being understood in all cases that (a)
the Agent is acting as the agent for the customer; (b) the transactions are
without recourse against the Agent by the customer; (c) as between the Agent and
the customer, the customer will have full beneficial ownership of the shares;
and (d) each transaction is initiated solely upon the order of the customer and
not for the Agent's account.
9. This agreement shall be binding upon receipt by us in San Francisco,
California, of a counterpart hereof duly accepted and signed by the Agent, and
shall be construed in accordance with the laws of California.
Accepted: G. T. GLOBAL FINANCIAL
---------------------------- SERVICES, INC.
Agent Name
By: By: /s/ David A. Minella
---------------------------------- -----------------------------
Signature David A. Minella, President
----------------------------------
Print Name and Date
<PAGE>
NOT FOR USE BETWEEN MEMBERS OF
THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC.
FOREIGN SALES CONTRACT SALES CONTRACT
Between: G. T. GLOBAL FINANCIAL SERVICES, INC.
General Distributor of the
G.T. Global Group of Funds
50 California Street, 27th Floor
San Francisco, CA 94111
and: ________________________________
________________________________
________________________________
Phone __________________________
Date ___________________________
As a general distributor of the G. T. Global Group of Funds (the "Funds"),
we agree to sell you, subject to the terms and conditions of this Foreign Sales
Contract, to any limitations imposed by any of the Funds and to confirmation by
us in each instance, shares issued by the Funds ("Shares"). The Funds shall
also mean any registered investment company with which we have now or hereafter
signed an agreement.
1. YOU WARRANT AND REPRESENT TO US THAT SHARES OF THE FUNDS MAY, PURSUANT
TO ALL APPLICABLE LAWS AND GOVERNMENTAL RULES, REGULATIONS AND ORDERS, BE
OFFERED FOR SALE AND SOLD BY YOU IN THE COUNTRY OR COUNTRIES WHERE YOU CONDUCT
YOUR BUSINESS OPERATIONS, AND THAT YOU MAY LAWFULLY CONDUCT SUCH BUSINESS
OPERATIONS AND HAVE ALL REQUIRED LICENSES AND PERMITS TO DO SO AS MAY BE
REQUIRED BY SUCH LAWS AND GOVERNMENTAL RULES, REGULATIONS AND ORDERS. YOU AGREE
TO INDEMNIFY AND SAVE US AND THE FUNDS HARMLESS FROM ALL LIABILITIES, LOSSES,
DAMAGES, CLAIMS AND EXPENSES, INCLUDING COUNSEL FEES, IN CONNECTION WITH THE
FOREGOING WARRANTIES AND REPRESENTATIONS.
2. We will furnish you, without charge and on request, reasonable
quantities of the Funds' Prospectuses, shareholder reports and sales material,
all in the English language. You are solely responsible for providing accurate
translations of such documents with such additional information as may be
necessary as required by applicable laws and governmental rule, regulations and
order.
<PAGE>
Broker/Dealer Sales Contract Sales Contract
Page 2
3. The price of Shares to you will be the net asset value as next
determined after we receive your order, together with our underwriting
commission. Your attention is called specifically to the fact that each
price is always subject to confirmation, and will be the price next computed
after an order and the payment therefore are received.
You will pay for Shares at the next quoted price in United States
dollars in New York Eastern Time Same Day Funds credited to our account at
the Connecticut Bank and Trust Co., N.A. during the hours that the New York
Stock Exchange is open (currently 8:30 a.m. to 4:00 p.m. Eastern Time). We
must receive payment before an order for Shares can be confirmed, and the
applicable price to you will be based upon the net asset value of Shares next
determined after we are advised that Same Day Funds are available to us.
. We will also furnish you on request with public offering prices for
Shares (including sales charges) determined in accordance with the current
Prospectus of each Fund. You will advice us of the appropriate sales charge
to be included in the price of Shares shown in our confirmation to you or the
absence of such sales charge if you propose to sell such shares to your
customer at net asset value. Such sales charge must conform to one of the
stated rates in the current Prospectus of the Fund, but need not necessarily
be the same as would be charged to a U.S. investor for an order of like
amount.
4. We reserve the right to cancel this agreement at any time without
notice if any Shares shall be offered for sale by you at less than the then
net asset value determined by or for the respective Funds.
5. Under this agreement you act as principal and are not employed by
us as broker, agent or employee; you are not authorized to act for us nor to
make any representations on our behalf; and in purchasing or selling Shares
hereunder you rely only upon the current Prospectus and Statement of
Additional Information and upon such written representations as may hereafter
be made by us to you over our signature. You also agree that every effort
shall be made by you to place Shares on an investment basis.
6. You agree that although you are not a member of the National
Association of Securities Dealers, Inc., you will abide by the Rules of Fair
Practice of such Association, including, without limitation, the following
provision:
(a) You shall not withhold placing customers'; orders for any
Shares so as to profit yourself as a result of such respective Funds except
for the purpose of covering purchase orders already received, and you shall
not purchase any Shares from us other than for investment except for the
purpose of covering purchase orders already received; and
<PAGE>
Broker/Dealer Sales Contract Sales Contract
Page 3
(b) Neither party to this agreement shall, as principal, purchase
any Shares from a record holder at a price lower than the net asset value
next computed by or for the issuer thereof. Nothing in this subparagraph
shall prevent you from selling Shares for the account of a record holder to
us or the issuer thereof at the net asset value then quoted by or for such
issuer and charging the investor a fair commission for handling the
transaction.
You further agree that in selling Shares to a U.S. national, you
will not charge a sales charge in excess of that stated in the Prospectus of
the applicable Fund.
7. Either party hereto may cancel this agreement upon ten days'
written notice.
8. This agreement shall be binding upon receipt by us in San
Francisco, California, of a counterpart hereof duly accepted and signed by
you, and shall be construed in accordance with the laws of California.
Accepted: G. T. GLOBAL FINANCIAL
---------------------------- SERVICES, INC.
Company Name
By: By: /s/ David A. Minella
---------------------------------- -----------------------------
Signature David A. Minella, President
----------------------------------
Print Name and Date
<PAGE>
EXHIBIT 10
(Letterhead)
Morrison & Foerster
February 26, 1988
G.T. Global Income Series Inc.
50 California Street
San Francisco, CA 94111
Re: Shares of Common Stock of
G.T. Global Income Series, Inc.
Ladies/Gentlemen:
We refer to the Registration Statement on Form N-1A (filed December 23,
1988) (the "Registration Statement") of G.T. Global Income Series, Inc. (the
"Company") relating to the registration of an indefinite number of shares of two
series of the Company's Common Stock (collectively, the "Stock").
We have been requested by the Company to furnish this opinion as Exhibit 10
to the Registration Statement.
We have examined such records, documents, instruments, certificates of
public officials and of the Company, made such inquiries of the Company, and
examined such questions of law as we have deemed necessary for the purpose of
rendering the opinion set forth herein. We have assumed the genuineness of all
signatures and the authenticity of all items submitted to us as originals and
the conformity with originals of all items submitted to us as copies.
We are not admitted to the practice of law under the laws of Maryland,
where the Company was incorporated. The Company has procured the opinion of
Maryland counsel, Piper & Marbury, dated February 26, 1988, concerning issues
involving Maryland law and we have relied thereon in giving our opinion, and we
believe you and we are justified in relying thereon. In any case in which we
have relied upon the opinion of Piper & Marbury our opinion is subject to all
qualifications stated therein affecting matters as to which we have so relied,
and it is understood that we have made no independent investigation of any such
matters.
Based upon and subject to the foregoing, WE ARE OF THE OPINION THAT:
<PAGE>
The issuance and sale of the Stock by the Company have been duly and
validly authorized by all appropriate action and, upon delivery thereof and
payment therefor in accordance with the Registration Statement and Article V, of
the Articles of Incorporation of the Company, and Stock will be duly authorized,
validly issued, fully paid and nonassessable by the Company.
We consent to the incorporation of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Morrison & Foerster
-----------------------
Morrison & Foerster
<PAGE>
Letterhead
G.T. Capital Management
August 3, 1989
G.T. Investment Funds, Inc.
50 California Street
San Francisco, California 94111
Gentlemen:
In my position as Vice President and General Counsel of G.T. Capital
Management, Inc., the investment manager and administrator for G.T. Investment
Funds, Inc. ("Company") and its funds, I have provided legal counsel and have
participated in various business and other matters relating to the Company,
including the organization and registration of the G.T. Global Health Care Fund
series ("Fund") of the Company. You have requested my opinion relating to the
issuance of shares of common stock of the Fund.
I have examined the Company's Articles of Incorporation, as amended, and
other corporate documents relating to the authorization and issuance of the
shares of common stock of the Company. In addition, I am of the understanding
that the Company intends to file with the Maryland Department of Assessments and
Taxation Articles Supplementary to the Articles of Incorporation of the Company
classifying 100,000,000 shares of the common stock of the Company as shares of
G.T. Global Health Care Fund.
Based upon such examination, and on the condition that such Articles
Supplementary are duly filed, I am of the opinion that:
1. All legal requirements have been complied with in the organization of
the Company, and the Company is a validly existing corporation under the
laws of the State of Maryland.
2. Up to 100,000,000 shares of the Fund may be legally and validly
issued from time-to-time in accordance with the Company's Articles of
Incorporation and By-Laws, both as amended, and subject to compliance with
the Securities Act of 1933, the Investment Company Act of 1940, and
applicable state laws regulating the offer and sale of securities.
<PAGE>
3. All shares that are issued as described in the immediately foregoing
paragraph will be legally issued, fully paid and nonassessable by the
Company.
I consent to the filing of this opinion in connection with the Company's
Registration Statement on Form N-1A (File No. 33-19338) and any amendments
thereto, to be filed with the Securities and Exchange Commission.
Sincerely,
/s/ James W. Churm
------------------
James W. Churm
Vice President &
General Counsel
<PAGE>
Letterhead
G.T. Capital Management
September 19, 1990
G.T. Investment Funds, Inc.
50 California Street
San Francisco, California 94111
Gentlemen:
In my position as Vice President and General Counsel of G.T. Capital
Management, Inc., the investment manager and administrator for G.T. Investment
Funds, Inc. ("Company") and its funds, I have provided legal counsel and have
participated in various business and other matters relating to the Company,
including the organization and registration of the G.T. Global Growth & Income
Fund series ("Fund") of the Company. You have requested my opinion relating to
the issuance of shares of common stock of the Fund.
I have examined the Company's Articles of Incorporation, as amended, and
other corporate documents relating to the authorization and issuance of the
shares of common stock of the Company. In addition, I am of the understanding
that the Company intends to file with the Maryland Department of Assessments and
Taxation Articles Supplementary to the Articles of Incorporation of the Company
classifying 100,000,000 shares of the common stock of the Company as shares of
G.T. Global Growth & Income Fund.
Based upon such examination, and on the condition that such Articles
Supplementary are duly filed, I am of the opinion that:
1. All legal requirements have been complied with in the organization of
the Company, and the Company is a validly existing corporation under the
laws of the State of Maryland.
2. Up to 100,000,000 shares of the Fund may be legally and validly
issued from time-to-time in accordance with the Company's Articles of
Incorporation and By-Laws, both as amended, and subject to compliance with
the Securities Act of 1933, the Investment Company Act of 1940, and
applicable state laws regulating the offer and sale of securities.
<PAGE>
3. All shares that are issued as described in the immediately foregoing
paragraph will be legally issued, fully paid and nonassessable by the
Company.
I consent to the filing of this opinion in connection with the Company's
Registration Statement on Form N-1A (File No. 33-19338) and any amendments
thereto, to be filed with the Securities and Exchange Commission.
Sincerely,
/s/ James W. Churm
------------------
James W. Churm
Vice President &
General Counsel
<PAGE>
Letterhead
G.T. Capital Management
July 17, 1991
G.T. Investment Funds, Inc.
50 California Street
San Francisco, California 94111
Gentlemen:
In my position as Vice President and General Counsel of G.T. Capital
Management, Inc., the investment manager and administrator for G.T. Investment
Funds, Inc. ("Company") and its funds, I have provided legal counsel and have
participated in various business and other matters relating to the Company,
including the organization and registration of the G.T. Latin America Fund
series of the Company ("Latin America Fund") and the G.T. Global Small Companies
Fund series of the Company ("Small Companies Fund"). You have requested my
opinion relating to the issuance of shares of common stock of Latin America Fund
and of Global Small Companies Fund.
I have examined the Company's Articles of Incorporation, as amended, and
other corporate documents relating to the authorization and issuance of the
shares of common stock of the Company. In addition, I am of the understanding
that the Company intends to file with the Maryland Department of Assessments and
Taxation Articles Supplementary to the Articles of Incorporation of the Company
classifying 100,000,000 shares of the common stock of the Company as shares of
G.T. Latin America Fund and classifying 100,000,000 shares of the common stock
of the Company as shares of G.T. Global Small Companies Fund.
Based upon such examination, and on the condition that such Articles
Supplementary are duly filed, I am of the opinion that:
1. All legal requirements have been complied with in the organization
of the Company, and the Company is a validly existing corporation under
the laws of the State of Maryland.
2. Up to 100,000,000 shares of the Latin America Fund and up to
100,000,000 shares of the Small Companies Fund may be legally and validly
issued from time-to-time in accordance with the Company's Articles of
Incorporation and By-Laws, both as amended, and subject to compliance with
the
<PAGE>
Securities Act of 1933, the Investment Company Act of 1940, and applicable
state laws regulating the offer and sale of securities.
3. All shares that are issued as described in the immediately foregoing
paragraph will be legally issued, fully paid and nonassessable by the
Company.
I consent to the filing of this opinion in connection with Post-Effective
Amendment No 13. of the Company's Registration Statement on Form N-1A (File
No. 33-19338) to be filed with the Securities and Exchange Commission.
Sincerely,
/s/ James W. Churm
------------------
James W. Churm
Vice President &
General Counsel
<PAGE>
Letterhead
G.T. Capital Management
January 15, 1992
G.T. Investment Funds, Inc.
50 California Street
San Francisco, California 94111
Gentlemen:
In my position as Vice President and General Counsel of G.T. Capital
Management, Inc., the investment manager and administrator for G.T. Investment
Funds, Inc. ("Company") and its funds, I have provided legal counsel and have
participated in various business and other matters relating to the Company,
including the organization and registration of the G.T. Global
Telecommunications Fund ("Tele Fund") and the G.T. Global Financial Services
Fund ("Fin Fund") series of the Company. You have requested my opinion relating
to the issuance of shares of common stock of Tele Fund and of Fin Fund.
I have examined the Company's Articles of Incorporation, as amended, and
other corporate documents relating to the authorization and issuance of the
shares of common stock of the Company. In addition, I am of the understanding
that the Company intends to file with the Maryland Department of Assessments and
Taxation Articles Supplementary to the Articles of Incorporation of the Company
classifying 100,000,000 shares of the common stock of the Company as shares of
G.T. Global Telecommunications Fund, and classifying 100,000,000 shares of the
common stock of the Company as shares of G.T. Global Financial Services Fund.
Based upon such examination, and on the condition that such Articles
Supplementary are duly filed, I am of the opinion that:
1. All legal requirements have been complied with in the organization
of the Company, and the Company is a validly existing corporation under
the laws of the State of Maryland.
2. Up to 100,000,000 shares of the Tele Fund and up to 100,000,000
shares of the Fin Fund may be legally and validly issued from time-to-time
in accordance with the Company's Articles of Incorporation and By-Laws,
both as amended, and subject to compliance with the Securities Act of 1933,
the Investment
<PAGE>
Company Act of 1940, and applicable state laws regulating the offer and
sale of securities.
3. All shares that are issued as described in the immediately
foregoing paragraph will be legally issued, fully paid and nonassessable by
the Company.
I consent to the filing of this opinion in connection with Post-Effective
Amendment No. 16 to the Company's Registration Statement on Form N-1A (File
No. 33-19338) to be filed with the Securities and Exchange Commission.
Sincerely,
/s/ James W. Churm
------------------
James W. Churm
Vice President &
General Counsel
<PAGE>
Letterhead
Kirkpatrick & Lockhart
May 11, 1992
G.T. Investment Funds, Inc.
50 California Street
San Francisco, California 94111
Gentlemen:
You have requested our opinion regarding certain matters in connection with
the issuance of shares by G.T. Investment Funds, Inc. ("Company"). We have
examined the Company's Articles of Incorporation, as amended and supplemented,
and other corporate documents relating to the authorization and issuance of the
shares of common stock of the Company. In addition, we have examined the
Articles Supplementary to the Articles of Incorporation filed with the Maryland
State Department of Assessments and Taxation in Baltimore, Maryland, classifying
100,000,000 shares of common stock of the Company as shares of G.T. Emerging
Markets Fund series of the Company ("Emerging Markets Fund"). Based upon this
examination, we are of the opinion that:
1. All legal requirements have been complied with in the organization of the
Company and the Company is now a validly existing corporation in good standing
under the laws of the State of Maryland;
2. The authorized capital stock of the Emerging Markets Fund consists of
100,000,000 shares (par value $.0001);
3. Up to 100,000,000 shares of the Emerging Markets Fund may be legally and
validly issued from time to time in accordance with the Company's Articles of
Incorporation and By-Laws, and subject to compliance with the Securities Act of
1933, the Investment Company Act of 1940, and applicable state laws regulating
the sale of securities; and
4. When so issued, the shares of the Emerging Markets Fund will be fully paid
and nonassessable.
<PAGE>
We hereby consent to the filing of this opinion in connection with Post-
Effective Amendment No. 20 to the Registration Statement on Form N-1A (File
No. 33-19338) which you are about to file with the Securities and Exchange
Commission. We also consent to the reference to our firm under the caption
"Counsel" in the Registration Statement.
Very truly yours,
/s/ Arthur J. Brown
-------------------
Arthur J. Brown
<PAGE>
Letterhead
Kirkpatrick & Lockhart
October 16, 1992
G.T. Investment Funds, Inc.
50 California Street
San Francisco, California 94111
Gentlemen:
You have requested our opinion regarding certain matters in connection with
the issuance of shares by G.T. Investment Funds, Inc. ("Company"). We have
examined the Company's Articles of Incorporation, as amended and supplemented,
and other corporate documents relating to the authorization and issuance of the
shares of common stock of the Company. In addition, we have examined the
Articles Supplementary to the Articles of Incorporation filed with the Maryland
State Department of Assessments and Taxation in Baltimore, Maryland, classifying
100,000,000 shares of common stock of the Company as Class A shares and
100,000,000 shares of common stock of the Company as Class B shares of the G.T.
Global High Income Fund series of the Company ("High Income Fund"). Based upon
this examination, we are of the opinion that:
1. Up to 100,000,000 Class A shares and 100,000,000 Class B shares of the
High Income Fund may be legally and validly issued from time to time in
accordance with the Company's Articles of Incorporation and By-Laws, and
subject to compliance with the Securities Act of 1933, the Investment
Company Act of 1940, and applicable state laws regulating the sale of
securities; and
2. When so issued, the shares of the High Income Fund will be fully paid
and nonassessable.
We hereby consent to the filing of this opinion in connection with Post-
Effective Amendment No. 24 to the Registration Statement on Form N-1A (File
No. 33-19338) which you are about to file with the Securities and Exchange
Commission. We also consent to the reference to our firm under the caption
"Counsel" in the Registration Statement.
Very truly yours,
/s/ Robert Hacker
-----------------
Robert C. Hacker
<PAGE>
Letterhead
Kirkpatrick & Lockhart
May 26, 1994
G.T. Investment Funds, Inc.
50 California Street
San Francisco, California 94111
Gentlemen:
You have requested our opinion regarding certain matters in connection with
the issuance of shares by G.T. Investment Funds, Inc. ("Company"). We have
examined the Company's Articles of Incorporation, as amended and supplemented,
and other corporate documents relating to the authorization and issuance of the
shares of common stock of the Company. In addition, we have examined the
Articles Supplementary to the Articles of Incorporation filed with the Maryland
State Department of Assessments and Taxation in Baltimore, Maryland, classifying
(i) 100,000,000 shares of common stock of the Company as Class A shares and
100,000,000 shares of common stock of the Company as Class B shares of the G.T.
Global Natural Resources Fund series of the Company ("Natural Resources Fund")
and (ii) 100,000,000 shares of common stock of the Company as Class A shares and
100,000,000 shares of common stock of the Company as Class B shares of the G.T.
Global Infrastructure Fund series of the Company ("Infrastructure Fund"). Based
upon this examination, we are of the opinion that:
1. Up to 100,000,000 Class A shares and 100,000,000 Class B shares of the
Natural Resources Fund and up to 100,000,000 Class A shares and 100,000,000
Class B shares of the Infrastructure Fund may be legally and validly issued
from time to time in accordance with the Company's Articles of
Incorporation and By-Laws, and subject to compliance with the Securities
Act of 1933, the Investment Company Act of 1940, and applicable state laws
regulating the sale of securities; and
2. When so issued, the shares of the Natural Resources Fund and
Infrastructure Fund will be fully paid and nonassessable.
We hereby consent to the filing of this opinion in connection with Post-
Effective Amendment No. 34 to the Registration Statement on Form N-1A (File
No. 33-19338) which you are about to file with the Securities and Exchange
Commission. We also
<PAGE>
consent to the reference to our firm under the caption
"Counsel" in the Registration Statement.
Very truly yours,
Kirkpatrick & Lockhart
By:/s/ Daniel T. Steiner
---------------------
Daniel T. Steiner
<PAGE>
Letterhead
Kirkpatrick & Lockhart
December 21, 1994
G.T. Investment Funds, Inc.
50 California Street
San Francisco, California 94111
Gentlemen:
You have requested our opinion regarding certain matters in connection with
the issuance of shares by G.T. Investment Funds, Inc. ("Company"). We have
examined the Company's Articles of Incorporation, as amended and supplemented,
and other corporate documents relating to the authorization and issuance of the
shares of common stock of the Company. In addition, we have examined the
Articles Supplementary to the Articles of Incorporation filed with the Maryland
State Department of Assessments and Taxation in Baltimore, Maryland, classifying
(i) 100,000,000 shares of common stock of the Company as Class A shares and
100,000,000 shares of common stock of the Company as Class B shares of the G.T.
Global Financial Services Fund series of the Company ("Financial Services Fund")
and (ii) 100,000,000 shares of common stock of the Company as Class A shares and
100,000,000 shares of common stock of the Company as Class B shares of the G.T.
Global Consumer Products and Services Fund series of the Company ("Consumer
Products and Services Fund"). Based upon this examination, we are of the
opinion that:
1. Up to 100,000,000 Class A shares and 100,000,000 Class B shares of the
Financial Services Fund and up to 100,000,000 Class A shares and
100,000,000 Class B shares of the Consumer Products and Services Fund may
be legally and validly issued from time to time in accordance with the
Company's Articles of Incorporation and By-Laws, and subject to compliance
with the Securities Act of 1933, the Investment Company Act of 1940, and
applicable state laws regulating the sale of securities; and
2. When so issued, the shares of the Financial Services Fund and Consumer
Products and Services Fund will be fully paid and nonassessable.
<PAGE>
We hereby consent to the filing of this opinion in connection with Post-
Effective Amendment No. 39 to the Registration Statement on Form N-1A (File
No. 33-19338) which you are about to file with the Securities and Exchange
Commission. We also consent to the reference to our firm under the caption
"Counsel" in the Registration Statement.
Very truly yours,
Kirkpatrick & Lockhart
By: /s/ Daniel T. Steiner
---------------------
Daniel T. Steiner
<PAGE>
DISTRIBUTION PLAN
G.T. INVESTMENT FUNDS, INC. -- CLASS A SHARES
WHEREAS, G.T. Investment Funds, Inc. ("Company") is registered under the
Investment Company Act of 1940, as amended ("1940 Act"), as an open-end
management investment company, and currently offers for public sale distinct
series of shares of common stock, each corresponding to a distinct portfolio;
and
WHEREAS, the Company's Board of Directors ("Board") has established G.T.
Global Government Income Fund ("Government Fund"), G.T. Global Strategic Income
Fund ("Strategic Income Fund"), G.T. Global Health Care Fund ("Health Care
Fund"), G.T. Global Growth & Income Fund ("Growth & Income Fund"), G.T. Global
Telecommunications Fund ("Telecommunications Fund"), G.T. Global Emerging
Markets Fund ("Emerging Markets Fund"), G.T. Global Financial Services Fund
("Financial Services Fund"), G.T. Global High Income Fund ("High Income Fund")
and G.T. Latin America Growth Fund ("Latin America Fund") as series of shares of
common stock of the Company; and
WHEREAS, the Company hereafter may establish additional series of its
common stock (any such additional series together with the Government Fund,
Strategic Income Fund, Health Care Fund, Growth & Income Fund,
Telecommunications Fund, Emerging Markets Fund, Financial Services Fund, High
Income Fund and Latin America Fund, collectively are referred to herein as the
"Funds," and singly may be referred to as a "Fund"); and
WHEREAS, the Company's Board has established Class A and Class B shares of
each Fund; and
WHEREAS, the existing Class A shares of each Fund are subject to a
Distribution Plan ("Plan") in effect since October 22, 1992, the substance of
which is substantially similar to that contained in this Plan; and
WHEREAS, the Company desires to adopt an amended Plan pursuant to Rule
12b-1 under the 1940 Act with respect to the Class A shares of each of the
above-referenced Funds; and
WHEREAS, the Company has entered into a Distribution Contract
("Distribution Contract") with G.T. Global Financial Services, Inc. ("G.T.
Global" or "Distributor") pursuant to which G.T. Global serves as Distributor of
the Class A shares of each such Fund;
NOW, THEREFORE, the Company hereby adopts this Plan with respect to the
Class A shares of each Fund in accordance with Rule 12b-1 under the 1940 Act.
1. A. The Government Fund, Strategic Income Fund, Growth
& Income Fund, Health Care Fund, Financial Services Fund, Latin
America Fund, Telecommunications Fund, Emerging Markets Fund, and
High Income Fund are each authorized to pay G.T. Global a service
fee for the Fund's
<PAGE>
Class A shares at the annualized rate of up to 0.25% of the
average daily net assets of the Fund's Class A shares.
B. The Government Fund, Strategic Income Fund and
Growth & Income Fund are each authorized to pay G.T. Global for
its expenditures incurred in providing services as Distributor of
the Fund's Class A shares at the annualized rate of up to 0.35%
of the average daily net assets of the Fund's Class A shares,
less any amounts paid by the respective Fund as the
aforementioned service fee.
C. The Health Care Fund, Latin America Fund,
Telecommunications Fund, Financial Services Fund, Emerging
Markets Fund, and High Income Fund are each authorized to pay
G.T. Global for its expenditures incurred in providing services
as Distributor of the Fund's Class A shares 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 respective Fund as
the aforementioned service fee.
D. If the Company establishes additional Funds in the
future and the applicability of the Plan with respect to such
Funds is approved in the manner set forth in paragraph 4 of this
Plan, as well as by the then sole shareholder of the Class A
shares of such Funds, this Plan may be amended to provide that
each such additional Fund will reimburse G.T. Global at rates to
be established by the Board.
E. Distribution fees and service fees under this Plan
shall be calculated and accrued daily by each Fund and paid
monthly to G.T. Global or at such other intervals as the Company
and G.T. Global shall agree.
2. A Fund may reimburse G.T. Global at a lesser rate than the fee
specified in paragraph 1 of this Plan, as agreed upon by the Board and G.T.
Global and as approved in the manner specified in paragraph 4 of this Plan.
3. As Distributor of the Funds' Class A shares, G.T. Global may spend
such amounts as it deems appropriate on any activities or expenses primarily
intended to result in the sale of the Class A shares of the Funds or the
servicing and maintenance of shareholder accounts, including, but not limited
to, payment of sales commission, ongoing commissions and other payments to
brokers, dealers, financial institutions or others who sell Class A shares
and/or service Class A shareholder accounts; compensation to employees of G.T.
Global; compensation to, and expenses, including overhead and telephone expenses
of, G.T. Global; the printing of prospectuses, statements of additional
information and reports for other than existing shareholders; and the
preparation, printing and distribution of sales literature and advertising
materials.
4. This Plan shall take effect with respect to the Class A shares of any
Fund on July 7, 1993, together with any related agreements, immediately after it
has been approved by votes of
-2-
<PAGE>
a majority of both (a) the full Board and (b) those Directors of the Company
who are not interested persons of the Company and have no direct or indirect
financial interest in the operation of this Plan or any agreements related
thereto ("Independent Directors"), cast in person at a meeting (or meetings)
called for the purpose of voting on such approval; and after the Directors
who approve the Plan with respect to such Fund's Class A shares have reached
the conclusion required by Rule 12b-1(e) under the 1940 Act.
5. This Plan shall continue in effect until June 30, 1994, and shall
continue thereafter in full force and effect for successive periods of up to one
year, provided that each such continuance is approved in the manner provided in
paragraph 4.
6. G.T. Global shall provide to the Board and the Independent Directors
shall review and approve, in exercise of their fiduciary duties, at least
quarterly, a written report of the amounts expended with respect to the Class A
shares of each Fund by G.T. Global under this Plan and the Distribution Contract
and the purposes for which such expenditures were made.
7. For purposes of this Plan, "distribution fees" shall mean any fees for
activities in connection with G.T. Global's performance of its obligations under
the Plan or the Distribution Contract that are not deemed "service fees."
"Service fees" shall mean fees for activities covered by the definition of
"service fee" contained in Article III, Section 26(b) of the Rules of Fair
Practice of the National Association of Securities Dealers, Inc., as amended.
8. This Plan may be terminated at any time with respect to the Class A
shares of any Fund by vote of the Board, by vote of a majority of the
Independent Directors, or by vote of a majority of the outstanding voting Class
A shares of that Fund. Termination of the Plan with respect to the Class A
shares of one Fund shall not affect the continued effectiveness of this Plan
with respect to the Class A shares of any other Fund.
9. This Plan may not be amended to increase materially the amount of
reimbursement a Fund is authorized to receive under paragraph 1 hereof unless
such amendment is approved in the manner provided for initial approval in
paragraph 4 hereof, and such amendment is further approved by a majority of the
outstanding voting Class A shares of the Fund, and no other material amendment
to the Plan shall be made unless approved in the manner provided for approval
and annual renewal in paragraph 5 hereof.
10. If and to the extent that any of the expenses of the Class A shares of
a Fund listed below in this paragraph are considered to be "primarily intended
to result in the sale of shares" issued by that Fund within the meaning of Rule
12b-1 under the 1940 Act, the Fund's payment of such expenses is authorized
without limit under this Plan, without regard to reimbursements made by the Fund
pursuant to paragraph 1 of this Plan or the requirements for approval of any
increase in such fees under paragraph 9 of this Plan. These expenses include:
(i) the costs of preparing, printing and mailing all required reports and
notices to Class A shareholders, irrespective of whether such reports or notices
contain or are accompanied by material intended to result in the sale of Class A
shares of the Fund or other funds or other investments; (ii) the costs of
preparing, printing and mailing all prospectuses; (iii) the costs of preparing,
printing and mailing any proxy statements and proxies, irrespective of whether
such proxy statements include
-3-
<PAGE>
any item relating to, or directed toward, the sale of the Fund's Class A
shares; (iv) all legal and accounting fees relating to the preparation of any
such reports, prospectuses, proxies and proxy statements; (v) all fees and
expenses relating to the qualification of the Fund and/or its Class A shares
under the securities or "Blue Sky" laws of any jurisdiction; (vi) all fees
under the 1940 Act and the Securities Act of 1933, including fees in
connection with any application for exemption relating to or directed toward
the sale of the Fund's Class A shares; (vii) all fees and assessments of the
Investment Company Institute or any successor organization, irrespective of
whether some of its activities are designed to provide sales assistance;
(viii) all costs of processing Class A share transactions, preparing and
mailing confirmations of Class A shares sold or redeemed or share
certificates, and reports of Class A share balances; and (ix) all costs of
responding to telephone or mail inquiries of investors or prospective
investors.
11. It is recognized that the costs of distributing a Fund's Class A
shares may exceed the sum of the sales charges collected on sales of Class A
shares of such Fund and reimbursements made by that Fund pursuant to paragraph 1
of this Plan. In view of this, if and to the extent that any investment
management and administration fees paid by a Fund might be considered as
indirectly financing any activity which is primarily intended to result in the
sale of that Fund's Class A shares, the payment by the Fund of such fees hereby
is authorized under this Plan.
12. While this Plan is in effect, the selection and nomination of
Directors who are not interested persons of the Company shall be committed to
the discretion of the Directors who are not interested persons of the Company.
13. As used in this Plan, the phrase "majority of the outstanding voting
Class A shares" shall have the same meaning as the phrase "majority of the
outstanding voting securities," has in the 1940 Act, and the phrases "interested
person" shall have the same meaning as that phrase has in the 1940 Act.
14. The Company shall preserve copies of this Plan (including any
amendments thereto) and any related agreements and all reports made pursuant to
paragraph 6 thereof for a period of not less than six years from the date of
this Plan, the first two years in an easily accessible place.
IN WITNESS WHEREOF, the Company has executed this Distribution Plan on July
7, 1993.
Attest: G.T. INVESTMENT FUNDS, INC.
/s/ Peter R. Guarino By: /s/ David A. Minella
- ------------------------------- --------------------------------
Peter R. Guarino David A. Minella
Assistant Secretary President
SEAL:
-4-
<PAGE>
DISTRIBUTION PLAN
G.T. INVESTMENT FUNDS, INC. -- CLASS B SHARES
WHEREAS, G.T. Investment Funds, Inc. ("Company") is registered under the
Investment Company Act of 1940, as amended ("1940 Act"), as an open-end
management investment company, and currently offers for public sale distinct
series of shares of common stock, each corresponding to a distinct portfolio;
and
WHEREAS, the Company's Board of Directors ("Board") has established G.T.
Global Government Income Fund ("Government Fund"), G.T. Global Strategic Income
Fund ("Strategic Income Fund"), G.T. Global Health Care Fund ("Health Care
Fund"), G.T. Global Growth & Income Fund ("Growth & Income Fund"), G.T. Global
Telecommunications Fund ("Telecommunications Fund"), G.T. Global Emerging
Markets Fund ("Emerging Markets Fund"), G.T. Global Financial Services Fund
("Financial Services Fund"), G.T. Global High Income Fund ("High Income Fund")
and G.T. Latin America Growth Fund ("Latin America Fund") as series of shares of
common stock of the Company; and
WHEREAS, the Company hereafter may establish additional series of its
common stock (any such additional series together with the Government Fund,
Strategic Income Fund, Health Care Fund, Growth & Income Fund,
Telecommunications Fund, Emerging Markets Fund, Financial Services Fund, High
Income Fund and Latin America Fund, collectively are referred to herein as the
"Funds," and singly may be referred to as a "Fund"); and
WHEREAS, the Company's Board has established Class A and Class B shares of
each Fund; and
WHEREAS, the existing Class B shares of each Fund are subject to a
Distribution Plan ("Plan") in effect since October 22, 1992, the substance of
which is substantially similar to that contained in this Plan; and
WHEREAS, the Company desires to adopt an amended Plan pursuant to Rule
12b-1 under the 1940 Act with respect to the Class B shares of the above-
referenced Funds; and
WHEREAS, the Company has entered into a Distribution Contract
("Distribution Contract") with G.T. Global Financial Services, Inc. ("G.T.
Global" or "Distributor") pursuant to which G.T. Global serves as Distributor of
the Class B shares of each such Fund and pursuant to which G.T. Global is
entitled to receive payments of contingent deferred sales charges imposed with
respect to certain redemptions of Class B shares;
NOW, THEREFORE, the Company hereby adopts this Plan with respect to the
Class B shares of each Fund in accordance with Rule 12b-1 under the 1940 Act.
1. A. Each Fund is authorized to pay G.T. Global for its
expenditures incurred in providing services as Distributor of the
Fund's Class B shares at the
<PAGE>
annualized rate of 0.75% of the average daily net assets of the
Fund's Class B shares.
B. Each Fund is authorized to pay G.T. Global a
service fee for the Fund's Class B shares at the annualized rate
of 0.25% of the average daily net assets of the Fund's Class B
shares.
C. If the Company establishes additional Funds in the
future and the applicability of the Plan with respect to such
Funds is approved in the manner set forth in paragraph 4 of this
Plan, as well as by the then sole shareholder of the Class B
shares of such Funds, this Plan may be amended to provide that
each such additional Fund will reimburse G.T. Global at rates to
be established by the Board.
D. Distribution fees and service fees under this Plan
shall be calculated and accrued daily by each Fund and paid
monthly to G.T. Global or at such other intervals as the Company
and G.T. Global shall agree.
E. Each Fund shall accrue and carry forward amounts
reimbursable that are not paid because they exceed the annualized
rate of 0.75%, in the case of the distribution fee, and 0.25%, in
the case of the service fee, of the average daily net assets of
such Fund's Class B shares and shall pay such amounts within the
0.75% and 0.25% per annum payment rate limitations as long as
this Plan, including any amendments hereto, is in effect.
2. A Fund may reimburse G.T. Global at a lesser rate than the fee
specified in paragraph 1 of this Plan, as agreed upon by the Board and G.T.
Global and as approved in the manner specified in paragraph 4 of this Plan. The
terms of paragraph 1.E. of this Plan shall apply to such lesser agreed upon
rate, if any. Although a Fund is not liable for unreimbursed distribution
expenses, in the event of termination or discontinuation of the Plan, the Board
may consider the appropriateness of having the Class B shares of the Fund
reimburse G.T. Global for the then outstanding carry forward amounts plus
interest thereon to the extent permitted by applicable law from the effective
date of the Plan.
3. As Distributor of the Funds' Class B shares, G.T. Global may spend
such amounts as it deems appropriate on any activities or expenses primarily
intended to result in the sale of the Class B shares of the Funds and the
servicing and maintenance of shareholder accounts, including, but not limited
to, payment of sales commissions, ongoing commissions and other payments to
brokers, dealers, financial institutions or others who sell Class B shares
and/or service Class B shareholder accounts; compensation to employees of G.T.
Global; compensation to, and expenses, including overhead and telephone expenses
of, G.T. Global; the printing of prospectuses, statements of additional
information and reports for other than existing shareholders; and the
preparation, printing and distribution of sales literature and advertising
materials. In addition, G.T. Global may be entitled, to the extent permitted by
applicable law, to interest on unreimbursed amounts carried forward pursuant to
paragraph 1.E. hereunder at a rate equal to that paid by G.T. Global for bank
borrowings. Proceeds from contingent deferred sales
-2-
<PAGE>
charges received by G.T. Global (in connection with the redemption of Fund
shares) will be applied to reduce the costs incurred as described above.
4. This Plan shall take effect with respect to the Class B shares of any
Fund on July 7, 1993, together with any related agreements, immediately after it
has been approved, by votes of a majority of both (a) the full Board and
(b) those Directors of the Company who are not interested persons of the Company
and have no direct or indirect financial interest in the operation of this Plan
or any agreements related thereto ("Independent Directors"), cast in person at a
meeting (or meetings) called for the purpose of voting on such approval; and
after the Directors who approve the Plan with respect to such Fund's Class B
shares have reached the conclusion required by Rule 12b-1(e) under the 1940 Act.
5. The Plan shall continue in full force and effect until June 30, 1994,
and shall continue thereafter in full force and effect for successive periods of
up to one year provided that each such continuance is approved in the manner
provided in paragraph 4.
6. G.T. Global shall provide to the Board and the Independent Directors
shall review and approve, in exercise of their fiduciary duties, at least
quarterly, a written report of the amounts expended with respect to the Class B
shares of each Fund by G.T. Global under this Plan and the Distribution Contract
and the purposes for which such expenditures were made.
7. For purposes of this Plan, "distribution fees" shall mean any fees for
activities in connection with G.T. Global's performance of its obligations under
the Plan or the Distribution Contract that are not deemed "service fees."
"Service fees" shall mean fees for activities covered by the definition of
"service fee" contained in Article III, Section 26(b) of the Rules of Fair
Practice of the National Association of Securities Dealers, Inc., as amended.
8. This Plan may be terminated at any time with respect to the Class B
shares of any Fund by vote of the Board, by vote of a majority of the
Independent Directors, or by vote of a majority of the outstanding voting Class
B shares of that Fund. Termination of the Plan with respect to the Class B
shares of one Fund shall not affect the continued effectiveness of this Plan
with respect to the Class B shares of any other Fund.
9. This Plan may not be amended to increase materially the amount of
reimbursement a Fund is authorized to make under paragraph 1 hereof unless such
amendment is approved in the manner provided for initial approval in paragraph 4
hereof, and such amendment is further approved by a majority of the outstanding
voting Class B shares of the Fund, and no other material amendment to the Plan
shall be made unless approved in the manner provided for approval and annual
renewal in paragraph 5 hereof.
10. If and to the extent that any of the expenses of the Class B shares of
a Fund listed below in this paragraph are considered to be "primarily intended
to result in the sale of shares" issued by that Fund within the meaning of Rule
12b-1 under the 1940 Act, the Fund's payment of such expenses is authorized
without limit under this Plan, without regard to reimbursements made by the Fund
pursuant to paragraph 1 of this Plan or the requirements for approval of any
increase in such fees under paragraph 9 of this Plan. These expenses include:
(i) the costs of
-3-
<PAGE>
preparing, printing and mailing all required reports and notices to Class B
shareholders, irrespective of whether such reports or notices contain or are
accompanied by material intended to result in the sale of Class B shares of
the Fund or other funds or other investments; (ii) the costs of preparing,
printing and mailing all prospectuses; (iii) the costs of preparing, printing
and mailing any proxy statements and proxies, irrespective of whether such
proxy statements include any item relating to, or directed toward, the sale
of the Fund's Class B shares; (iv) all legal and accounting fees relating to
the preparation of any such reports, prospectuses, proxies and proxy
statements; (v) all fees and expenses relating to the qualification of the
Fund and/or its Class B shares under the securities or "Blue Sky" laws of any
jurisdiction; (vi) all fees under the 1940 Act and the Securities Act of
1933, including fees in connection with any application for exemption
relating to or directed toward the sale of the Fund's Class B shares; (vii)
all fees and assessments of the Investment Company Institute or any successor
organization, irrespective of whether some of its activities are designed to
provide sales assistance; (viii) all costs of processing Class B share
transactions, preparing and mailing confirmations of Class B shares sold or
redeemed or share certificates, and reports of Class B share balances; and
(ix) all costs of responding to telephone or mail inquiries of investors or
prospective investors.
11. It is recognized that the costs of distributing a Fund's Class B
shares may exceed the sum of the contingent deferred sales charges collected on
sales of Class B shares of such Fund and reimbursements made by that Fund
pursuant to paragraph 1 of this Plan. In view of this, if and to the extent
that any investment management and administration fees paid by a Fund might be
considered as indirectly financing any activity which is primarily intended to
result in the sale of that Fund's Class B shares, the payment by that Fund of
such fees hereby is authorized under this Plan.
12. While this Plan is in effect, the selection and nomination of
Directors who are not interested persons of the Company shall be committed to
the discretion of the Directors who are not interested persons of the Company.
13. As used in this Plan, the phrase "majority of the outstanding voting
Class B shares" shall have the same meaning as the phrase "majority of the
outstanding voting securities," has in the 1940 Act, and the phrase "interested
person" shall have the same meaning as that phrase has in the 1940 Act.
14. The Company shall preserve copies of this Plan (including any
amendments thereto) and any related agreements and all reports made pursuant to
paragraph 6 thereof for a period of not less than six years from the date of
this Plan, the first two years in an easily accessible place.
-4-
<PAGE>
IN WITNESS WHEREOF, the Company has executed this Plan of Distribution on
July 7, 1993.
Attest: G.T. INVESTMENT FUNDS, INC.
/s/ Peter R. Guarino By: /s/ David A. Minella
- ------------------------------ -------------------------------
Peter R. Guarino David A. Minella
Assistant Secretary President
SEAL:
-5-
